The Offer to Purchase document is often disregarded as a speed bump on the road to a Purchase and Sale Agreement. The Offer serves as the guidepost for the negotiation of the Purchase and Sale Agreement by mapping its essential terms. In Part 1 of our three part series, we are going to focus on the Buyer–we will explore the basics of an Offer and the available terms that every Buyer should consider. We won’t bore you with a dry explanation of what the terms “purchase price” or “time for performance” mean; instead, we are going to focus on practical considerations and terms that are not on the face of a standard form Offer (while we assume a certain level of reader sophistication, for those who want a better understanding of terms that appear in the Offer, we recommend reading our three part series: The Closing).
What is the Offer? An Offer is a document signaling to the Seller the terms upon which the Buyer is willing to purchase the Seller’s property. Once accepted by the Seller, it is a legally binding contract. For our curious readers, we recommend reading: McCarthy v. Tobin, 429 Mass. 84 (1999). This case explains how and why an Offer is legally binding.
The Contingencies All Buyers Should Consider:
- Inspection Contingency: Most Buyers elect to include this contingency for good reason. You wouldn’t buy a used car without kicking the tires, so why would you buy a house blindly? Some waive this contingency to make the Offer look more attractive, but beware: if you find something after the Offer is accepted, the Seller isn’t legally obligated to make any repairs. It is implied in every offer that the Buyer is purchasing the property “as is” unless stated otherwise.
- Appraisal Contingency: This contingency should be in every Offer. Let me say that again: this contingency should be in every Offer. Consider this scenario: the property appraises slightly below the Purchase Price. It’s not so low as to cause your lender to deny your loan, but instead you are asked to bring extra cash to closing to make up this difference. At base, this contingency protects you against a bad deal.
- Sale Contingency: You’ve found the house of your dreams but you need the cash from the sale of your current house to buy it. With this contingency, should the sale of your current house fall through, you’ll be protected. Buyer Beware: this contingency will always be looked at negatively in a Seller’s market.
- Satisfactory Review of Condominium Documents: Condominiums are formed and regulated by many documents (e.g., master deed, declaration of trust, bylaws, insurance policies, meeting minutes, and budgets). Having an experienced attorney review these documents is important. If there’s a problem, you’ll be protected.
- Subject to [Insert Here]: You can make an offer with any contingency. “This transaction is subject to the Buyer winning the lottery.” While you can certainly propose any contingency, whether it will be accepted is a different matter. While an Offer is often drafted frantically to take a house off the market, care and consideration can help to minimize the risk of a deal souring before closing. When in doubt, the counsel of an experience Real Estate Attorney, even before the Offer is placed, can save Buyers many thousands of dollars.
Stiles Law, with offices located in Boston and Marshfield, Massachusetts, is a firm concentrating in real estate conveyancing and mortgage lending services, representing buyers, sellers, borrowers, banks, mortgage companies, investors, builders and developers in all of their real estate and mortgage transactions. Stiles Law serves all areas of eastern Massachusetts–the North Shore, Boston, and Cape Cod, in addition to the entire South Shore, including: Plymouth, Kingston, Duxbury, Hanover, Pembroke, Marshfield, Scituate, Norwell, Cohasset, Hull, Hingham, Weymouth, Braintree, and Quincy.
Copyright © 2014 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts. No child labor laws were breached during the creation of this Blog and Bob Bonkley was compensated for his likeness and appearance in the same.
[whohit]The Offer Part 1 [/whohit]