92 State Street, Suite 700· Boston, MA 02109-2004 · Phone: 617.367.0468 · Fax: 617.507.7856
This is a summary of some of the things that take place when you buy a home. It is not a substitute for individual legal advice. It is to your advantage to have your own lawyer when you buy a home. The other attorneys in the process are there to protect the lender and the seller, not you. Your own attorney can see that you are protected in the terms of the sale contract and can protect you against the unscrupulous practices of some mortgage lenders.
Traditionally, real estate brokers are agents of the seller. They are paid by the seller, and their first obligation is to sell the property at the highest price possible. Their deal with the seller usually provides that the higher the selling price, the more they get paid. The broker is also required to treat you fairly, and it is generally in the interest of an ethical broker to do so. But you must remember that, unless you are explicitly working with a buyer s broker, the broker works for the seller.
The buyer's broker is relatively new in the real estate field. A buyer's broker explicitly works for you as buyer. Usually a buyer s broker is still paid by the seller, by sharing in the commission of the seller s broker according to rules set by realtor s organizations and by the state regulatory board.
If you find a broker that you like and trust, it is generally in your interest to work primarily through that broker. Since any home listed with a broker is generally listed in a multiple listing service, the broker that you work with usually can show you any home that is listed with any other broker. If you decide to buy the property, the two brokers will share the commission. Many large real estate agencies have Websites, and some provide open access to the multple listing service.
According to the rules which govern the practice of law, if you have your own attorney, the attorneys for the other parties should not talk with you directly, but should communicate with you only through your attorney. Lender's attorneys, for some reason, often forget to observe this rule. For your own protection, you should not talk directly with the attorneys for other parties unless your own attorney agrees.
When you are shown a property that you like, the first document that you will be asked to sign is an "offer to purchase" form. You will also be asked to put down a sum of money to bind the offer. If the offer is not accepted by the seller, the deposit will be returned to you, unless you decide to make a new, higher, offer. If your offer is accepted, you will be expected to go through with the purchase and will usually lose the deposit if you try to back out.
Despite what anyone else may tell you, unless the offer form explicitly states otherwise, it is a binding contract once the seller accepts it, and its provisions are important. While sellers and brokers will understandably want things to move as rapidly as possible, it is your attorney s job to make sure that your rights are protected. Sometimes that may require things to be slowed down. Since many people shop for homes on evenings and weekends, it is usually not convenient or possible to reach your attorney before signing. Here are some things to watch for:
Here is a true story to illustrate why this is important. A condominium unit in Brookline did not come with parking. Overnight street parking is not allowed in Brookline. The seller claimed to have arranged rented parking in the neighborhood. Since the buyer could not see the rented parking when he was shown the property, he put in the offer a statement that it was "contingent on the availability of parking as represented." When the buyer saw the parking space, it turned out to be too small for his car. Because he had included that language in his offer, he was able to get back his deposit when he withdrew his offer. If not for that language in the offer, he would have lost the deposit.
The next step will be to sign a completed Purchase and Sale agreement. This will take place after your lawyer and the seller's lawyer have negotiated its terms. It is more detailed than the accepted offer, and when it has been signed by all parties, it replaces the accepted offer as the contract between the parties. It is important to have your own lawyer at this stage to see that the terms of the agreement protect your interest. The P&S Agreement will probably be signed in multiple copies. Your mortgage lender will want to see a copy as soon as possible. With the signing of an agreement, you will be expected to put down additional money. The deposits are usually held by either the listing broker or the seller's attorney.
If you don't go through with the sale, you may lose this deposit. The Purchase and Sale agreement will generally contain contingency clauses for mortgage financing and for any inspections that have not yet taken place. You should not lose your deposit if you back out of the sale in accordance with these clauses. You also should not lose your deposit if the sale cannot take place because a title examination has disclosed problems with the seller's title.
If you are buying a property which includes rental apartments, there are a number of additional considerations. The Purchase and Sale Agreement should have a list of tenants, how much each pays in rent, what security and last month's rent deposits are being held for each, and the expiration date of each tenant's lease. It should provide that the seller will transfer the deposits to you at the closing. It should recite what appliances, such as stoves, dishwashers, air conditioners, and refrigerators, in each apartment are the property of the seller and are part of the sale. You should be shown copies of any leases, and the P&S Agreement should provide that no leases are to be renewed or new leases executed without your approval.
