A home is probably the biggest purchase you will make in your life. Whether you are buying or selling, you should spend significant time educating yourself about the process. The information included here is meant to give you a broad idea about the types of things you should know. For all the necessary information and to get a better idea how it all applies to your situation, make sure to take the time to talk with a real estate agent or broker and others in the home buying or selling process such as a mortgage lender, lawyer, and others.

Multiple Listing Service

The Multiple Listing Service, or “MLS,” is a centralized database that lists real estate for sale in the United States.

Role of the Real Estate Agent

Real estate agents are resources for buyers and sellers and are active in many aspects of the homebuying and selling process, from listing and finding a home, to facilitating in potentially complex negotiations, to giving advice about the offer and purchase agreement, and assisting at closing.

Agency Disclosure

A real estate broker or salesperson must tell you who he or she represents in a prospective transaction, as governed by the state of Massachusetts. This disclosure of the relationship the agent has with you or another party must be made in writing at the time of your first personal meeting to discuss a specific property or properties.

Types of Agent Relationships

Sellers Agent

|
If you engage the services of a listing broker to sell your property, you become the broker's client. That broker represents you, the seller, and owes you undivided loyalty, confidentiality and accountability. In negotiating for the best price and terms, he must put your interests first.

Buyer's Agent

You may engage the services of a broker to represent you exclusively as a buyer of real property. In this case, the broker represents you and is accountable to you. She must obey your instructions and keep confidential anything you tell her that may affect your purchase of real property. In negotiating for the best prices and terms, she must put your interests first.

Disclosed Dual Agent

A broker can work for both the buyer and the seller on the same property provided the broker gets the consent of both parties and provides each with a signed written notice of the relationship. In this case, the broker is considered a "disclosed dual agent." This broker owes both the seller and buyer a duty to deal with them fairly and honestly. In this type of agency relationship, the broker does not represent either the seller or the buyer exclusively, and neither party can expect the broker's undivided loyalty. Undisclosed dual agency by a broker is illegal. Read a dual agency disclosure form. Read a dual agency consent form.

Facilitator

When a real estate agent works as a facilitator that agent assists the seller and buyer in reaching an agreement but does not represent either the seller or buyer in the transaction. The facilitator and the broker with whom the facilitator is affiliated owe the seller and buyer a duty to present each property honestly and accurately by disclosing known material defects about the property and owe a duty to account for funds. Unless otherwise agreed, the facilitator has no duty to keep information received from a seller or buyer confidential. The role of facilitator applies only to the seller and buyer in the particular property transaction involving the seller and buyer. Should the seller and buyer expressly agree a facilitator relationship can be changed to become an exclusive agency relationship with either the seller or the buyer.

Licensed Brokers and Salespersons

Only licensed real estate brokers and salespersons can assist you with the purchase, sale, lease or exchange of real property. The license must be current and in an active status. This assistance includes a number of services, such as examining property for basic valuations (not to be confused with the services of a licensed appraiser), negotiating purchase, sale or lease agreements, maintaining escrow accounts, and advertising.

To become licensed, an applicant must satisfactorily complete the agent curriculum in real estate approved by the Board and pass a written examination conducted by the Board's testing service.

A real estate broker negotiates agreements to sell, exchange, purchase, rent or lease interests in real property for a fee, commission or other valuable consideration for another person. A broker is responsible for accepting and escrowing all funds, such as a deposit placed on the purchase of a home, and for finalizing transactions. A real estate broker must supervise any transactions conducted by a salesperson.

A real estate salesperson engages in some of the same activities as a broker, except for a few important differences. The salesperson cannot complete the negotiation of any agreement or transaction. A salesperson also has no authority or control over escrow funds. A salesperson must be affiliated with a broker, either as an employee or as an independent contractor, and work under the supervision of the broker. A salesperson cannot operate or own a real estate business.

Offer to Purchase

This is a binding and enforceable contract. Have your broker or agent provide you with a comparative market analysis (CMA) to determine the value of the home. A CMA shows you what properties similar to yours have sold for in the area, so you can gauge what your prospective home is worth in relation to those properties. It can also serve as a basis for granting you a loan on a particular property. Also, discuss with the agent in detail the offer you would like to extend. As a sign of your good faith, you may want to consider providing a deposit with your offer. Usually, deposits are between %5 and 10%. This check should be put into escrow by your broker. You can almost always get your deposit back, unless you back out of the deal for a reason not allowed under the Offer to Purchase contract.

An Offer to Purchase often includes an addendum to address certain contingencies. A contingency is states that, in the event of certain described events, you would have the option to revoke your offer to the seller. A standard addendum outlines contingencies for mortgage financing, a home inspection, radon, pest, and lead paint. Be thoughtful about the contingencies you need.

If you make an offer to purchase a property listed by a broker, the broker or salesperson is required to convey your offer to the owner of the property.

Deposits

Both parties need to be clear about who will hold any deposit funds and what will happen in the event of a dispute between the parties. All agreements should be in writing, and no party should sign an agreement or pay any money until they are comfortable that they understand the terms.

If a broker accepts money from you for any reason, that broker must deposit the payment in an escrow account, a bank account which is maintained specifically as a depository for funds belonging to others, in a timely manner. The money must be kept in the escrow account until the transaction is successfully completed or is terminated. It is illegal for a broker to mingle your funds with private or business funds or other non-escrow accounts.

If a salesperson accepts your payment or deposit, the salesperson must turn over this money to the broker with whom she or he is affiliated.

