Buying a House in Massachusetts

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Buying a House in Massachusetts

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Buying a house is one of the most important legal transactions you'll ever undertake. It's important to know your legal rights and understand the process.

Working With a Real Estate Agent
In Massachusetts, real estate agents have what's called a "fiduciary duty" to the party that they are representing, in this case, the buyer. As a fiduciary, a real estate agent is held by law to owe specific duties to the party that they are representing, in addition to duties or obligations stated in a listing agreement, an agency agreement, or other contract of employment.

The state of Massachusetts requires that real estate agents provide full disclosure to home buyers and sellers at their first meeting on the Real Estate Agency Disclosure Form. The state disclosure form provides information on consumer's rights and the various agency options. The form must be presented to every prospective home buyer and seller by any real estate agent upon first meeting with the consumer to discuss a specific property or property purchase.

The specific fiduciary duties of a seller's agent include:

Loyalty
Full disclosure
Confidentiality
Reasonable care
Account for funds
Obedience to lawful instruction
Massachusetts does not require seller property disclosure forms. Some, but not all, real estate companies use a voluntary form, which covers title, zoning, system utilities, building and structural information as well as water drainage problems. As a buyer, you should ask for the information at the appropriate time because every seller has the duty to respond fully and accurately to any request for information about a property.

Sellers are only required to disclose lead-based paint and urea formaldehyde foam insulation (UFFI), so it is up to you and your home inspectors to uncover defects or other possible adverse influences such as radon, asbestos, underground fuel tanks and so forth.

For residences built before 1978, Massachusetts and the federal Residential Lead-Based Paint Hazard Reduction Act of 1992 provide that buyers be given the right to take up to ten days to inspect a property for the presence of lead paint. This right may be waived. Massachusetts law does not prohibit the sale of properties containing lead paint or other potentially hazardous substances.

Purchase Agreements
When you find a house you'd like to buy, you'll put together and sign a purchase and sale agreement. A purchase and sale agreement is binding after the document has been agreed to and signed by the buyer and seller. Often in the purchase of real estate, there are a number of offers and counter offers until an agreement is reached.

It is customary for the buyer to give a deposit or binder as a show of good faith at the time an offer is presented. Normally this deposit is held in escrow (meaning that the money is held by a third party, usually a real estate broker, a title insurance company, or an attorney until closing on the sale in completed), but not deposited until the seller has accepted the buyer's offer.

The purchase and sale agreement should include the following information:

Parties
Property description
Insurance
Mortgage contingency
Deposit amount
Purchase price
The transactions involved in purchasing a home give rise to a number of legal question that a Massachusetts real estate attorney with real estate background and experience is best equipped to answer.

Inspection
Most municipalities in Massachusetts do not require a property inspection prior to the sale of residential properly but it's always a good idea to hire an independent professional home inspection service before you buy a house. You may wish to employ a professional home inspector, lead paint inspector, termite and pest inspector, sewage and septic system inspector, engineer or other expert to evaluate the property as a condition of an offer.

An inspection should include an examination of the overall home construction and condition, wood damage, presence of lead (disclosure required on all homes built before 1978), disclosure of known elevated levels of radon, environmental hazards (presence of any substance in building material, soil, water or air that poses a health risk) and condition of soil.

Legal Title Issues
Most banks and mortgage lenders require that an examination of the seller's title to the property be conducted to determine if the property is marketable and will provide adequate security for the loan it is making. Your real estate lawyer or title company will investigate the legal title of the property you want to buy, and may find issues with the legal title you'll need to understand.

In Massachusetts, for example, an implied easement may be present where there is an easement by necessity. Generally, whenever a transfer occurs that results in a "landlocked" parcel and there is no method of access whatsoever, except over the land retained by the seller, or over the land of a stranger, then the necessity is recognized. Another implied easement is recognized when land in one ownership is divided and, at the time of division, one portion is being used for the benefit of the other portion, as with an access road or a driveway.

The property you're interested in may also be subject to a "lien," which is a claim against real property that serves a security for repayment of a debt payable to the property's owner. The lien is recorded in the public records to give notice to the claim against the property, and usually, liens are to be paid when the property is sold.

In Massachusetts, liens on a piece of property may include:

Mortgages
Construction or mechanic's lien
Judgment liens
Estate tax lien
Federal tax lien
State tax lien
Unpaid municipal utilities (water, sewer and electric lights)
Past due child support lien
Closing Costs
"Closing costs" are those costs that include the mortgage broker's fee, discount points, appraisal and title search fees, insurance charges, survey fees and other charges associated with the legal transfer of the property. These costs typically amount to between 2% and 3% of the mortgage amount.

In Massachusetts, you may need to pay for the following closing costs at the time you purchase your home:

Loan discount points
Loan origination fee
Underwriting fee
Processing fee
Administrative fee
Appraisal fee
Credit report
Tax service
Flood certification
Document preparation fee
Settlement or closing fee
Title insurance
Recording fee
RESPA

The US Department of Housing and Urban Development's (HUD) Federal Housing Administration (FHA) administers several regulatory programs to ensure equity and efficiency in the sale of housing. One of these programs, under the Real Estate Settlement Procedures Act (RESPA), applies to almost all mortgage loans and mortgage companies, not just FHA-insured mortgages.

RESPA protects consumers by requiring a series of disclosures that prevent unethical practices by mortgage companies and that provide consumers with the information to choose the real estate settlement services most suited to their needs. RESPA helps consumers avoid surprises, like when an unexpected fee appears in your closing documents. The disclosures take place at various times throughout the settlement process. Certain disclosures are required at the time of loan application, before closing occurs, at closing, and after closing.

Mortgages
At the time of purchase, you'll sign a promissory note that legally obligates you to pay back the money you borrowed to buy your house. A promissory note is, in effect, an "IOU." You promise to pay your lender the full amount, payable in equal monthly installments, at the interest rate previously agreed upon. Your lender will keep the original until you completely pay off the loan. A mortgage is a type of security instrument, or a contract in which you name your house as the collateral to secure the repayment of your loan. If you fail to make your loan payments, under the terms of the mortgage, the lender can foreclose on the loan, and your house will be sold to pay off the loan.

It's a good idea to shop around and get the best possible deal on your loan because the terms offered by the lenders will vary.

Private Mortgage Insurance
If you put down less than 20% on a home mortgage, lenders often require you to have "private mortgage insurance" (PMI). PMI is a type of insurance that protects the lender in the event the borrower defaults on the loan, which is a concern if you don't have much equity in your home. PMI covers the gap if the sale of your home in a foreclosure sale might not bring enough to pay off the mortgage plus the foreclosure costs.

The Homeowners Protection Act of 1998 (HPA) establishes rules for automatic termination and borrower cancellation of PMI on home mortgages. Under the 1998 federal law, lenders are required to allow you to drop your PMI once you have 20% equity in your home.


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