1. A Purchase and Sale (P&S) agreement is a legal document that has been prepared and agreed to by attorneys representing the buyers and sellers in a real estate transaction. In Massachusetts, it must be signed by a buyer and seller after both parties have come to an agreement on an offer on a piece of real estate. The P&S will include the final sale price and all terms of the purchase, and it covers the weeks between when a property is taken off the market and closing; some conditions extend beyond the closing date.
2. The P&S is typically signed after all contingencies (other than financing) have been completed. So, for example, it would be signed after a home inspection, if an inspection is part of the written deal. Why is financing secured after the P&S is signed? The bank needs a copy of the fully signed P&S before it can obtain a final commitment from its underwriters. Frequently, banks won’t order a home appraisal until after the P&S has been signed for fear of “wasting” a buyer’s money before it’s clear that all the other contingencies have been met.
3. Buyers should be prepared to have a cash deposit on hand. Buyers typically put down earnest money — it’s often $1,000 — with their initial offer. But additional money is required at the signing of the P&S. “The norm on Cape Cod is usually 5 percent to 10 percent down with the P&S agreement,” says Broker and owner Mandy Robinson. That means if the final negotiated selling price of a Cape Cod cottage is $500,000, the buyer must bring $25,000 to $50,000 to the signing of the P&S. That money will be applied on the buyers’ behalf to the purchase price.
4. The P&S money is rarely refundable. Buyers should be absolutely sure that they intend to close on a house before signing the P&S because the deposit is typically nonrefundable. If the buyer walks away from the deal without legal cause, the P&S deposit is given to the seller. One of the few exceptions: If a buyer has a financing contingency and fails to secure a mortgage, the money may be returned to the buyer, provided all terms, conditions, and dates have been met by the buyer.
5. When the P&S is signed, a seller can — cautiously — celebrate. “The P&S binds the buyer to the property,” says Mandy. “If no bank financing is to be obtained, this is indeed the time for the seller to exhale and breathe a sigh of relief — and schedule the closing.” If bank financing is being secured, then the ball is now firmly in the bank’s court, and the commitment date in the offer is the next hurdle to overcome. If the buyers have worked with a reputable local bank, however, this waiting period should only be a formality. Mandy encourages buyers to consider using local Cape Cod banks in part because they often use local appraisers who know the Cape Cod area intimately. Those appraisers are usually the most helpful in obtaining the most accurate valuation for Cape Cod homes. Mandy is happy to give her bank recommendations to buyers; give her a call to discuss.
If you have questions about buying or selling a Cape Cod property, talk to one of the experts from Prudential Cape Shores Real Estate. Our friendly staff knows the beautiful Lower Cape/National Seashore area of Old Cape Cod. Visit capeshores.com, call 508-349-1000, or email email@example.com.