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Making An Offer On A Home

The Massachusetts Real Estate Offer to Purchase is normally only a one to two page document. ​While it may appear relatively straight forward, this is simply not the case and considerable litigation has occurred over it throughout the years. Because significant liability can result in a real estate transaction by simply signing the Offer to Purchase, the buyer and the seller should retain a real estate attorney as soon as possible.

The Offer to Purchase is a Binding Contract

One of the most important aspects of a Real Estate Offer is that it can be a BINDING contract even if a Purchase and Sale Agreement is never signed. In McCarthy v. Tobin, 429 Mass. 84, (1999), the Massachusetts Supreme Judicial Court held that if an Offer to Purchase real estate is in writing, contains all material terms, and appears that the parties intended to be bound, they are required to close the deal even if a Purchase and Sale Agreement has never been signed. Failure to do so can result in long-term litigation.

Purchase Price and Deposit Terms

What is also important to keep in mind about a Real Estate Offer is the purchase price and deposit. A buyer of a house or a condominium will want the deposit terms to be as low as possible while the seller will want them to be as high as possible to make it less attractive for the buyer to walk away. A typical deposit with the Offer to Purchase is normally between $500.00 and $1000.00. A typical deposit upon signing the Purchase and Sale Agreement is about 3% to 5% of the purchase price. For the home buyer, any higher amount may be cause for alarm but the deposit amount does fluctuate with market conditions (lower in a buyer’s market, and higher in a seller’s market).

Purchase and Sale Agreement Issues

The third item to consider, is the date on which the Purchase and Sale Agreement will be signed. For the home buyer, it is necessary to allow enough time to take care of important tasks such as performing a home inspection and arranging for mortgage financing. This period of time, however, should not be so long that it harms the home seller if the deal does not ultimately close since the seller will need to put the property back on the market. The recommended time period, in most instances, is about 7 to 10 days.

Home Inspection Issues

Arranging for a home inspection is also critical. In some instances, Buyers waive the right of inspection to make their bid more attractive to the seller; in other cases, the seller might not allow an inspection. Home inspections for residential real estate are common and, absent compelling circumstances, should never be waived. If the buyer waives an inspection, and a problem develops in the future, it is unlikely that the buyer will have any recourse. If the inspection cannot take place until after signing of the Purchase and Sale Agreement, then an appropriate contingency must be placed to protect the buyer in the Purchase and Sale Agreement itself.

Mortgage Financing Issues

The last critical factor of the Real Estate Offer, is the Buyer’s mortgage financing. The mortgage financing contingency (or mortgage commitment) is designed to protect the Buyer’s deposit if financing cannot be secured by a particular date. It is always in the Buyer’s interest to negotiate the latest possible date to notify the seller, so that enough time is provided. Home Sellers will want to keep this notice date to as short a period as possible in case the deal falls through and they need to put the home back on the market.

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