Buying a Home or Condo in Boston
"Joe not only helped us find the right home, but he was a trusted adviser and friend along the entire process through closing. Joe was a great analytical resource when it came to valuation and experienced in the nuances of the Boston market trends. He was able to help manage us through the negotiating and closing process including being a patient sounding board on a laundry list of questions. We were able to see dozens of places and Joe helped manage our expectations, scrutinize properties, and plan for the remaining process.
Joe helped us find the perfect home that satisfied our unique (and tough to satisfy) preferences."
Chris H, Somerville
Boston real estate transaction basics
1. MORTGAGE PRE-APPROVAL/PROOF OF FUNDS
Unless you are paying cash, it is vital to get pre-approved at the beginning of the process in order to understand how much home you can actually afford. You do not want to be surprised later on in the process.
If you are financing your purchase, all sellers will want to see a pre-approval (if not financing, you will need “proof of funds”) before he or she signs your offer. This market moves quickly and you need to be prepared to submit the pre-approval with your offer.
I can provide you with a short list of great lenders with competitive rates who are very experienced in this market and are appropriate for your needs.
2. WORKING TOGETHER
Over almost 30 years, I have successfully helped hundreds of buyers attain their real estate goals. As your buyer agent, I have several fiduciary obligations to you, among which are loyalty, disclosure, confidentiality, and reasonable care. If you go directly to the listing agent, they owe those duties to the seller, not you.
At our first meeting, we will discuss how we will work together, what your wants and needs are, and we will assemble an action plan for efficiently choosing and viewing properties. We will discuss your property and timing needs.
Also at your first meeting (either physical or electronic) where you discuss particular properties, the Commonwealth of MA requires by law that I present you with the Massachusetts Mandatory Licensee Relationship Disclosure. This is NOT A CONTRACT. It does not obligate you to me. It's purpose is to make you aware of the fiduciary relationship I have with you.
As we winnow down the properties you are interested in and prepare to make an offer, I will be with you to advise you on property value, the proper terms for an offer, and how we can best succede in successfully procuring the property for you.
3. ELEMENTS OF THE OFFER TO PURCHASE
In Massachusetts, the offer to purchase is only the first step in the transaction. It covers price, deposits, inspection, mortgage, and other contingencies.
As your buyer agent, I will advise you and draft the offer with you. I have had decades of experience writing it and presenting it, in addition to constructing the best strategy to get it accepted. If you are unrepresented, the seller agent is prohibited by law from giving you any advice whatsoever. You are at a major disadvantage if you do not have a buyer agent. The seller is represented by an experienced Boston real estate agent and you should be, too.
Here is an example of the offer to purchase real estate and addendum from the Greater Boston Real Estate Board.
There is a binder (initial deposit), usually a check for between $1,000 and $5,000 for more expensive properties.This will be given to the listing agent when your offer is accepted and will be placed in an escrow account upon agreement and written execution by both parties.
The real estate offer to purchase is really only the first part of a three part process:
- Offer to Purchase. The offer lays out the very basic terms of the agreement and then gives you some time to do your due diligence.
- Purchase and Sale contract, also known as the P&S.
- Closing, or passing of title.
The offer to purchase real estate in Boston normally covers price, percentage of the price you will be financing, time frame, and contingencies.
Offer contingencies: Normally, you will want to have your offer subject to the following contingencies to be satisfied by the time you execute the P&S in about10 days. You can get your deposit back and get out of the transaction if these contingencies are not satisfied:
- A satisfactory home inspection. I have a list of experienced, well regarded home inspectors. The fee is generally about $500 depending upon the size of the property. The seller agent is prohibited from making recommendations. We generally put a dollar amount as a cap in the offer.
- Inspection and approval of all condominium documents and financials (if a condo...). A Boston real estate attorney will know what problems to look for in these documents ("condo docs"). As your buyer agent, I can make recommendations for an attorney. Once again, the seller agent is prohibited from doing so. Additionally, you or I as your buyer-agent will want to make every effort to speak with the Trustee and or management company for the association in order to find out if there are any current building problems, upcoming projects, or special assessmants. The financials should include line items for all common area costs such as water and sewer, master insurance, contributions to reserve, etc.
- Mortgage contingency (if the purchase will be financed). This contingency is actually usually set to expire about three weeks after you execute the purchase and sale contract . This protects you from having to buy the property if your financing falls through. It states the time frame and terms you are allowed in order to get approved. Your buyer agent can advise you with this.
- There may be other contingencies depending upon your circumstances.
Additionally, you will be asked to submit
- The pre approval letter from your bank if you are financing your purchase. If you are not financing, you will be asked to provide proof of funds.
- A mandatory agency disclosure form form stating whether your broker is working for you as a buyer's or seller's broker. It is very important that your agent work with you as a buyer agent. You should be signing this disclosure at your first meeting with your agent.
- A signed lead notification form (most properties in Boston are NOT de-leaded) if the property was constructed before 1978. This discloses whether the seller has any knowledge of the presence of lead paint in the property. While not required with the offer, it will be required prior to P&S.
4. PREPARING AND NEGOTIATING THE OFFER TO PURCHASE REAL ESTATE
Our objective is obviously to get the property for the lowest possible price. The average selling price of homes and condos recently in Boston and suburbs has been around 95-105% +, depending on neighborhood, etc (see market report ). That having been said, in some neighborhoods, such as the South End, selling prices have averaged higher than asking prices. The suburbs have been very competitive. We've entered a period of high sales activity, which can be a challenging situation for buyers.
