What to expect when buying a home in Massachusetts
When buying a home in Massachusetts all offers to purchase property must be made in writing. In order for the buyer to show good faith to the seller, an escrow check in the amount of $1,000, customarily accompanies an Offer to Purchase. Your Offer to Purchase permits deposit of your check into an escrow account only after all parties have signed the agreement. Most agreements further state that additional escrow monies shall be placed on deposit at the signing of the Purchase and Sale Agreement. The additional deposit combined with the offer deposit usually equals between 5 and 10 percent of the sale price.
The closing date is specified on both the Offer and the Purchase and Sale Agreement, usually about six to eight weeks from the signing of the original offer. The agreement forms prepared by most Realtors in the area have been developed by the Greater Boston Real Estate Board and their legal counsel. Read all portions of all contracts before signing.
We highly recommend the use of a real estate attorney to guide you in this very important area. If you do not have one, we will be happy to recommend some to you. Remember, after both parties have signed these documents, you are legally obligated. Deletions and/or changes may be made afterward on the fully signed document only when they are agreed upon in writing by both parties.
A mortgage contingency, structural, radon and pest inspection contingencies and Title V Septic certification are normal portions of every Offer to Purchase. The pest, radon and structural inspections are paid for by the buyer and must be satisfactory to the buyer. The Title V Certification is supplied by the Seller. Should you need a list of inspectors, your Realtor will be happy to provide one for you. These contingencies are usually satisfied before the signing of the Purchase and Sale Agreement. The mortgage contingency, however, is usually carried over into the Purchase and Sale Agreement. These contingencies are for the protection of all involved in the transaction, and we highly recommend that they be incorporated into an agreement.
During the time of the mortgage contingency, which is usually about three business weeks, you should plan to consult with several banks to find the one that best suits your needs. We will be happy to assist you by providing up-to-date information on local lenders, their services and rates. Upon acceptance of a mortgage contingency, a conveyance attorney is assigned to you by the bank. The attorney is responsible for the bank's interest in the real property. The buyer is responsible for payment of his services.
At the closing, both the buyer and seller will sign all necessary papers. It is customary in this area for the bank to require the buyer to escrow his real taxes and hazard insurance payments at the bank. The bank will then pay these amounts for you when they come due. If you have any other questions regarding local practices, please remember, we are only a telephone call away, and welcome your inquiry.
Role of an Attorney in the Real Estate Transaction
The Purchase or Sale of your home is one of the most important transactions you will ever make. The process of buying a home requires attention to numerous details, many of which require extensive knowledge of local real estate laws. Therefore, it is advisable to consult with and enlist the services of a knowledgeable real estate attorney.
The role of an attorney is particularly important in the following matters:
A. Purchase and Sale Agreement
To avoid potential complications, it is advisable for both the buyer and seller to enlist the services of a real estate attorney prior to signing a Purchase and Sale Agreement. By doing this, each attorney can help make his/her client aware of the legal ramifications of each clause in the Purchase and Sale Agreement.
B. Title Search
This is accomplished by examining the records at the Registry of Deeds and, in some cases, the Registry of Probate of the county in which the property is located to insure that the owner does in fact have a good, clear record and marketable title to the property. The title search will also reveal any encumbrances, rights of way, easements, restrictions and any other matters or conditions which may affect the property.
C. The Closing
This is the final financial settlement. The buyer, the seller, their respective attorneys, and the attorney for the mortgage holder meet to finalize and execute all the closing documents. These include, among many others:
- The Deed
- Discharges of Mortgages
- Promissory Note and Mortgage
- The Truth in Lending Statement which documents all finance charges
- Surveyor Mortgage Plot Plan
- Final Accounting which involves a prorating of property taxes, water bills, etc.
Do After the Closing
After the closing, the title examination is updated and the Deed, Mortgage and other miscellaneous documents, including a Municipal Lien Certificate from the town or city in which the property is located, are recorded in the Registry of Deeds, at which time title to the property is transferred to the new owner.
The attorney's role is to make sure that his/her client is informed and protected through the transaction. When choosing an attorney, keep in mind that many specialize in certain aspects of legal practice. You should take the time to make sure that the attorney you choose is familiar with local real estate laws and practices.
Role of a Lender in the Real Estate Transaction
In most real estate transactions you need to establish a relationship with a local lender to act as the mortgage holder. Some of the key factors in choosing your lender are:
- Interest Rates
- Points
- Types of Mortgages
- Length of Terms Available
- Fixed Rate
- Fluctuating Rate
It is important to search for a lender who is willing to act as a financial counselor. He should be able and willing to analyze your financial situation and offer you a mortgage tailored to your particular needs keeping in mind interest rates, cash requirements and monthly payments.
WHAT TO BRING WHEN APPLYING FOR A MORTGAGE
- Purchase and Sale Agreement executed by all parties.
- Account numbers for each bank account where deposits are held, including the name and full address of each depository.
- Loan numbers for each mortgage loan outstanding on other properties owned, plus the name and full address of each lender.
- Loan numbers for each installment loan outstanding, plus the name and full address of each lender.
- Name and telephone number of a person whom the appraiser should contact to gain access to the property being financed.
- Name and telephone number of the real estate broker (if any) involved in the transaction.
- Your own attorney's name and telephone number (if applicable).
- A copy of your cancelled earnest money check.
- A complete schedule of your real estate holdings. Include the address of each property, the type of property and number of rental units if rented, the income from each property, the mortgage payments, the taxes and insurance and any income (or loss) from operating the property.
- If you are self-employed or have tax shelters, bring two years' income tax returns.
- Social Security numbers for each borrower.
- Name and address of your present employer(s) for each borrower; if employed less than two years, the name( s) and address( es ) of previous employers during the previous two years.
- Be prepared to verify if you were a full-time student at any time during the past two years.
- Photocopies of your stocks and bonds, if you use their value to qualify for the mortgage loan; if they are in the hands of your broker, provide the name and address of your broker, plus your account number(s).
- Condominium buyers should try to obtain a copy of the condominium documents if the project is FNMA 1028. This will circumvent the need for providing the condominium documents to the lender.
- An estimate of the annual property taxes and reliable quote for insurance; condominium buyers should provide an estimate for the homeowners association fee. If this fee includes heat, include that information.
Role of an Insurance Agent in the Real Estate Transaction
The role of the agent is to provide a comprehensive policy which will provide adequate protection in the event of a loss. It should provide coverage for your dwelling, personal property, loss of use, and liability. The amount of insurance should equal the replacement value of the dwelling. A bank or mortgage company cannot require insurance in excess of the dwelling replacement cost. The insurance agent can help you to calculate the replacement value of your new home.
Although the provisions of the basic homeowner contract are set by the insurance commissioner, the rates are competitive. Your goal is to acquire quality protection and service at an affordable price. There are various endorsements to the basic homeowner contract to enhance the coverage, to amend limitations and to tailor the policy to suit your particular needs.
It is important that the agent make you aware of these endorsements so that you make an informed decision on the structure of your policy. It is also important that you be informed of the policy exclusions, some of which can be altered or amended by endorsement and some which cannot.
Your home is likely to be your largest investment you will make, therefore it is vital that you select an insurance agent of integrity and demonstrated competence.