Home Inspection

In Massachusetts, home inspections are not required by law, but they are vital to the home buying process. A standard home inspection is a visual examination of the physical structure (e.g. foundation, roof, walls, and floors) and major interior systems of a residential building (e.g. plumbing, electrical systems, and heating) consisting of one to four dwelling units. If a home inspection uncovers costly major repairs, you may want to re-think the purchase of the home—a contingency you should include in your Offer to Purchase before you move forward. A home inspector's license can be verified with the Board of Registration of Home Inspectors at its website or by calling the Board at (617) 727- 4459.

Inspectors are not required to inspect for wood destroying insects, lead paint, toxic materials, or deal with septic systems. You can (and should, as the case may be) request these additional inspections for which there is an additional fee and likely different inspectors. You may also wish to request special tests to determine the presence of toxic or hazardous materials. These include lead paint, radon, airborne asbestos, urea formaldehyde foam insulation ("UFFI"), oil spillage, and others.

Septic Systems and Cesspools

Massachusetts environmental regulations require that a property which is serviced by a septic system, cesspool or other private waste disposal system be inspected within two (2) years before sale (three (3) years if pumped at least once each year) or within six (6) months after sale (if weather conditions prevent a pre-sale inspection). Only licensed inspectors and soil evaluators may conduct such inspections. Should a system fail an inspection, the buyer and seller may negotiate who will pay to repair or replace the system or, if the agreement for sale contains a contingency, the buyer may decide to withdraw. The fact that a system passes a Title 5 inspection is not a guarantee that the system will continue to function properly. Even a properly maintained system may only last an average of 15 to 20 years.

Smoke Detector Certificates

Massachusetts law requires that all residential structures be equipped with approved smoke detectors upon sale. The local fire department will inspect and then issue a certificate to prove compliance.

Purchase and Sale Agreement (P&S)

After the contingencies in the Offer to Purchase have been resolved (except the mortgage/loan commitment contingency, which cannot be resolved until later), it is time to negotiate the P&S. The P&S, which is a more detailed offer document than the Offer to Purchase, replaces the Offer to Purchase. The P&S includes the following (not an exhaustive list):

  • A legal description of the property
  • The purchase price
  • The escrow amount, when funds are due
  • Information regarding what type of deed, title, and information regarding any liens and encumbrances
  • A description of the physical condition of the property, whether the property is in good standing (e.g. no outstanding notices of violations of any kind), and a plan regarding when the buyer may receive the codes and keys to the property
  • An acknowledgment of the fee due to the broker
  • What happens if the buyer breaches the agreement
  • A summary of the buyer’s financing
  • A provision regarding the inspection and your rights if the inspection is not satisfactory to you
  • Appraisal and loan commitment contingency
  • You can negotiate the terms of a purchase and sale agreement.

An attorney should be involved to help draft and negotiate the terms of this agreement.

Loan application

Usually an appraisal is part of a loan application where real estate is being used as collateral or security for a loan. The lender needs an accurate estimate of value to ensure that the value is equal to or greater than the price you’ve agreed to pay for the home. You will receive a commitment letter from the lender. The letter is an offer to provide you with a loan to purchase your home. The letter should contain specifics regarding the interest rate of the loan, length of the loan and the conditions of the loan’s approval

Before the day of the closing

  • Buy a lender’s title insurance policy, which protects the mortgage lender and your own title insurance policy, which benefits you individually if there is a title problem. 
  • Buy homeowner’s insurance and flood insurance if required
  • Get the utilities put in your name
  • Do a walk-thru of the home you are purchasing to make sure:
    • All of the seller’s personal items have been removed
    • All the items you and the seller agreed to keep in the home are still there
    • All fixtures are still there
    • It is clear of debris 

The Closing

Your attorney is responsible for handling the closing— from preparation, the day of, and any follow up matters. The cost of the closing depends on many factors including the fees, insurance costs, taxes, and the value of the mortgage. You will receive a Good Faith Estimate (GFE) of the costs from your mortgage broker before the day of your closing that should break down the charges.

You will need to sign many documents, including:

  • A promissory note (an agreement that you will repay your mortgage to the lender),
  • A deed conveying ownership (in Massachusetts, we use “quitclaim” deeds. This means that the seller terminates (“quits”) any right and claim to the property so that the transfer of ownership interest can occur)
  • A mortgage (with this document, you are promising the lender your home as security for repayment of the debt, which is the loan amount).

You will also need to sign several other documents including various disclosures, certifications, and statements.

Helpful Resources:
State resources

Office of Consumer Affairs and Business Regulation
10 Park Plaza
Suite 5170
Boston, MA 02116
Administration:
617-973-8700

Consumer Hotline:
617-973-8787
Online Resource Center:
http://www.mass.gov/consumer

Department of Housing and Community Development
100 Cambridge Street, Suite 300
Boston, MA 02114
Phone: (617) 573-1100
Fax: (617) 573-1120
TTY 617-573-1140
www.mass.gov/dhcd
http://www.mass.gov/hed/housing/affordable-own/

Federal Resources
Consumer Financial Protection Bureau
(855) 411-CFPB (2372)
TTY/TDD (855) 729-CFPB (2372)
P.O. Box 4503
Iowa City, IA 52244
Fax (855) 237-2392

http:///www.consumerfinance.gov

U.S. Department of Housing and Urban Development
451 7th Street, SW
Washington, DC 20410
Online FAQ Site:  www.hud.gov/answers
Email:  answers@hud.gov
Telephone:  (800) CALL-FHA (225-5342)
www.hud.gov

Other Relevant Consumer Guides
Managing Credit and Debt
Home Improvement
How to Hire a Contractor and Checklist

Other Resources
(“Buying and Selling a Home in Massachusetts” contains educational information found at the resources below)

Division of Professional Licensure Board of Registration of Real Estate Brokers and Salespersons: http://www.mass.gov/ocabr/licensee/dpl-boards/re/
Massachusetts Association of Realtors: www.marealtor.com