In the real estate industry, laws, colloquialisms and common practices vary widely from state to state. The rights of home buyers also differ depending on location. Certain standards and programs are consistent across the country — especially those regulated or funded by the federal government. However, states and municipalities often expand upon these rules — offering additional funding and protections. In this post, we explain how the Massachusetts home buying process differs from those of other states. We provide a glossary of terms all home buyers should know, and specify which are specific to Massachusetts and New England. From “earnest money deposit” to “dual agency” and from “quitclaim deed” to “caveat emptor,” learn 70 real estate terms Massachusetts home buyers should know.
70 Massachusetts Real Estate Terms Home Buyers Should Know in 2022
The glossary of Massachusetts real estate terms assembled below is organized by category. For example, the terms “down payment” and “fixed-rate mortgage” can be found in the “financing” category. The terms “dual agency” and “true buyer brokerage” are under the category “real estate agents.”
Terms Related to Home Buyer Rights in Massachusetts
Real Estate Settlement Procedures Act (RESPA)
RESPA is a federal law that mortgage brokers, lenders and servicers in Massachusetts are required to follow. This law was designed to protect home buyers and property owners from corrupt behavior conducted by the above parties. The Real Estate Settlement Procedures Act requires brokers, lenders and servicers in the mortgage industry to educate borrowers.
In an article for Investopedia, James Chen writes that RESPA demands that these parties “provide disclosures.” Such disclosures are related to “real estate transactions, settlement services, and consumer protection laws.” According to Chen, the law also “prohibits loan servicers from demanding excessively large escrow accounts and restricts sellers from mandating title insurance companies.” RESPA not only applies to mortgages. It also applies to property owners trying to refinance their mortgages or take out a home improvement loan, construction loan or line of credit.
Massachusetts Fair Housing Law
Like RESPA, the Fair Housing Act is a federal law. The Fair Housing Act prohibits certain forms of discrimination in the rental and purchase of real estate. Many states have since elaborated on the federal Fair Housing Act — providing additional protections to renters and home buyers.
The federal law makes it illegal to discriminate based on color, race, ethnicity, religion, sex, “familial status” and disability. According to this resource from Mass.gov, the state’s Fair Housing Law goes a step further. State law prohibits discrimination based on gender identity, “veteran or active military status, age…and source of income.” The Fair Housing Act and Massachusetts Fair Housing Law both apply to “property owners, landlords, property managers, mortgage lenders and estate agents.”
Financing Terms for Home Buyers in Massachusetts
A mortgage is a loan issued by a lender to a prospective buyer, so they can buy real estate. Depending on the results of the appraisal and inspection, your mortgage loan might cover the entire purchase price of the home. In some cases, it might only cover a portion. Borrowers make monthly payments — including interest, insurance, taxes and the loan principal — over a set period of time.
Typical mortgage repayment terms are 10 years, 15 years or 30 years long. Once the borrower has paid off the entirety of their loan, they own the home outright. If buyers fail to make regular payments, however, the financial institution that originated the loan could repossess their home. There are many different types of mortgage loans, each with different DTI, credit score and down payment requirements.
Next on our list of Massachusetts real estate terms home buyers must know is “acceleration clause.” Your mortgage lender might include an acceleration clause in your contract to protect their investment. This clause mandates that you pay off the entire outstanding loan balance all at once if you violate terms of the shared agreement.
Most often, acceleration clauses allow lenders to collect if you miss a bunch of monthly mortgage payments. A “due-on-sale” clause is a type of acceleration clause. This clause requires you to pay off the rest of your loan when you sell your house.
An FHA loan is a mortgage insured by a federal agency but issued by a financial institution like a bank or credit union. These loans are insured by the Federal Housing Administration. According to Zach Wichter in a recent article for Bankrate, “more than 83% of all FHA loan originations [in 2020] were for [first-time buyers].”
Many first-time buyers opt for these loans because of the minimal down payment and lower credit score required. With a minimum credit score of just 500 to 580 — depending on the size of your down payment — FHA loans are more attainable. Closing costs owed by borrowers are also limited. Lenders can only require borrowers to pay up to 5% in closing costs when they approve an FHA loan. The only downside to taking out an FHA loan is that borrowers “must pay FHA mortgage insurance” — both upfront and annually.
