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.
(Go to top.)