What’s the difference between a Massachusetts Offer and Purchase and Sales Agreement?
If you’ve never bought real estate in Massachusetts, you’re probably wondering, “What’s the difference between a Massachusetts Offer and Purchase and Sales Agreement?”
The buying process is quite different here than in other states. But don’t worry, I’m going to walk you through the basics so you can understand the differences between these two important documents, and what to expect during the process.
The difference between a Massachusetts Offer and Purchase and Sales Agreement
In Massachusetts, the offer process typically consists of two parts. First, the buyer submits a Massachusetts Offer to Purchase, which we like to just call the Massachusetts Offer. This is basically a written offer that includes some of the key details that the buyer is setting forth, such as purchase price, closing date, financing, etc. The seller will then go back and forth with the buyer to settle the terms of the offer. When both the buyer and seller are happy with the terms, the Purchase and Sales Agreement comes next and is used to formalize the details of the sale.
To put it more simply, it’s a two-step process that looks like this:
- The buyer submits the Massachusetts Offer with key details about the offer
- The buyer and seller make their own changes to the offer until they’re both happy, and then they proceed with a formal Purchase and Sales Agreement
This, however, is only a custom in Massachusetts and is not a law. There is one major catch that you should be aware of, though. That is, a signed Massachusetts Offer is actually considered to be a binding contract. Whether you are the buyer or seller, signing the Massachusetts Offer means you approve of and intend to proceed with the terms set forth in the offer. Now, certain things can still be negotiated from this point, such as if you need to adjust the closing date by a few days. On the other hand, the signed offer makes it more difficult to change the substantial details, such as purchase price or contingencies, which can have a greater impact on the sale (and your life).
If you’re buying or selling, think of the Massachusetts Offer as a rough draft of the final offer — and take it seriously. For additional details about buying and selling in Massachusetts, read this chapter from the International Lawyers Network.
Now that you know the difference between a Massachusetts Offer and Purchase and Sales Agreement, it’s time to go through what the process looks like.
Making a Massachusetts Offer
You’re probably wondering:
- What goes into a Massachusetts Offer?
- Is there anything that will protect me when making the offer?
- Is there anything that could keep me from making the offer?
If you’re buying for the first time in Massachusetts, or just need a refresher, let me walk you through these three key points.
What goes into a Massachusetts Offer?
The Greater Boston Real Estate Board (GBREB) has created a form that most brokers use to draft a Massachusetts Offer to Purchase. When the offer is drafted, this form includes the following:
- The property’s MLS number, along with a description of the property
- What is included in the sale, such as appliances, furniture, light fixtures, etc.
- Deposits – $1,000 is a typical deposit amount that binds the buyer to the offer, and also shows the seller that the buyer is committed to the offer
- Expiration date of the offer
- Closing date
Is there anything that will protect me when making a Massachusetts Offer?
A lot of sellers won’t consider any offers that don’t include a deposit. If you opt out of the purchase, you will forfeit this deposit. Having said that, your broker will help you include contingencies in your offer, which will protect you in certain cases and allow you to get your deposit back. Contingencies are described in the Addendum to Offer.
For example, if you include an inspection contingency that allows you to back out if the property is found to have wood-destroying insects (termites), mold, drainage/sewer issues, or other major problems, these will be included in the Addendum to Offer. You’ll be able to back out of the purchase and receive your deposit back by exercising this contingency.
Is there anything that could keep me from making a Massachusetts Offer?
If you’re paying with cash, you’ll be all set to make your offer as long as you’re able to prove that you have the funds. But if you need to finance your purchase (like most buyers do), you won’t be able to make your offer until you receive a pre-approval letter from your lender. A lot of real estate agents also require a pre-approval letter before they start to take your house hunt seriously. Once you receive your pre-approval, you can show the seller that you’re financially qualified to proceed with buying their home.
What is the process for making a Massachusetts Offer?
Making a Massachusetts Offer is a pretty straightforward process. Your offer will be written up by your agent, and you’ll send a check for your deposit amount. Your offer will then be presented to the seller (directly or via their agent). From there, the seller can accept, counter, or reject your offer.
Often, the seller will counter the offer price or some other terms, which opens up the deal for negotiations. After you and the seller settle the terms of the offer, you’ll both sign the offer and then it will be replaced by the more formal Purchase and Sales Agreement.
What happens with the Purchase and Sales Agreement?
Lawyers are key to the Purchase and Sales Agreement. This agreement is usually drafted by the seller’s attorney and includes all the details about the purchase and sale. These details include purchase price, down payment amount, financing, property liens, closing costs, and a lot more. You (the buyer) will have your attorney review the drafted agreement. Once everything looks to be in order, you and the seller will sign the formal agreement, and then you’ll send it to your mortgage lender.
Don’t buy without a legal expert
Home buying can be stressful, and you need all the peace of mind you can get. I offer free legal review of your Massachusetts Offer and your Purchase and Sales Agreement, and I can help your realtor draft both. Contact me for free legal help with your home purchase.