Understanding the Massachusetts Purchase and Sale Agreement PDF
What is a Purchase and Sale Agreement?
The purchase and sale agreement, commonly referred to as "P&S", is a document that presents a purchase offer from the buyer to the seller. It includes everything that the buyer is willing to pay for the house, including exceptions.
The P&S is a legally binding contract and after its execution, it can only be cancelled by agreement of the parties. In Massachusetts, the P&S is commonly 5-10 pages long, setting forth in detail the rights and obligations of the parties. The seller will most likely utilize standard language written by one of many trade organizations.
With a few very limited exceptions , the seller/owner of a home does not have to use a real estate agent to sell his or her home. If the owner sells without a licensed agent or broker, the owner is responsible for knowing the laws that may or may not apply to him.
Most people do not have the skills or knowledge to represent themselves in this situation. In addition to the above-noted standard language, 15 pages (or more) of legalese, the buyer may have additional contingencies that need to be addressed. Importantly, if the seller agrees to such contingency, he is solely responsible for completing it. The seller assumes all risks of error or oversight.
Essential Components of a Massachusetts Purchase and Sale Agreement
A Massachusetts Purchase and Sale Agreement will have a few essential clauses:
Contingencies
Contingencies are a very important part of any Purchase and Sale Agreement. Common contingencies include the buyer’s right to terminate the Agreement if—through an inspection or appraisal—or other contingencies, the buyer no longer wishes to purchase the property. Generally a buyer terminates a Purchase and Sale Agreement when he or she loses their contingency. However, a broker, agent or attorney will often influence the purchase to agree. In this scenario, the buyer often does not rebuttal the Agreement and the agreement stays in force even if the buyer does not want the property.
Pricing
Pricing is key in a Purchase and Sale Agreement. Pricing will be settled at a price and date that the seller and buyer can agree upon, with a deposit given by the buyer. Pricing and cost estimates should line up with your attorney before signing.
Timelines
The Purchase and Sale Agreement will have timelines for closing. If the buyer is getting a mortgage, and if the buyer needs a mortgage contingency, all of these will have timelines and deadlines within the timeline. For example, you may have sixty days to get a mortgage or sell another property; it does not mean you can stay around for a year. In addition, timelines will have penalties if the buyer places false information into the Purchase and Sale Agreement.
How to Find the Agreement PDF
The Massachusetts Real Estate Bar Association holds a collection of standardized Purchase and Sale Agreements created and vetted by Massachusetts lawyers. These contracts can be very useful to an attorney practicing in Massachusetts as, at the beginning of most, the seller provides information regarding the property such as lead paint, smoke detectors, and title work. As a result, the attorney for the buyer can utilize the work done by attorneys for the seller thus saving a significant amount of time and assisting in being able to better serve the client. Further, because they are uniform contracts, there is always a level of confidence that what you are reviewing with a contract is very likely to be similar to what you have seen before. The REBA forms can be accessed through the website for the Real Estate Bar Association at www.reba.net. This website has a number of standardized forms including the Purchase and Sale Agreement PDF. If you are not a member of the Real Estate Bar Association and would like to utilize these contracts, membership is open to all Massachusetts licensed attorneys and for a nominal fee you can access the various forms through the website. If you are not an attorney, many of the larger brokerages employ business practice departments whose role is to assist agents with understanding and answering questions about contracts. At the very least, many larger brokerages have set forms agreements on file that have been reviewed by attorneys which can be compared even if they are not the same as the REBA forms.
Your Purchase and Sale Agreement and Customization
One of the benefits of a Massachusetts Purchase and Sale Agreement is the ability to easily customize the form to fit the needs of your transaction. It may be used for the sale of a single residential property or for the sale of the assets of a business, or even the sale of a commercial building with multiple tenants. In addition, it may be used for the purchase of all or part of a corporation or a limited liability company. The form may be used as the basis for the agreement in these situations and additional language may simply be added to fit the needs of your particular situation. When doing this, however, it is extremely important to consult with an experienced real estate attorney who will plug the new language into the form agreement to make sure that it will work, not only with the other provisions of the agreement, but that it will not violate any other controls or requirements, such as the by-laws or articles of incorporation of a corporation, the operating agreement of a LLC, or the requirements of the law, and, if involved, the zoning and land use controls and regulations of the municipality in which the property is located.
