In Massachusetts, where I practice as a real estate attorney, there is a two step process for most real estate purchases. Usually without the assistance of counsel, the parties enter into an Offer to Purchase (the “OTP”). There are some contingencies in the OTP, which generally center around a “satisfactory” inspection. If the property “passes” inspection, the next step is to enter into a Purchase and Sale Agreement (the “PNS”) which has more provisions than the OTP, and “fleshes out” the details of the transaction in greater depth. What every real estate professional in Massachusetts needs to take note of, however, is that there are Massachusetts Supreme Judicial Court decisions, which clearly hold that the OTP, if it includes the basic facts of the transaction (like purchase price, closing date and the like), can be viewed as an enforceable contract, upon which the Buyer can sue the Seller for specific performance, even if the parties are never able to work out a mutually satisfactory PNS.
That being the case, I thought I would make some observations about what I am seeing in many OTP’s which can, and should be, improved by the realtors who generally draw the documents up.
1. Make Sure the OTP is legible. This may sound like a basic truism on a document as important as the OTP, but I am amazed at how many times, I receive OTP’s to review, where I cannot read some of the important terms therein, because of strike-overs or substitutions in the margins. The OTP should really be written very neatly, and precisely, because it is from this document that an accurate PNS can be drafted by the attorneys representing the Buyer and Seller.
2. Think Long and Hard About Who Will Hold the PNS Deposit. If you are a Buyer’s agent, and would like to get paid at the closing, you are almost always better off having the attorney for the Seller hold the deposit(s). The Listing Broker holding the deposit often takes his or her time to pay you your fee. Then, you have that ugly possibility that the Listing Broker may experience some kind of financial difficulties which delay (or prevent) your getting paid. I would opt for the attorney, who is subject to strict disciplinary rules if the deposit does not get delivered and who should be willing to pay over the deposit(s) at the closing for distribution by the closing agent.
3. Be Precise in Indicating What is “Included” and Excluded” from the Sale. The OTP is the place to be specific in this area. Many disputes at the PNS level can be avoided if there is definition of the inclusions and exclusions.
4. Be Realstic in Terms of Date for Mortgage Commitment and Submission. I have seen many OTP’s where the date to submit the mortgage application has passed by the time I start working on the PNS. Make the dates comport with reality. Similarly, put in a realistic time frame for the receipt of a mortgage commitment. Lenders are understaffed, and appraisals are taking longer than in the past. Give all parties a chance to do what is possible.
As I said above, the OTP is basically completed by the realtors. If you are involved, take the time to make your OTP accurate and realistic. It will make your transactions move more smoothly, and the extra time spent at the outset of the transaction will almost always bear fruit somewhere down the line.
The Offer to Purchase–It behooves realtor’s to spend extra time on this important document
15 12 2009Comments : 2 Comments »
Tags: Offer to Purchase; Purchase and Sale Agreement
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Home Owner’s Title Insurance–Lots of real benefits for realtors, too
6 12 2009The subject of Home Owner’s Title Insurance always comes up in purchase transactions in which I am involved. For my more sophisticated clients, it is generally a “no-brainer”. The client spends a little extra money and then has piece of mind respecting his or her title which will last throughout ownership of the home. Even if the person performing the title search missed a probate, or didn’t see an undischarged private mortgage, HOTI will cover it. More importantly, even if there is a forgery in the chain of title or the Registry has lost, or misfiled, an important document, the company providing the HOTI will stand behind the title. This assurance provides a lot of comfort for an investment that far outshadows all others for the average purchaser,
Having said all this, and truly believing that HOMI is the right way to go, I am continually shocked when realtors at a purchase closing are neutral,or even negative,about their customer’s purchasing HOTI. Perhpas, they are “grandstanding”, trying to show how they are helping the purchaser to husband each and every of their hard-earned dollars for more important things. Perhaps, they are ignorant of the true benefits of HOTI to the realtors, especially the Buyer’s agent who may be involved in the sale of the property being purchased somewhere down the road.
There follow several reasons why this writer, a person who has conducted thousands of real estate purchases over more than 40 years of practice in Massachusetts, believes that realtors should provide whole-hearted endorsement for the purchase of HOI, not only for their customer’s benefit, but for their own, as well:
1. If there is a title claim, it is more than likely that everyone involved int he purchase trsnaction, including the realtor, will be named in the litigation. This will mean that time, effort and money will need to be expended by ALL particilants to exculpate themselves.
2. If there is a title claim, no matter what the outcome, all people involved will be “tainted” with being involved in a transaction that didn’t turn out quite right. If there is HOTI, the title insurance company will absorb the costs from dollar one. It is unlikely that anyone, other than the person, or entity, certifying the title, will be involved in any of the proceedings. If anything, the realtor who endorsed the purchase of HOTI will seem like a hero for making such a practical, and ultimately beeficial, suggestion.
3. Many times, your purchaser will be a seller some day. If the transaction went well, you will get the listing. Won’t you feel that much better knowing that while selling the property my have its owns set of obstacles, obtaining clear title will not be one of them if HOTI was obtained when the property was purchased.
So the next time you hesitate, or even balk, when the subject of Home Owner’s Title Insurance comes up, think again. The deal you save may be your own!!!!
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Selecting a Real Estate Attorney–Some advice from a 4l year veteran
3 12 2009In my over forty years of practicing real estate law in Massachusetts, I have had clients in all sizes and shapes. Many of my clients have been satisfied with my services, others not so much. When I have disected what went wrong with the clients who were less than enchanted, I found that the old “C” word, communication, led to most of the disappointments on both sides.
With that inmid, I would submit the following set of rules to follow when considering attorneys to assist you in what will, perhaps, be the biggest single investment you will make in your lives.
1. Ask the prospective attorney the following questions:
a. Is real estate you primary area of practice? It seems so obvious, but many times you will have counsel who is “learning while you learn”. This is generally not a good thing.
b. Will you do this on a fixed fee basis or on an hourly basis? Many seasoned attorneys are not afraid to quote a fixed fee. Others will say “hourly” but will consider a “ceiling” on the amount of the fee. Some will day a fixed fee, with the understanding that if the deal goes way off the tracks, the parties may revisit the fee situation to assure that the attorney is not disadvataged when events really changed in the course of the transaction. In any event, too many people enter into a professional relationship with an attorney with no clear understanding of what the matter will cost, and that can lead to disatsifaction on both sides.
c. Whatever is agreed upon for fees, enter into a fee agreement with your attorney. This should set forth the amount of your retainer, if any, the hoursly rate if that is the way the transaction is structured and any other important aspects of the attorney’s representation.
d. Find out in advance if you can expect to be dealing with the attorney you slected most of the time. or if you will be dealing with an Associate or a Paralegal. My firm, Topkins & Bevans, is small, and one of my marketing approaches is “I am the A Team, and there is no B Team”. Other lawyers operate on a different basis. Find out in advance so you will not be frustrated because Mr. X or Ms Y is not returning your calls or emails.
2. Once you have established the rules wth your attorney, learn to live with them. Attorneys, like any other professionals, cannot manage through exception. Realize that the attorney has other clients, and that sometimes you will have to wait for a response.
3. Try to listen to the advice your attorney gives you. AsI said abopve, the purchase or sale of real estate is one of the most important things you will do in your financial life. Once you find the right attorney, listen to what he or she has to say. Many of us have been through thousands of transaction, and we know our crsft. Listen to what we tell you; we are on your side.
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Tags: Real Estate Attorney
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