- How do you make an offer to buy a home or land in the Berkshires?
- What are the differences between buying real estate in the Berkshires and New York?
- Can I get out of the deal if I have an “attorney review clause” in my real estate contract?
- Is it OK to sign the Standard Berkshire County Multiple Listing Service Purchase and Sale Agreement?
In the Berkshires, the usual way to make an offer is to use a standard Purchase and Sale Agreement (the ‘P&S’). The buyer presents the signed P&S to the seller, and if the seller signs it, the P&S then becomes a legally binding contract.
How do you make an offer to buy a home or land in the Berkshires?
The process of buying real estate is different in the Berkshires than the rest of Massachusetts or New York.
In most places, including the rest of Massachusetts, you may sign a short document that is an “offer” or “letter of intent” to purchase a home or land. This offer letter is not binding and is really just an expression of the parties’ intent to enter into a contract. The parties may negotiate the terms of the offer, such as price, closing date and mortgage amount, and then, if the offer is accepted, they will work towards signing a more detailed and legally binding “Purchase and Sale Agreement.”
We do not use that form or process here.
In the Berkshires, the usual way to make an offer is to use the “Standard Berkshire County Multiple Listing Service Purchase and Sale Agreement.” The Broker prepares the Purchase and Sale Agreement; the buyer then signs the Purchase and Sale Agreement and presents it to the seller. If accepted, the seller signs the Agreement, and the offer becomes a legally binding contract. In other words, once the Agreement is signed by both the seller and the buyer, you may not be able to change the essential terms of the agreement. Under the terms of the standard agreement, the buyer’s first deposit is due on the same day the agreement is fully executed by both parties. The first deposit is usually one percent of the total purchase price.
Typically, an “attorney review period” (usually 3-5 business days) is included in the Purchase and Sale Agreement, during which time the parties’ respective attorneys may address issues and dates not included in the original Agreement and propose changes to the contract. (See more about the attorney review clause below.) Importantly, this clause does not give you the right to withdraw your offer without forfeiting your initial deposit. The attorney review clause does allow for technical adjustments by your attorney to correct legal errors and, arguably, to re-negotiate important terms. However, once the Agreement is fully executed, the right to withdraw is reserved to specific contingencies in the contract.
Why is it important that there is a difference between offers in the Berkshires and other regions? Because you may not be able to substantially change or withdraw from the contract after the seller accepts your offer. You are strongly advised to have an attorney review the Standard Berkshire County Multiple Listing Service Purchase and Sale Agreement before signing it. Tell your attorney how you plan to use the property so your attorney can ensure that you have enough time to perform due diligence without putting your deposit at risk. For example, you will want to be able to inspect the property and have your attorney confirm that no zoning issues or land use restrictions prevent you from using the property as you intended.
The standard contract contains several contingencies with corresponding “contingency dates”. These include an inspection contingency, a mortgage contingency, an insurance contingency and, if the property contains a septic system, a septic system inspection contingency. If you discover a problem with the home or land before the expiration of the inspection contingency date, you will be able to withdraw from the contract and your initial deposit will be returned to you. Alternatively, your attorney can help you negotiate with the seller to repair any defects revealed by the inspections or provide a credit so you can repair it yourself after the closing. However, if the inspection contingency date has already passed by the time you discover the defect, you will not be able to withdraw or negotiate repairs or credits. There is a second deposit (typically four percent of the total purchase price) that is due from the buyer immediately after the inspection contingency dates expires.
The mortgage contingency clause also allows you to withdraw from the contract and get your deposits back, but only if you apply for the mortgage in a timely manner and if your bank informs you in writing that you are not approved for a mortgage.. However, if you find out that you can’t get a mortgage after the mortgage contingency date has passed, you will not be able to receive the return of your deposit. This is why it is extremely important for your attorney to monitor these dates and, if necessary, request extensions from the seller’s attorney.
An experienced attorney will often propose an addendum to the Purchase and Sale Agreement to protect your deposit and add contingencies. These contingencies might include statements for things like septic system/Title V compliance, radon gas mitigation, UFFI insulation, lead paint, and your access to the property while it is under agreement. If you tell the attorney how you plan to use the property (strongly advised), the attorney can also add contingencies for the stated use based on zoning or other restrictions.
If a homeowner’s association is involved (both incorporated and unincorporated associations), an experienced attorney will ask for representations about annual dues, special assessments, pending lawsuits, and other possible restrictions.
Even though the Standard Berkshire County Multiple Listing Service Purchase and Sale Agreement is a standard agreement, your purchase could be anything but standard. An attorney familiar with Berkshire County real estate will be able to protect your interests and propose changes to the standard contract based on your particular circumstances and desires.