Unlike FHA loans, only rural home buyers are eligible for USDA loans. With a USDA loan, mortgages finance 100% of the home’s purchase price as long as the property meets all requirements. Hal M. Bundrick, CFP explains how USDA loans work in his article “What Is a USDA Loan? Am I Eligible for One?” for NerdWallet. USDA loans are either issued directly by the United States Department of Agriculture (USDA) or by a third party. These loans are intended to “improve the economy and quality of life in rural America.”
Loan guarantees are insured by the USDA but issued by a bank or credit union. They do not require a down payment, but do require mortgage insurance if a down payment less than 20% is paid. However, USDA loans have the cheapest PMI rates of any lender. Direct loans are issued by the government department itself and are granted only to low income buyers. In Massachusetts, borrowers might qualify for a Farm Home 100% loan. For homes that require remodeling, the USDA also sponsors Rural Housing Renovation Loans.
VA loans are intended for members of the military, veterans and the partners of fallen service members. They are insured by the US Department of Veterans Affairs. Like USDA loan guarantees and FHA loans, they are issued by third party lenders like banks and credit unions. Like a USDA loan, a VA loan does not require a down payment. VA loans do not require any ongoing mortgage insurance or a specific credit score. Closing costs could also be subsidized for VA loan borrowers.
Either conforming or non-conforming, a conventional mortgage is a home loan that is not insured by the federal government. Conforming loans meet requirements set by the FHFA, but non-conforming loans do not meet these requirements. Instead, they set their own standards for unique home, expensive properties and/or non-traditional borrowers. Unlike non-conforming loans, conforming loans are limited to a certain purchase price related to the area’s median home value.
For both conforming and non-conforming conventional mortgages, minimum credit scores and down payments are higher than for government-insured loans. They require a minimum credit score of 620 and 20% down payment if you do not want to pay for private mortgage insurance.
Some home buyers borrow from Fannie Mae — AKA the Federal National Mortgage Association — to finance their purchase. Fannie Mae was formed by the New Deal in the 1930s, but continues to operate today. A Fannie Mae loan is a conforming conventional mortgage that flexes to the needs of borrowers. In her article “Pros and Cons of Fannie Mae Loans” for The Balance, Lorraine Roberte explains how these loans differ from other mortgages.
Roberte notes that “Fannie Mae buys loans from other lenders…rather than lend money directly to the consumer.” This allows the GSE to fund loans for a wider variety of home buyers. Fannie Mae loans can have lower down payment requirements and allow borrowers to cancel mortgage insurance once they have paid 20% of the DP. According to Roberte, Fannie Mae loans also “accept nontraditional income sources” and “offer different types of loans to meet your needs.”
Like Fannie Mae, Freddie Mac is another GSE or government-sponsored enterprise that buys up mortgages. In most ways, Freddie Mac functions identically to Fannie Mae and is similarly regulated by the FHFA. Unlike Fannie Mae, Freddie Mac shops these loans from small financial institutions like community banks and credit unions.
According to FreddieMac.com, the GSE was “chartered by Congress in 1970 to keep money flowing to mortgage lenders.” Its primary goal is to stabilize the housing market and provide affordable options for home buyers.
FHA HUD 203(k) Rehab Loan
Many first-time home buyers — in Massachusetts and across the US — buy fixer-uppers that need renovations. Insured by the FHA, the HUD 203(k) rehab loan bundles your mortgage with the cost of renovations.
There are two options available to first-time home buyers seeking this type of loan: the streamlined or limited 203(k) loan and the standard 203(k) loan. The former allows you to add as much as $35k in repairs to your mortgage while the latter is intended for bigger jobs.
Other rehab loans include the Freddie Mac CHOICEReno eXPress Loan, Freddie Mac CHOICERenovation Loan and the Fannie Mae HomeStyle Renovation Loan.
A balloon loan is another type of mortgage. However, a balloon mortgage differs significantly from conventional and government-backed loans. Loan terms are shorter — usually between five and seven years. Your initial monthly mortgage payment might be fairly low.
At the end of the loan term, borrowers owe the remainder of their mortgage principal and must pay that balance as a lump sum. Borrowers who cannot pay either sell their property to make the balloon payment or refinance their existing mortgage.
When choosing a mortgage, home buyers will opt for either a variable or fixed interest rate. With a fixed-rate mortgage, your interest rate remains the same from your first payment to your very last payment.