Obviously some properties go for less, and these days, many sell above asking price. Right now, due to lack of inventory and other market factors, sellers hold an edge, but that depends upon the property, the seller's motivation, and the time on market. if the property has been on the market for a couple of months, doesn't show well, isn't located well, isn't priced appropriately, it is a different case than if the property has just entered the market, shows great, is in a great location, is priced properly, and other people are interested in it.
My job is to use all my tools and skills to provide as strong a negotiating position as possible.
I will assist you in determining the property value range. I have years of experience to apply to this process. We want to apply appropriate downward pressure and to make a strong case for our offering price. Will we have competition in getting the property, or will the seller be flexible? Some sellers will flex even if it is a good deal, and others won't, even if it is overpriced.
The transaction timeframe:
The general time frame for the purchase process is usually about six weeks from acceptance to closing. I've done it in as little as two weeks, but generally, figure on about 6 weeks for your lender to get everything done. Here's how it works:
Week 1: Offer accepted and signed.
Week 2: (usually 10-14 days in): Purchase and sale contract executed.
Week 5: Mortgage committment due.
Week 6: Closing.
If the transaction does not involve financing, it can get done in as little as a week, depending upon whether there are other contingencies that involve inspections, etc.
5. OFFER ACCEPTED!
- Hire a real estate attorney. I have recommendations for great real estate attorneys that I have worked with many times. This attorney will negotiate the terms of the P&S contract with the seller’s attorney, and work to resolve any inspection or other issues. In addition, If you are purchasing a condo, your attorney will review the condominium documents and financials to make sure that the association is on sound legal and financial footing.
- Hire a home inspector. It is vital to hire a licensed home inspector to go through your new home in order to find any serious defects. I have a short list of experienced, well-regarded home inspectors who are thorough and who know how to explain any problems.
- Get your loan application rolling. You will need to have a fully executed purchase and sale agreement in order to make full application, but use this time to start submitting your paperwork.
6. P&S: THE PURCHASE AND SALE CONTRACT
The contract to buy/sell real estate in Boston Massachusetts is known as a "Purchase and Sale" contract, or "P&S". This is the contract that contains *all* the provisions relating to your purchase and generally occurs about 10 days after the offer is accepted. During this time, you will do most of your "due diligence": Have your home inspection, get your loan application rolling, and I and/or your attorney will obtain all the condo docs and financials. Also, I will get contact information for building management or trustees in order to find out if there are any current building problems, upcoming projects, or special assessments. I have great lenders, attorneys, and inspectors whom I've teamed up with in the past, and that my clients have been very happy with.
You will need a real estate attorney that is experienced at Boston residential sales working for you. We do not use escrow or title companies here. Do NOT act as your own attorney. Do NOT hire your cousin Steve who is criminal attorney.
Your attorney will:
- Negotiate the terms of the P&S with the seller's attorney, including any issues that arise due to home inspection, condo docs, or other matters. They will review it with you and address any points of concern. Once acceptable, you will sign it and provide an additional deposit to be placed into escrow. This deposit is usually 5% of the purchase price (minus the initial deposit you made with the offer). Provide the signed P&S to your lender immediately. Your attorney will examine all the association documents and financials, and work with the seller's attorney. They will know what to be concerned about and what won't be a problem. They will be able to (hopefully) resolve all the issues that arise in concert with me.
- Run a title search to make sure that there are no encumbrances, clouds, or liens on the title to the property. Co-ordinate with the lender.
- Co-ordinate with the lender.
- Act as the settlement agent and coordinate the closing with buyer, seller, and lender. This includes preparing the settlement statement (HUD) and detailing all monies.
- Coordinating the dispersal of all funds at the closing.
Make sure that your mortgage application is rolling by now. I have several lenders that I have worked with many times and have high confidence in.
7. FUNDING YOUR MORTGAGE
- The most important part of the post P&S period of time is getting your mortgage ready to be funded. You should be staying in close touch with your lender in order to provide any requested documentation in a timely manner.
- We need to get a clean mortgage commitment in a timely manner. I will work with your attorney and lender on this. Generally, the required date is three weeks after P&S, but not always.
- Also: Make arrangements to procure homeowners insurance. I can assist you with information regarding the type and extent of insurance you need.
8. FINAL DETAILS
Your attorney will generally also work as the closing attorney. He or she will co-ordinate the scheduling as well as the necessary documents and monies.
9. SCHEDULE A FINAL WALK-THROUGH WITH YOUR BUYER-AGENT
You and I will walk through the property prior to closing in order to determine that the home has been left in the condition that was stipulated in the Purchase and Sale contract. If not, the issue will be handled at the closing table with your attorney.
10. CLOSE ON YOUR NEW PROPERTY!
Typical real estate purchase closing costs in Boston
Buyer attorney fee:
$600 - $1100
Recording fees; costs to record deed etc. at the Registry:
Various loan origination and processing fees:
$1,000 - $1800, depending upon lender.
Points, if applicable.
$400+- to $575+- depending upon property type
Municipal lien certificate: Detail of any taxes owed on the property.
$25 in Boston. More in some other municipalities.
Title exam: $200, courier fee $35, obtain MLC $25, Rundown fee $35.
Owner's title insurance
About $4.00 per thousand of purchase price.
Declaration of homestead prep: Protects your property from creditors.
Pro rata of the quarterly taxes.
Condo fees (HOA):
Pro rata of monthly condo fees. For new construction, you may be required to contribute three months fees to reserve.