Purchase & Sale Basics
Once the inspection is completed, the buyer and seller will execute a Purchase and Sale Agreement. In real estate slang, it is referred to as the “P and S”. Why do the parties need to sign a whole new document when they have already signed a binding offer? This is generally the point in the process where it looks as though there is a more solid deal in place. The buyer has been pre-approved for a mortgage and is satisfied with the results of their home inspection. The offer set out the basic terms of the parties’ agreement, but now it is time to sign a more complete & detailed form of agreement. In Massachusetts, the Seller attorney will usually prepare the P&S. In some cases, the listing agent may generate a “standard form” P&S to which the attorneys for buyer and seller will add to, or subtract from, with and “Addendum” or “Rider”.
The P&S will contain the following information:
- The names of the buyers, sellers, real estate brokers & lawyers
- The purchase price, amount of the deposit the buyer has put down, and who is responsible for holding the deposit until closing
- Additional items and fixtures that are or are not included with the sale – i.e. microwave, washer, dryer, refrigerator, etc.
- The date by which the buyer must obtain their mortgage commitment – “the mortgage contingency date”
- The closing date & location
- The condition that the property must be left in, including any requested repairs from the home inspection
- Any seller’s concessions towards closing costs
- Any other contingencies – Is the purchase of the new home contingent upon the sale of buyer’s current home, Is the sale contingent upon the Seller finding suitable housing?
- The amount of damages due if the buyer defaults
- Who is responsible for obtaining smoke & carbon monoxide certificates
- The state of title to the property – insurable, marketable, clear record?
Why not just sign a “Standard” Form Purchase and Sale Agreement?
Since Purchase and Sale Agreements in Massachusetts are drafted by the Seller Attorney or Seller’s real estate agent, standard forms are usually skewed in the Seller’s favor. The standard form contains nearly 30 provisions that will control the rest of the purchase transaction up to, through and even beyond the closing date. P&S agreements use very specialized language, or “terms of art”, in those 30 paragraphs, and unless the buyer is well versed in real estate law, they may end up with an unwanted surprise. It is important to have a buyer attorney to not only help understand what this “Standard” contract says, but, to also modify & tailor the P&S to protect the buyer & meet the specifics of their unique home purchase.
Purchase & Sale Tips
- Understand What You Are Signing – buyer’s attorney should take the time to go through the P&S clause by clause so that it is clear what is being signed
- If you are buying a bank owned home, the Purchase and Sale contract is often a “take it or leave it” proposition
- An additional deposit is due from the buyer with the signing of the P&S, so be sure funds are available
- The closing date in the P&S is NOT always set in stone. Issues arise during the mortgage process or title examination search which may delay either the buyer or seller from meeting the closing date. Stay flexible.
The Mortgage Buddy strongly recommends that you utilize the services of a licensed Massachusetts attorney to assist you with the drafting and negotiating of your purchase and sales agreement.