Adjustable Rate Mortgage
Buyers who choose an adjustable or variable rate mortgage start with a fixed interest rate. After an introductory period, their interest rate changes at regular intervals — buffeted by trends in the market. Because your obligation could increase substantially from one loan reset to the next, a variable rate mortgage can be risky. If you choose to refinance your home loan, you could switch from a variable to fixed-rate mortgage.
Mortgage Promissory Note
A mortgage promissory note should be part of your home loan paperwork. The post “These Lenders Are Launching Blockchain Pilot Programs” from Blockchain Home Registry explains. According to BHR, “an applicant’s mortgage documents include their loan application, pre-approval letter, good faith estimate, truth-in-lending disclosure statement and settlement statement.”
These documents “also include details of your mortgage — called a ‘note’ — and the deed to your new home.” This note is a contract that outlines your legal obligation to your mortgage lender and makes you responsible for all payments. When you sign a mortgage promissory note, you agree to all terms of the mortgage.
Though somewhat uncommon, an assumable mortgage is another financing option available to certain home buyers. An assumable mortgage lets buyers “assume” the current homeowner’s loan under the terms they received from their broker.
Buyers might opt for an assumable loan because the mortgage’s original interest rate might be lower than today’s rates. The buyer could also eliminate certain closing costs related to broker services.
In a recent article for MassLive, Daniel Hale explains how assumable loans work in Massachusetts. Hale writes that to assume the seller’s loan, buyers “must pay the seller an up-front lump-sum.” This must equal “the amount of equity they currently have in the home.” This can be either a pro or con.
If the property owner has a lot of equity in their home, the buyer would need to pay off a huge chunk upfront. However, if the seller has little equity in the home, the buyer would pay quite a bit less. Most assumable mortgages are government-backed FHA or VA loans.
Prospective buyers who already own another property might consider a bridge loan to help finance their upcoming purchase. In an article for Forbes Advisor, Kiah Treece explains. Treece writes that a bridge loan is “a form of short-term financing that [lets owners] borrow money for up to a year.” With higher interest rates and shorter loan terms, bridge financing is not right for every home buyer.
However, Treece notes that “the application and underwriting process for bridge loans is generally faster than for traditional loans.” Because they will use the equity in their home as collateral, most borrowers work with their current lender to obtain a bridge loan.
Mortgage Lender and Mortgage Broker
A mortgage lender is a bank, credit union or other financial institution that issues your loan. Mortgage lenders and mortgage brokers are not the same. According to Deborah Kearns in an article for Investopedia, “a mortgage broker works as an intermediary between you and lenders.” While the lender sets terms, the broker processes your mortgage loan application. He or she receives a commission for doing so — either from the buyer or from the lender.
Above, we explained that buyers hunting for more expensive properties might opt for non-conforming conventional loans. A jumbo loan is one type of non-conforming conventional loan. Because they pose a greater risk to lenders, these loans have more restrictive requirements related to the applicant’s credit score and DTI ratio.
To secure financing, most mortgage lenders require prospective buyers to put down between 3% and 20% of the home’s purchase price. They then finance the rest of the home’s purchase price as long as the inspection and appraisal justify that price. Your borrowing power must also match what you want to offer the property owners. Some mortgage loans — like FHA loans and VA loans — have comparatively low down payment requirements.
In 2021, the average homeowner put down 12%, splitting the difference. Putting down less than 20% could cause you to incur private mortgage insurance. Your mortgage insurance premium is reflected in monthly mortgage payments.
Massachusetts Down Payment Assistance (DPA)
As noted above, one hurtle in the home buying process — and any other real estate transaction — is saving up for a down payment. Programs funded by federal, state and local governments provide qualifying home buyers with grants and loans that cover part of their down payment. Some programs are also funded by private enterprises and nonprofit organizations. These programs are usually geared towards first-time buyers and buyers in certain neighborhoods.
In his article “8 Steps to Buying a House in Massachusetts” for Clever, Jamie Ayers identifies a few Massachusetts DPA programs. First, Ayer points to the program run by MassHousing — an agency dedicated to making affordable housing more widely available in Massachusetts. Ayer writes that “MassHousing offers down payment assistance of up to $25,000” for Bostonians. This DPA program is also available to buyers in “one of [the] Commonwealth’s 26 Gateway Cities.” Buyers who are house-hunting elsewhere in Massachusetts could receive grants up to $15k. Boston Home Center and the USDA also provide down payment assistance to Massachusetts home buyers.
