Although a home buyer signs and initials many documents en route to buying a home, the purchase and sale agreement, also known as the “P&S”, is the primary document that sets out the terms and conditions of the agreement between a buyer and seller.
The pre-printed document is titled “Standard Form Purchase and Sale Agreement,” but there isn’t anything “standard” about this document that a buyer most commonly signs first, followed by the seller.
Frankly, the standard P&S is written primarily to benefit the seller, and home buyers are wise to retain an attorney to make modifications to the P&S that will protect their interests. The following are just four things home buyers should be aware of concerning a P&S.
- Under common law, the buyer bears the risk of loss, if the property is destroyed/damaged by natural disaster or fire between the signing of the P&S and closing. An attorney can add language that transfers the risk of loss back to the seller, who should have a home owner’s insurance policy that covers the property.
- The standard P&S has a provision that gives the seller 30 days beyond the scheduled closing date to correct a title issue that may arise before closing. Without additional language added to the P&S agreement limiting the seller’s ability to extend the closing date, the seller could extend the closing date past the buyer’s interest rate lock date, which could result in the buyer paying a higher interest rate or no longer qualifying for the loan and risking the loss of his or her deposit.
- Many times, through no fault of the buyer, lenders fail to provide the necessary financing in time for the scheduled closing date. Although the closing may happen only a day or two later, technically the buyer is in default and the buyer’s earnest money deposit is in jeopardy. A seller could decide to take the buyer’s deposit and put the home back on the market or decide not to sell. A simple provision providing the buyer with an additional two or three business days to close, if the buyer’s lender is not able to close by the closing deadline, could protect the buyer’s deposit.
- The buyer should include a provision that the seller is representing that there is no unresolved litigation or regulatory hearings involving the property or any knowledge of complaints or notices of violations of local, state or federal by-laws, ordinances or laws concerning the property. Such a provision is important because a seller could fail to disclose such an issue, which could cloud the title, and then, if the seller could not resolve the issue, he or she could use their right to extend the date of delivery of the deed (closing date).
This guest blog post is courtesy of Rich Rosa, a Massachusetts lawyer and real estate broker, and Partner in the law firm, Rosa & Kres, LLP. For more information about Rich Rosa, read his About page on the real estate law and brokerage blog that he maintains.
Keith Munsell 
Very informative and excellent advice. Thank you.
How about the seller not meeting the closing date? We have a messy situation. We signed a P&S with 20% down of purchase price. Within that timeframe, we reviewed the condo docs and didn’t like the hazard waste information and so we canceled our agreement. All that was within the timeframe allowed. However, we took more time afterwards and decided that the hazard information was okay to deal with. But, we found out that borrowing for the downpayment out of our retirement was costly and we then didn’t want to do the 20%, instead we said 8%. The builder said okay but there was no need to change the old P&S, he’d just do an addendum. The addendum had a line item stating ‘upon pre-approved letter’ for the new percentage down. Our bank approved us. The deadline was past due when our bank called us a week later and said no we can’t do the 8% because the appraiser stated ‘declining market’. Now it has to be 10%. We told the builder we couldn’t do that. He threatened to take the deposit money ($18,000) and sue us for performance if we didn’t more forward with the deal. He held us to the original P&S which we initially asked to change when we came back to the table. Would that hold up in court? The P&S also had a closing date of 5-12-08. Well, because of us being threatened for a lawsuit, we worked out a deal that the builder pay half of that 2% and we come up with the other monies. He now said that he can’t close till May 23rd. I can’t do that. It has to be before May 16th. Is there anyway of us not getting sued? We don’t like losing the 18k but would, just don’t want to be sued.
Yvonne, you should be leveraging your real estate attorney for this, you have been working with an attorney, correct?
Thank you this is very informative. Does the same hold true for commercial properties in MA? would you have the same top 4 concerns?