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.<\/p>\n
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.<\/p>\n
\u20221.\u00a0\u00a0\u00a0\u00a0\u00a0 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.<\/p>\n
\u20222.\u00a0\u00a0\u00a0\u00a0\u00a0 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.<\/p>\n
\u20223.\u00a0\u00a0\u00a0\u00a0\u00a0 Be Precise in Indicating What is “Included” and Excluded” from the Sale.\u00a0 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.<\/p>\n
\u20224.\u00a0\u00a0\u00a0\u00a0\u00a0 Be Realstic in Terms of Date for Mortgage Commitment and Submission.\u00a0 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.<\/p>\n
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.<\/p>\n","protected":false},"excerpt":{"rendered":"
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” … Continue reading The Offer To Purchase–Massachusetts (and perhaps other) Realtors Should Make Extra Effort on this Important Document<\/span>