Debt to Income Ratio
Part of the mortgage loan process is determining an applicant’s debt-to-income ratio. Your debt to income ratio is your monthly income compared to your monthly payments. This includes minimum payments on student loans, alimony, child support, credit cards, auto loans and more. We explain this in greater detail in our recent post “Can You Get a Mortgage With Lots of Student Loans in 2022?.”
When it comes to your debt-to-income ratio, FHA lenders and other government programs tend to have looser requirements than conventional loan providers. The conventional loan debt-to-income ratio usually maxes out at 45% for loan approval.
After you submit your application for financing, your mortgage lender might provide a pre-qualification letter. A pre-qualification letter is not related to a particular property. Instead, it reflects the buyer’s qualifications and precedes home inspections, appraisals and final approvals. As such, a pre-qualification letter does not guarantee the lender will issue a loan for the property you want to buy.
It does, however, provide buyers with an idea of which homes they can afford. If possible, home buyers should obtain a pre-approval letter before meeting with real estate agents. Real estate agents typically prefer to work with buyers who have already obtained a pre-qualification letter and are actively working with a lender.
Earnest Money Deposit
Home buyers might choose to make an earnest money deposit when competing against other buyers. This deposit is a non-refundable deposit — unrelated to a down payment — that demonstrates a buyer’s seriousness about a particular property. Buyers use earnest money deposits to encourage sellers to accept their bid over other offers.
According to this article from MassLive, “the purpose of earnest money is to legally bind you to the transaction.” It creates “a penalty if you break a mutually signed contract of sale.” If the seller does accept a buyer’s bid and escrow falls through, earnest money protects the seller from incurring a financial loss.
The deposit is usually equal to a small percentage of the seller’s asking price and is held in an escrow account until closing. According to MassLive, the typical approach to earnest money in Massachusetts is a bit different to that in other states. In Massachusetts, buyers “initially put down a smaller amount, typically $1,000” when they submit an offer. After this initial deposit, buyers then “commit a more substantial amount, usually 5% of the purchase price.” This is when buyers sign a P&S agreement, which we will explain in greater detail below.
On top of their down payment and earnest money deposit, home buyers must budget for closing costs. In most states, both the buyer and the seller are responsible for a certain share of closing costs. As we explain in this recent post, most closing costs are tied to your loan amount and/or your home’s purchase price. From real estate agents to loan officers, closing costs reimburse people who performed services for buyer and seller during the home buying process.
Closing costs owed by the borrower include title search fees, tax status research fees and appraisal fee. They also include recording fees, lender underwriting fees, and loan origination fees. Homeowners and title insurance premiums, mortgage broker fees, assumption fees and attorney’s fees are also paid by buyers at closing. Most Massachusetts buyers will pay between $10k and $27k in closing costs.
Buyers with lower credit scores but a bit of cash on hand can buy discount points at closing to reduce their mortgage interest rate. Given this, purchasing discount points is sometimes called “buying down the rate.” As we note in our post “What Credit Score Do You Need for a Mortgage,” one discount point typically equals 1% of your loan.
Real Estate Attorney
A real estate attorney handles legal issues related to buying and selling property. They manage everything from preparing purchase contracts and closing documents to representing parties in estate disputes. In Massachusetts, buyers are required to work with a real estate attorney when purchasing real estate.
This is because processing real estate transactions is considered practicing law in Massachusetts. Massachusetts does not allow non-lawyers to practice law. Real estate attorneys draft Purchase and Sale Agreements, provide legal advice and represent your interests during the home buying process. However, it is important to remember that a real estate attorney does not replace the role of a real estate agent.
Home Buying Terms Related to Insurance
Your mortgage lender might require you to pay for title insurance, which protects the buyer and the lender from consequences of an unclear title.
Until you have paid off your mortgage, your property is partially owned by the bank, credit union or other institution that issued your loan. Given this, most lenders require homeowners insurance.
According to Julia Kagan in a recent article for Investopedia, homeowners insurance “covers losses and damages to an individual’s residence.” It also covers damage and loss of “furnishings and other assets in the home.” It can also protect homeowners from liability if someone is injured on their property.
Keep in mind that when you make a claim, you will still have to pay your policy’s deductible. Unfortunately, damage and/or loss wrought by natural disasters is rarely covered by homeowners’ insurance. This is why certain homeowners augment their policy with flood or wildfire insurance.