If possible your lawyer should ask the seller to obtain a "estoppel certificate" from each tenant. That is a letter, signed by the tenant, reciting the state of the deposits for that tenant. That prevents the tenant from later claiming that there was a deposit that was not disclosed to you.
You should make sure that the home inspection includes a check for whether each tenant's gas and electrical meters serve only their apartments or whether any common areas are on a tenant's meter. Since by state law, tenants can only be required to pay for utilities for their own apartments, you should arrange to have any cross-metering fixed promptly, or you could be responsible for paying for the tenant's utilities. Two- and three-family houses often have hall and cellar lights metered to the first-floor apartment. If there are tenants in the first-floor apartment, you may be held responsible for their electric bills unless this is fixed. The best solution is a public meter, which serves only the common areas. The property you are buying is very likely to have this problem if it lacks a public meter.
If the property was built before 1978, you should be given a seller disclosure of potential lead-based paint hazards, including an informational pamphlet from the U.S. Environmental Protection Agency. You must sign off on having received these disclosures. You need to pay attention to the notices which you will receive concerning lead paint. Especially if you are buying rental property, you should factor into your costs the probable cost of de-leading apartments. For more information, contact the Childhood Lead Poisoning Prevention Program at 617.284.8400 or 1.800.532.9571.
Until recently, anyone could go into business as a home inspector, with no qualifications or licensing requirements. A new licensing law took effect in Massachusetts on 1 May 2001. It allows an automatic license to anyone who had been working as a home inspector for three years and has inspected 125 homes. You should be carefully check out anyone you hire as a home inspector. There are now a number of resources available for this purpose on the Web, and we have links to some of them on our Website.
This office is sometimes able to refer clients to home inspectors with whom other clients have reported good results. We do this as a courtesy, without charge, and not as part of the legal services that we render. We cannot assume any responsibility for the quality of the home inspectors, and you are under no obligation to go to them. We are interested in hearing about your experiences with home inspectors so that we may better serve our clients in the future.
The mortgage market is constantly changing, and there is no way that we can give information here that is both comprehensive and up-to-date. But here are some things that you need to know very early in the process:
The Purchase and Sale agreement often provides for a walk-through of the property on the morning of the closing. The purpose of the walk-through is to verify that the property is now in essentially the same condition as it was when you agreed to buy it. It is usually arranged through the broker.
The Purchase and Sale Agreement will specify a date on which the title transfer will take place. By that day, the financing and other contingencies should have been satisfied and the title examination completed. At the closing, the money is transferred, the paperwork of the sale is completed, and you receive the keys to the property. You will need to bring with you a driver's license or other photo ID, so that the lender's counsel can be assured that you are who you say you are. This is also required in order to sign anything which needs to be notarized.
Here are some of the things that will happen at the closing:
Cities and towns in Massachusetts operate on a fiscal year that begins each year on the first of July. By law, they are required to send tax bills to the person who was the assessed owner as of first of January before the start of the fiscal year. That means that, depending on when your closing takes place, tax bills will continue to be sent to the previous owner, possibly for more than a year after the closing.
It is helpful if the seller agrees to send you the tax bills for the property so long as they continue to receive them, but there is no legal requirement that they do so. It is your responsibility to be aware of when tax bills come out and to see that they are paid on time. If your mortgage servicer is paying taxes, you should forward the tax bill to them. If you fail to do this, you will be charged interest for late payment of taxes.
There may be other adjustments, depending on the details of your agreement with the seller. The adjustments and closing costs are all compiled on a form promulgated by the U.S. Department of Housing and Urban Development, and it is calculated how much money will be paid by who and to whom.
First-time buyers are often shocked at some of the items listed as closing costs. In general, you can expect to be required to pay for the costs of the lender's appraisal, a plot plan, the title examination, the lender's attorney's fees, and a host of other items which always seems to grow with each closing.
Under state and federal law, if the property was built before 1978, the seller must provide you with a disclosure of potential lead-based paint hazards, including an informational pamphlet from the U.S. Environmental Protection Agency, and the buyer must sign off on having received it. Usually the broker will have the necessary materials. If not, or for more information, contact the Childhood Lead Poisoning Prevention Program at 617.284.8400 or 1.800.532.9571.
This information sheet is not a substitute for individual legal advice. It is based on the law in Massachusetts and may not be correct in any other jurisdiction. Copyright © 1995-2009 A. Joseph Ross