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Every real estate contract is different, customized to meet the specific needs and interests of the buyer and seller. Negotiating and drafting these agreements is an intricate process that requires diligence and a thorough understanding of applicable laws. Retaining an experienced lawyer, regardless of which side of the transaction you are on, will make this process less stressful while protecting your rights and interests.
Negotiations: An Essential Element of a Well-Drafted Contract
A real estate contract is only as good as the negotiations that go into creating it. The purchase or sale of property usually begins with an interested buyer making an offer, but this merely opens the door to an array of details that must be worked out. These include:
Purchase price. The core of the real estate agreement is how much money will ultimately be exchanged. In settling on the price, the parties must consider:
- The age and condition of the property
- Any renovations that must be done
- Property amenities, including those in the surrounding neighborhood
- Accessibility to the property
- For homebuyers, the local school system
- Zoning or land use restrictions
- Crime
- Comparable sales
- The economy
Down payment. A down payment immediately puts money in the hands of the seller and can serve as leverage for gaining certain concessions and advantageous terms. In general, the larger the down payment the more flexible the parties are likely to be in their negotiations.
Financing contingencies. What happens if the prospective buyer is unable to secure a mortgage? Ultimately, with the proper language in place in the contract, Massachusetts law allows the buyer to back out and get a refund of the down payment. But before this happens the parties may wish to require additional steps like applying to more lenders.
Inspection period. The buyer should be permitted a reasonable time to complete an inspection before closing on the property. This requires logistical considerations like making sure the property is available and determining how many inspections will be allowed. In Massachusetts, an inspection contingency is required if a buyer wishes to terminate the contract based on inspection issues.
Disclosures. What is the seller agreeing to disclose about the property? Massachusetts requires that certain conditions like lead paint and the presence of a septic system be disclosed. Other items such as plumbing or roofing issues are up for discussion, but the seller should be clear (regarding what is being represented in the disclosure) as should the buyer (regarding which conditions to ask about).
Other items to be included. Does anything else come with the real estate? Examples include fixtures, appliances, and equipment. The seller and buyer will want to be clear so there are no misunderstandings. These negotiations can affect the price and other terms of the contract.
Elements of Careful Real Estate Contract Drafting
Once the negotiations have concluded and the buyer and seller have agreed on the terms of the transaction, it’s time to formalize them in a contract. These are a few principles to keep in mind:
Identification of the parties. There should be no question who the parties to the contract are. Sometimes this is more complicated with commercial property because business entities are typically involved and their names should be precise.
Property description and terms. Every real estate contract should have a detailed description of the property, which may include boundaries and structures. Also, the negotiated terms should be written without ambiguities or vagueness.
Contingencies. Contracts are generally subject to conditions like the buyer being able to obtain financing, property appraisals, and title searches. Both parties will want these to be specified so their rights and interests are protected.
Disclosures and legal compliance. As mentioned above, certain disclosures are required by law while others are subject to negotiation. Massachusetts follows the caveat emptor (“buyer beware”) doctrine so be sure you closely review these.
Dispute resolution and legal remedies. Real estate contracts often include a dispute resolution procedure like mediation or arbitration. They also stipulate what happens in the event of a breach, e.g. a lawsuit for monetary compensation or specific performance.
Handling Your Real Estate Legal Needs
Real estate contracts are serious and they demand serious legal representation. With LaFountain & Wollman P.C. in your corner, you can have the confidence that your agreement has been carefully negotiated and drafted. Contact us to get started on your real estate deal.