Private Mortgage Insurance
PMI is required by certain lenders when borrowers submit a down payment less than 20% of their home’s purchase price. PMI is paid as part of your monthly loan payments and usually costs between half a percent and two percent of the total loan. In most cases, you can stop paying PMI once you have paid off 20% of the principal of your loan balance.
You might pay less in PMI if you have a higher credit score and more favorable credit history. Home buyers should keep in mind that PMI protects the lender’s investment, not the borrower’s. Thankfully, buyers can deduct PMI payments when they file their taxes.
Terms Related to Real Estate Agents
A seller’s agent — sometimes called a listing agent — is a real estate agent who represents the seller during a real estate transaction.
A buyer’s agent is a real estate agent who represents the buyer’s interests during a real estate transaction.
Illegal in many states, “dual agency” is when one real estate agent represents both the seller and the buyer in a real estate transaction. As long as the agent provides a formal disclosure of their activity to both the buyer and seller, dual agency is legal in Massachusetts.
Similar to dual agency, designated agency is when a real estate brokerage represents both parties in a real estate transaction. The real estate broker designates one of their agents to the seller and another to the buyer to avoid conflicts of interest.
Like dual agency, designated agency is legal in Massachusetts. Unlike dual agency, designated agency does not require the agent to provide their client with a formal disclosure.
“FSBO” is the acronym of “for sale by owner.” This means that the seller is representing his or herself instead of working with a real estate agent or real estate broker. Sellers might choose to list on their own, so they can avoid paying commission on the sale.
A subagent is a real estate agent who works for the seller but also finds a buyer for the property. He or she might be rewarded with a share of the listing agent’s commission fee. While rare, it is legal to act as a subagent in Massachusetts.
A commission fee is earned by the seller’s agent and the buyer’s agent after a sale. There’s no set standard of real estate commission rates for an agent and broker. However, you typically see 4-6% split between the listing agent and buyer’s agent. In Massachusetts, the seller usually pays both commissions at closing. Mortgage brokers might also earn commission fees, with fees paid by either the buyer or the lender.
True Buyer or Seller Brokerage
A true buyer brokerage is a brokerage that represents buyers and does not allow its agents to perform dual or designated agency. Similarly, a true seller brokerage is a brokerage that only represents the seller’s interest and will not attempt to also represent the buyer.
Exclusive Agency Listing
An exclusive agency listing is a real estate contract that establishes a single agent, broker or brokerage as the commission recipient. Regardless of who sells the property, this legally binding contract ensures the named agent receives a commission on that sale.
Terms Related to Deed and Title
A title search is usually conducted by a title company at the behest of your mortgage broker. It investigates the title of the property you hope to buy. For those unfamiliar with the term, the BHR post “How Blockchain Property Registries Protect Against Illegal Land Grabs” explains what a title is. According to BHR, “a title represents legal ownership of an asset.” A deed is the legal document that transfers title from one party to the next.
Next on our list of Massachusetts real estate terms is “release deed.” According to this eForms resource, “a Massachusetts release deed provides a legal method for the conveyance of [property] from a seller to a buyer.” A release deed does not guarantee a clear title, so the buyer should commission a title search to protect him or herself.
Unlike a release deed, a warranty deed does protect buyers from the consequences of an unclear title. This resource from New England-based Buyers Brokers Only, LLC explains that a warranty deed “offers four basic assurances” for buyers in Massachusetts. A warranty deed assures the buyer that the seller owns the property outright. It ensures the property is “free from any encumbrances” except those expressly outlined.
It also ensures that “the grantor of the title has the legal right to sell or transfer the property to the grantee.” Finally, a warranty deed legally obligates the grantor to “defend against any legal claims regarding problems with the title.” They must defend against claims that happened before and during their ownership of the property.
In Massachusetts, a quitclaim deed provides more protection than a release deed but less protection than a warranty deed. With a quitclaim deed, the seller must legally state that the title is free from encumbrances. They must also promise to “defend against any legal claims” related to the property’s title. Unlike a warranty deed, the seller need only defend against claims made while they owned the property — not before.
A lien is a claim made on the title of a property — often entered into the public record. It gives a lender the right to repossess your property if you fail to satisfy terms of your agreement with that lender.
Clear vs Cloudy Title
A clear title is one that is free from liens, unpaid property taxes and other debt obligations. A cloud on title refers to any claim on the title that would complicate a complete transfer of ownership upon sale.