“The process of buying real estate is different in Massachusetts than New York and most other states.”
“In New York, title companies do all of the legwork for closing. In the Berkshires, that work is done by the buyer’s attorney.”
What are the differences between buying real estate in the Berkshires and New York?
The process of buying real estate is different in Massachusetts than New York and most other states. The biggest difference is that in other states, most of the work is performed by real estate agents and title companies. Massachusetts General Laws Chapter 221, Section46A, prohibits the unauthorized practice of law by nonlawyers. Practically speaking, that means that the roles of the real estate agent and the title company are more limited in the Berkshires than in New York and many other states.
Outside of Berkshire County, it is common for the buyer to provide an “offer” or “letter of intent” on a standard non-binding form. If accepted, the offer is incorporated into a legally binding contract. You might work with an attorney to review the P&S and make a counter with another Rider. Often, one or both of the parties are not represented by an attorney.
In the Berkshires, the process is very different. There is no “offer” document. The buyer’s real estate agent may provide a copy of the “Standard Berkshire County Multiple Listing Service Purchase and Sale Agreement” and fill in some blanks. However, the agent may not make edits to the material terms of the form. The agent also is legally limited regarding advice given to you about conditions to add to the standard form or the wording of those conditions. This is a binding document, so it is important that the attorney reviews the wording and adds an addendum if necessary.
Title searches and other tasks for determining a clean title are also handled differently here. In New York, title companies do all of the legwork for closing. In the Berkshires, that work is done by the buyer’s attorney, and the title company is usually limited to providing title insurance. Attorneys in the Berkshires perform the title search and zoning review, obtain the MLC (Municipal Lien Certificate to certify that real estate taxes and other municipal charges against the property are paid) and prepare the settlement statement instead of the title company. Attorneys in the Berkshires also work with the buyer’s lender to prepare and review mortgage documents and oversee execution of the mortgage documents at closing.
The standard contract contains several contingencies, such as the inspection contingency and the mortgage contingency, with corresponding ‘contingency dates’.
Can I get out of the deal if I have an “attorney review clause” in my real estate contract?
New Yorkers and buyers from other states, as well as Massachusetts buyers from outside of the Berkshires, need to be careful. An offer that is made with the “Standard Berkshire County Multiple Listing Service Purchase and Sale Agreement” is binding if accepted by the seller.
Real estate agents may advise that you are protected if you to add an “attorney review” clause to Section 35 of the “Standard Berkshire County Multiple Listing Service Purchase and Sale Agreement.” They may recommend wording such as “Subject to Buyers and Sellers attorney review and acceptance within three business days of full execution.”
Does this mean you can get out of the deal and blame it on the attorney? Legally, no. The purpose of the review is to remedy legal defects in the document. The attorney cannot reject a contract for a non-legal reason. For example, if an error was made in describing the property, the review is an opportunity to fix the error. The attorney review clause does not provide a global right to withdraw. Arguably, the attorney review period provides the attorney an opportunity to re-negotiate some terms of the contract or propose additional terms. For example, if the contract is signed with an inspection contingency date that does not realistically provide the buyer enough time to perform a home inspection, the attorney can propose a different date. However, there is no guarantee that the seller will agree to this change, and the buyer could be stuck with a contract without a feasible inspection period.
In summary, if your offer is accepted by the seller, you are not permitted to withdraw from the contract without forfeiting your deposit, unless you properly withdraw under one of the specific contingency terms. If you are the seller, you cannot withdraw from the contract at all, and you are legally obligated to sell the property unless the buyer breaches a material term of the contract. It is a good idea to have an experienced real estate attorney in the Berkshires review any offers before signing them.
“The Standard Berkshire County Multiple Listing Service Purchase and Sale Agreement is a legal document, and including an “attorney review period” does not necessarily provide protection if you decide to withdraw after the offer is accepted.”
Is it OK to sign the Standard Berkshire County Multiple Listing Service Purchase and Sale Agreement?
It is always a good idea to ask a real estate attorney to review a Purchase and Sale Agreement before signing it. As stated before, the Standard Berkshire County Multiple Listing Service Purchase and Sale Agreement is a legal document, and including an “attorney review period” does not provide protection if you decide to withdraw after the offer is accepted.
If you use the standard form and the purchase is not complex, the document review is usually very quick. It takes a longer time if a problem is identified. And, if a problem is identified, you will want the review.
The information contained in this website is provided for informational purposes only, and should not be construed as legal advice on any subject matter. You should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice.