I Want to Buy This House
In the eastern part of Massachusetts, the typical real estate transaction follows this basic outline:
The Buyer may approach a real estate agent (Broker) in a target area. The Buyer and Broker select and visit certain properties. Once the buyer has determined that a particular property suits his or her purposes, then the Buyer makes a written “Offer To Purchase” the subject property. The Seller then accepts the “Offer”. The Buyer hires a home inspector and the property is then scrutinized by that inspector. If there are no major defects or impediments, the parties (Buyer and Seller) then enter into a “Purchase and Sale” Agreement. The Buyer completes his or her mortgage loan application and the loan commitment is issued. Finally, the closing occurs: the purchase money is tendered, and the Deed is accepted and recorded. You own a home! Each stage has its own pitfalls and requires you, the Buyer, to be diligent.
Caveat Emptor
You are probably excited by the prospect of visiting houses on the market. As you start the process of purchasing real estate keep in mind that “caveat emptor” (“let the buyer beware”) is how to approach any particular piece of property. You need to do your homework and ask as many questions as you can. The Seller’s obligation is to answer truthfully. The Seller has no obligation to disclose defects or issues that you could find out on your own with a little effort, called “due diligence.” (The Seller does have a statutory duty to tell you about the presence of lead paint or urea formaldehyde foam insulation.) Do you know what you want? Have you written down some of the features of a home that are important to you? Are you handy or not? And, most importantly, have you been pre-approved for your mortgage? Do you know how much you can spend? As part of your search for just the right property for you, a visit to the Town Hall could be in order to determine: (a) zoning district and map; (b) construction or improvements to the property (especially to determine if there has been an underground fuel storage tank on the premises at any time); (c) historic district or restriction;(d) wetlands; and so forth.
Legal Contract
The purchase of real estate is a very large investment. At several stages in this process, you will be entering into legally binding contracts. The “Offer to Purchase” and the “Purchase and Sale Agreement” are contracts with consequences. It would be wise to have counsel on your side early in the process.
Broker
Real Estate brokers earn a commission on the sale of real estate. The Broker is paid by the Seller. The Broker is the agent of the Seller. Brokers are skilled in putting the Buyer together with the right property when the Buyer has been clear about what the Buyer wants. You may have developed a rapport with your selling broker, but you must always remember that the Broker is not your agent. You, the Buyer, and the selling Broker may have differing agendas. In some instances, buyers engage the services of a “buyer’s broker” to represent or their interests in the process.
Offer to Purchase
Your Offer must contain certain contingencies to allow you to conduct your due diligence, such as (a) mortgage financing contingency; (b) home and pest inspection contingency; (c) potable water, if there is a well; and (d) radon test contingency. If you contemplate repairs, renovations, or additions, then you need to add a contingency to check building and zoning restrictions. Other potential issues include Lead paint, septic systems, urea-formaldehyde foam insulation, asbestos, carbon monoxide, and zoning compliance of accessory structures.
Home Inspectors
Home inspectors are regulated and licensed by the Commonwealth of Massachusetts: Division of Professional Licensure at 239 Causeway Street, Boston, MA 02114. (617)727-3074. Also, you can check online for your inspector’s license at: http://license.reg.state.ma.us/loca/locaProf.asp When you have engaged your inspector, make sure to ask for his or her license number and evidence of insurance. All inspectors will have a written contract for you to sign. Read it carefully. If you want to have a pest (termite) inspection, this is not encompassed in the routine home inspection, it is an extra. Word of mouth is often a good way to select a competent inspector. During the inspection, issues may come up. Perhaps the Seller’s debris is so tightly packed in the basement that the inspector cannot see much. Have your Broker negotiate for better conditions for the inspector. You will attend the inspection. Be especially wary of the mystery pipe. ( Where does it go and what was it for? This may be the only evidence of a prior underground fuel storage tank.) (This prompts you to run to the Fire Department and check the records for the removal of said tank.)
Purchase and Sale Agreement
Most frequently, the Greater Boston Real Estate Board’s standard form Purchase and Sale Agreement is used for real estate transactions in the greater Boston area. You and your attorney will have to tailor the form to fit your needs and situation.
Duties of the Buyer
Commonly, the Purchase and Sale Agreement will require the Buyer to have made a complete mortgage loan application by a certain date and to have obtained a written commitment of his or her loan by another certain date. Hence, the Buyer must diligently provide the documents requested by the mortgage lender and generally attend to the process without delay. The closing will not be scheduled by the lender until and unless the Buyer has submitted proof of having obtained property insurance, called hazard insurance.
Financing
The subject of financing is beyond the scope of this article. Suffice it to say, you must shop around. Not all mortgage lenders are the same and not all mortgage loans are the same. You can get really neat online help with all sorts of real estate financing-related issues. For example. you can calculate your monthly payment by using an amortization calculator.