Terms Related to the Seller and Buyer
Caveat Emptor or Buyer Beware
In Massachusetts, sellers benefit from the “caveat emptor” rule, which is Latin for “let the buyer beware.” This means that the seller is not required to provide a disclosure of defects to the property. Instead, it is the buyer’s job to uncover any issues with the property before purchasing the home.
The article “Selling a Massachusetts Home” from NOLO notes that MA is “one of few states” that follows caveat emptor. In Massachusetts, sellers need only disclose “the existence of lead paint…and the presence of a septic system.” Any other issues are the buyer’s responsibility.
An offer is a formal request to buy a property. It details how much you are willing to pay and which contingencies must be met to proceed with the sale. In Massachusetts real estate deals, each offer is legal binding.
Terms Related to Tax
Property Transfer Tax or Tax Stamp
A property transfer tax is paid by the seller at closing once the deed has been signed and filed. In Massachusetts, the seller typically pays the property transfer tax or tax stamp.
According to Jamie Ayers in an article for Clever, the the rate “in Massachusetts is $2.28 per $500” of the property’s fair market value. Certain counties might levy fees on top of the basic tax rate.
Property tax rates differ from city to city, but are always based on a percentage of a property’s fair market value. These tax payments are used to fund community resources like schools and libraries. According to the Massachusetts Property Tax Calculator from SmartAsset, “homeowners in Massachusetts face some of the largest annual property tax bills…in the country.”
Massachusetts property owners are billed quarterly, but the “median annual property tax payment in the state is $4,899.” As we note in a recent post, “sellers are responsible for all property tax due until closing, after which the buyer is responsible.”
Proposition 2 1/2
Instituted back in the 1980s, Proposition 2 1/2 is a Massachusetts law. This law limits how much a county or local government can increase their property tax levy each year. According to the Town of Andover website, real estate tax revenue collected by a community in Massachusetts cannot exceed a certain amount.
The 2 1/2 means a community can collect 2.5% on top of “the prior year’s levy limit” plus an extra percentage determined “new growth.” Home buyers should know that this law does not limit how much property owners pay in taxes each year. The Town of Andover resource notes that this “increase limitation applies only to the Levy Limit.”
Property Use Terms
Bundle of Rights
A “bundle of rights” refers to rights the buyer inherits from the seller once ownership is transferred. According to the MasterClass article “Bundle of Rights in Real Estate,” these rights include enjoyment, “possession, control, exclusion, derivation of income, and disposition.” You might also inherit land, air, running water and/or mineral rights.
In short, a bundle of rights explains how a property can be used by its owner. If you plan to buy a house in a community governed by an HOA, these rights could be subject to certain limitations.
With thousands of miles of rivers, coastline and lake shores across the state, Massachusetts home buyers should also familiarize themselves with riparian rights. In Massachusetts, these represent a property owner’s legal right to use surface water on their land.
An easement legally allows another party to access a property owner’s land. This other party is typically a neighbor who cannot access their own land except by your private road or a utility company.
Victoria Araj describes the different types of easements in her article “What Is An Easement? Everything You Need To Know” for QuickenLoans. According to Araj, these include an easement appurtenant, easement in gross and easement by prescription. An easement appurtenant is open-ended, meaning that it does not terminate when the property changes ownership.
Alternatively, “an easement in gross is tied to a specific person or entity, not the property itself.” An easement in gross can be terminated when a property is sold to a new owner. It cannot be terminated by the current owner unless the easement recipient releases their claim — either by choice or upon their death. Easements in gross cannot be transferred to other parties.
An easement by prescription is an informal easement. This easement is “created when a person continuously uses another’s land for a long period of time as if they had an easement.” In order to receive an easement by prescription in Massachusetts, one must have used the land in questions for at least twenty years. They can’t have used the land in secret or with the owner’s direct permission. As Araj notes in her QuickenLoans article, an easement by permission is not the same thing as adverse possession.
According to this resource from Buyers Brokers Only, LLC, adverse possession is how one party legally obtains a title to someone else’s property. They acquire that title “through the physical occupation” of the property in question. Like an easement by prescription, Massachusetts law requires the user to “physically occupy another’s property for a continuous period of 20 years.”
Purchase and Sale Agreement
A purchase and sale agreement or PSA is a contract signed by both buyer and seller after they settle terms of the sale. Massachusetts buyers should know that they must hire a real estate attorney to draft their P&S agreement. In an article for NOLO, Ilona Bray, J.D. describes how the MA PSA process differs from those in other states. Bray writes that in most states, your original offer becomes your purchase contract once both parties sign on the dotted line.
