Avenue 3 asks a Legal Expert Roger DuPont for home buying tips.
So you've found a property and you're ready to make an offer or, you're thinking about starting the process sometime soon, either way you want to be prepared. Next up, there's the "Offer" and the "Purchase and Sale Agreement", documents that often need explanation and clarity.
So we asked Attorney Roger DuPont of DuPont and LaBonte in Lexington MA questions most commonly asked by Buyers about these documents. We think his answers will give you the information you'll need to feel confident when you sign on the dotted line!
1. In a home purchase the Buyer and Seller sign an Offer to Purchase (“Offer”) followed by a Purchase and Sale Agreement (“P&S”). What is the function of the Offer?
Roger DuPont: The main reason to sign the Offer is for the Buyer and Seller to bind the deal quickly with a small deposit, usually $1,000. It’s really a “mini” Purchase and Sale Agreement and it allows the Buyer and Seller to set the basic terms (price, deposit, closing date, and financing details) before the P&S is signed. During the Offer stage most Buyers have the home inspected by a professional. If any defects are discovered they can be negotiated and, if Buyer and Seller agree, addressed in the ensuing P&S. The result can be that there is a price reduction, credit at closing, repairs by the Seller or some combination thereof. It’s also extremely important for the Buyer to remember that if he/she wants any special terms to be included in the purchase, it is critical to add them to the Offer. Those special terms might be as major as Buyer’s need to sell his/her current home in order to afford the new one; or as minor as including the swing set or appliances as part of the deal. If you are a Buyer and have special terms in mind, but do not state them in the Offer, it may be difficult, if not impossible, to add them to the P&S later. Remember, even though the Offer is a preliminary document, it is still a binding contract which creates legal rights and obligations.
Tip: Make sure that you change the language in the Offer form that says that the parties will execute a “standard form purchase and sale agreement” to a “mutually acceptable purchase and sale agreement”. While the standard form will be used as part of the P&S, it should be amended and supplemented to make it fit the transaction.
2. What steps are necessary to move from the Offer to the P&S?
Roger DuPont: Once the Offer is signed, the inspection is completed and the Buyer and Seller agree how to handle any resulting inspection issues, it’s time to proceed to the P&S and to pay the deposit (usually 5% of the purchase price including the $1,000 paid with the Offer). The standard form of the P&S not only incorporates the major terms of the Offer, but also adds numerous important details. To name just a few, it addresses the quality of the title to be transferred, the amount of time a Seller may extend the closing date to correct any title problems that may be discovered, the condition of the property on the day of sale and what happens if the Buyer is unable to obtain a mortgage. Note that it is generally accepted practice for the Buyer’s attorney to make changes to the face of the P&S and to add additional provisions with a Buyer’s Addendum. The addendum often addresses issues such as Seller’s knowledge of specific property conditions (such as the presence of underground oil tanks or other environmental factors), any current or potential legal issues or lawsuits involving the property and Seller’s obligation to make repairs or to credit the Buyer as a result of the home inspection.
Tip: Make sure that you and your attorney both have the mortgage contingency date (deadline) in your calendars and that you both review the terms of the written commitment before that date expires to make sure that there are no unexpected conditions included.
It’s important to remember that each real estate transaction is unique and all are determined by their particular facts and circumstances. By necessity, the advice contained here is general and cannot address each detail of your purchase. Therefore, if you have specific questions or concerns about the Offer/Purchase & Sale/Closing process you should consult with a real estate attorney.
When you're ready for a real estate attorney you can contact Roger DuPont at:
DuPont and LaBonte
24 Muzzey Street
Lexington, MA 02421
781-863-8668
Email: rad@dupontandlabonte.com
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