The Commonwealth of Massachusetts has some very effective consumer protections built into the home buying process. In Boston and Boston Suburbs paying attention to the following list of 5 high risk areas can help you avoid catastrophic mistakes.
Number 1. Find Out What You Can Afford
I made this tip number 1 because its the most expensive for the buyer when done incorrectly. I have had excruciating experiences with Boston Condo buyers who come into Boston on a trip specifically made for buying a Boston Home. All that travel, planning time and expense only to find out that the recently uptight banks will not fund the purchase. This after 2 days of planning, 2 days of looking at properties and another day negotiating the offer. All this with a Pre-Qualification letter in hand! A full weeks worth of work for the buyers and the Buyers Agent and then the bank says no can do, sorry. I have always been very cavalier about Pre-Qualification letters, preferring to talk about money after I’ve had a chance to get to know my buyers. As hard as I find it to talk to strangers about money right from the start, I have to do it to protect my buyers as well as myself.
The old style of Pre-Qualification letter does not cut it any longer. Read my article “Buying Boston Real Estate, The Pre-Approval Letter Must Come First“. The letters now have to be more specific. Tell the bank exactly what you want to buy. Be specific with amounts and sources of down payment funds, a gift is treated differently from cash assets you have accumulated. Where is the down payment coming from? Is your down payment large enough? Find out all you can and get a firm commitment from the bank before spending enormous amounts of time searching for properties
Number 2. Find an Accredited Buyers Agent
You need to be represented by a Buyers Agent. The sellers will not respect your intelligence if you walk in to an open house or arrange a showing without a Buyers Agent! I won’t go through the dozens of reasons for having a Buyers Agent. Regular readers have probably heard enough of that from me. Just a glance at the articles to the right tell you how important I think this is. Like my article “Buying Boston Real Estate Without a Buyers Agent is Like Going Into Court Without An Attorney“. If you don’t bother getting Buyers Agency representation, which costs you nothing, and can save you tens of thousands, how can you expect a good deal from the seller?
Number 3. Get a Qualified Licensed Home Inspector
Always, always, always get the home inspected. Don’t think you don’t need one because the home is new or newly renovated, that’s all the more reason to have the inspection done. The inspector finds things we don’t see, period. I’ve seen real financial and emotional pain avoided by rejecting a home because of problems that came up during the inspection. This is especially true for new construction as there are plenty of builders out there who do a substandard job. List of Home Inspectors. Also, if you have young children you will probably want to test for lead if the home was built more than 30 years ago. This is another $400 but you will know how much and where the lead is as well as guidance as to how to get rid ot it.
Number 4. Get a Real Estate Lawyer
This is a must. Talk about ways for shooting yourself in the foot! Get a good lawyer who is experienced in the type of property you are going to buy. If its a condo, get a lawyer who does a lot of condos. Most Boston Condos have a long history and a stack of condominium documents 3 inches high. Without a lawyer you are wide open for something going terribly wrong. It could have been sold illegally somewhere down the line, the title may have problems. Your lawyer will see those coming and make sure you have title insurance. This protects you if your title is challenged by anyone including heirs of former owners. Your real estate lawyer actually reads that 3 inch stack of documents looking for red flags. List of Real Estate Lawyers
Another protection that should be watched closely is your Mortgage Contingency confirmation date. This is the date when the bank gives you a final loan approval confirmation letter. I usually write this date into the offer for 4 weeks after the offer is accepted and 2 weeks before the closing. This date bears watching because if it passes by and you don’t get your confirmation from the bank, your 5 percent deposit is at risk for what the lawyers call nonperformance or essentially breach of contract. The sellers can keep part or all of your deposit. All is well though if the date is closely watched and if the bank is late with the letter a request for an extension is agreed to by both parties. If the bank changes its mind you get all your deposits back because of this contingency.
Number 5. Investigate Everything.
Now that you have a Buyers Agent, Lawyer,and Home Inspector its time to investigate everything. One of the best consumer protections provided by the Commonwealth of Massachusetts is you can take a property off the market for a $1000 deposit. Some states have this initial earnest money deposit amount as high as 10,000. Then you are given 2 weeks to investigate the property before you sign a purchase and sale agreement where you will put down more like 5 percent of the purchase price. After this 2 week investigation, you should know everything anyone knows about the building, the condo or the single family home. If at that time there is anything you don’t like, they will give the $1000 back and you can be on your way back to the shopping stage. The only money the investigation should cost you is the price of the inspection which is about $400. You won’t run up any legal bills if the property fails inspection, your lawyer will wait for the property to pass inspection before she starts to work on the offer. This is one of the most important consumer protections provided by Massachusetts. I’ll probably get some flak from listing agents for saying this but the Offer to Purchase is a “swiss cheese” contract and I’ve never seen anyone being held to it. There are so many contingencies that you essentially have 2 weeks to say uhhh never mind.
If you are buying a Boston condo (4 out of 5 Boston Homes are condos), investigate the condo association and the management company. Read the condominium documents, and talk with at least 2 trustees. Hang around at different times of day, try to meet as many neighbors as you can and ask how happy they are. If you are buying a single family, visit at all times of day. Listen for barking dogs with negligent owners and other sources of noise, like teenagers hanging out on the same corner every night drinking and starting fights etc. Believe me I’ve run into these things.
Written By RE/MAX Destiny Accredited Buyers Agent Jeff Persons – 617-512-3443
More articles by Jeff:
Recession Proof Boston Real Estate and the Megaphone Formation
Found a Boston Home I Really Like But What About This Inspection Report?
5 Clues That Your Boston Real Estate Buyers Agent is a Sellers Agent in a Brilliant Disguise.
A 20 Year Resident of Bostons Back Bay Tells Why He Likes Brookline MA So Much
Dont Just Investigate Your Boston Condo, Investigate The Management Company Too
Return To WeSellBoston.Net
5 Smartest Protections For Buying Boston Area Homes
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Jeff,
This is a great list – and could transfer over to any market.
On top of this I would say “buy right” – plenty of local listings to get could deals on.
And, to make sure to buy well under what you can afford.
Thanks, here in Boston we don’t have any steal deals. Prices are right where they were in 2004. No bargains here. Bargain hunters stay home!
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