In Massachusetts, however, the buyer drafts their initial offer “on a standard form…that’s shorter than the offer form used in most other states.” After contingencies outlined in the offer are met, the buyer and seller negotiate. Finally, the buyer and seller “sign a longer, more detailed contract.” This contract becomes your P&S agreement.
A non-governmental agency in Massachusetts, MassHousing supports affordable housing initiatives for buyers and renters alike. MassHousing is an important resource for prospective home buyers — especially first-time buyers in Massachusetts. Home buyers, business owners and renters can all obtain reasonable financing through MassHousing.
Tenancy by Entirety
In Massachusetts, tenancy by entirety or tenants by the entirety refers to how married couples own property together. This resource from the Middlesex North Registry of Deeds website explains how a tenancy by entirety arrangement protects individual spouses. According to MassRODs.com, “a tenancy by the entirety has a right of survivorship so when one owner dies.”
This means that the surviving spouse is granted ownership of the “entire property” in the event of the other spouse’s death. Tenants by entirety also provides an individual homeowner with “some protection” from their spouse’s debt obligations.
Tenancy in Common
Another ownership arrangement recognized by the State of Massachusetts, tenancy in common does not provide the same protections as tenancy by entirety. We explain in our recent post “Everything You Need to Know About Co-Owning a House” on the Torii blog. Unlike tenancy by entirety, tenants in common do not inherit shares when a co-owner passes away. Instead, these shares are inherited by willed successors. Tenants in common cannot legally sell the entire property or their personal shares without the agreement of all other owners.
As we explain on the Torii blog, contingencies are certain conditions the buyer or seller must meet before a sale can move forward. Most contingencies protect the buyer from purchasing a home with an unclear title or undisclosed damage.
Contingencies are usually outlined in the purchase agreement, which sets terms for the real estate transaction between buyer and seller. This contract is drawn up after the seller has accepted a buyer’s offer. However, they might also be outlined in the initial offer, which is a legally binding document in Massachusetts.
Common contingencies are the home inspection contingency, financing contingency, appraisal contingency, clear title contingency and insurance contingency. A home inspection contingency allows the buyer to either pull out of escrow or renegotiate if an inspection turns up major damage. The financing contingency allows a buyer to pull their offer if they are not offered a home loan to cover the cost. The others are self-explanatory.
Some contingencies are required by mortgage lenders and brokers. This is because lenders cannot lend an amount close to the asking price if the home is damaged or mired in legal controversy. Keep in mind that the seller might also include contingencies. For example, buying their home might be contingent upon the seller finding another property to move into around the same time.
A bump clause lets sellers keep their home on the market and actively pitch their property to other buyers — even after accepting an offer. It allows the seller to reject the offer they originally accepted in favor of another offer. The article “‘Bump Clauses’ Are Giving Sellers a Safety Net” from Realtor Magazine elaborates.
According to Realtor Magazine, “bump clauses are usually used when a contingency is involved in the original offers.” After the seller notifies them, the original buyer can either waive the contingency or move on. If a seller takes advantage of the bump clause and accepts another buyer, the first buyer does get their earnest money deposit back.
A homeowners’ association is an organization that receives funds from members of a community that are subject to its rules. If you plan to buy a condo, townhome or house in a gated community, you might be required to pay HOA dues. Dues pay for upkeep of communal property like tennis courts, swimming pools, gyms, roads and grounds. They also might also pay the salaries of security guards.
In an article for Bankrate, Ellen Chang writes that “HOAs are typically run by…unpaid volunteers.” These volunteers are usually homeowners “elected to a board of directors that oversees the HOA’s management.” Chang notes that annual fees range “from $200 to $2,500” depending on the area and “amenities offered.” In addition to the upkeep of common areas, an HOA might also dictate the design, maintenance and use of your home. Some HOAs even prevent homeowners from adopting certain breeds of dog.
Still Have Questions About Buying a Home in Massachusetts?
As in many other states, buying a house in Massachusetts can be complicated. The process is especially daunting for out-of-towners who are relocating to Massachusetts from another state. Whether you need help with financing, finding an attorney or hiring a real estate agent, feel free to contact our team. We can help guide you on your house hunting journey in Massachusetts, New Hampshire and the DMV area.