The fine points of the form agreement and important additional items that must be paid attention to will be addressed elsewhere in this blog series.
Avoiding Pitfalls with Purchase and Sale Agreements
The attorneys here at Merrigan Bouton & Murolo want to help you avoid the common pitfalls we see in Massachusetts Purchase and Sale Agreements (P&Ss). While the P&S is an incredibly valuable form to have in your arsenal, it is still a legal document that can create many problems if not used correctly. We will spend the next 6 weeks breaking down the most common mistakes we see buyers and sellers make so we can help you avoid them.
The first mistake is assuming the P&S and the offer are the same thing. When you move into the second step of the home buying process , both parties put themselves at a lot of risk by entering into this legally binding agreement. If you say "yes" to either of the following scenarios, you are likely making a huge mistake: If you find yourself in either of these situations, we recommend calling a lawyer so they can help fix some of the issues for you.
The Agreement – Legal Consequences for Breach
There are a variety of legal implications of entering in a Purchase and Sale Agreement in Massachusetts. The most important legal consequence is that by signing a Purchase and Sale Agreement, the buyer and seller are binding themselves to a contract for the sale of real estate.
Massachusetts law is very much in favor of holding buyers and sellers to the terms of a contract, even if that contract is not written in long paragraph form. Therefore, once the buyer and seller both sign an Agreement, it is difficult to break that contract without incurring financial penalties.
In addition, any person who is a signatory on a Purchase and Sale Agreement has to be careful about what they are signing. Lawyers are often called "the gatekeepers" in a real estate transaction. This means that it is their job to make sure that their clients understand what they are signing. A seller signs a Sale Agreement with the understanding that the buyer will pay the seller a certain amount of money for the seller’s property. In exchange for this, the buyer expects to receive a deed for the seller’s property at closing, along with other items of value. In addition, the Purchase and Sale Agreement will have certain contingencies, like an inspection clause or a mortgage clause, that allows the buyer to back out of the transaction without financial penalty if something happens (e.g. an inspection comes back with problems, or the buyer cannot get a mortgage). All contingencies are contract provisions, so both sides must know what their obligations are under the P&S and what happens if the contingencies are not satisfied.
Common Questions about Massachusetts Purchase and Sale Agreements
Are there contingencies for a Purchase and Sale Agreement? – Yes, typically the Purchase and Sale Agreement will be contingent upon home inspections and financing or even a sale of a buyer’s own property. The Purchase and Sale Agreement will also refer to a number of contingencies found in very specific Massachusetts laws.
What is an Addendum? An addendum is something that is added onto the Purchase and Sale Agreement to supplement it. Addendums can address anything from inspections to details about where closing costs will be paid. An addendum typically is not a formal document, so it will not need to be signed by both parties.
How is the Purchase and Sale Agreement in Massachusetts different from other states? Every state will have different laws when it comes to real estate and how to go about buying a house. In Massachusetts the buyer and seller are required to participate in closing attorneys for the transaction. The Purchase and Sale Agreement must also be notarized. Home inspections are seen as common due diligence in Massachusetts , whereas they may not be for buyers in other states.
Who do I talk to about negotiating terms for my Purchase and Sale Agreement in Massachusetts? You and your real estate attorney will negotiate the terms of your Purchase and Sale Agreement. Negotiations can be done in person or via telephone. If you have a real estate agent that is also able to help you with the negotiations.
What do I do if I want to change the Purchase and Sale Agreement? You will either need to hire a lawyer to negotiate the changes for you if you don’t have a real estate agent who will do it for you. Alternatively, you can just cross out the provision you want to change, rewrite the provision the way you want and sign your name next to it. This is sometimes enough for the other party to agree to the changes.