Estimated study time: 45 minutes
Content:
The Purchase and Sale Agreement (P&S) is the primary real estate contract in Massachusetts, governing the terms of a residential or commercial property transaction from agreement to closing. In Massachusetts residential practice, the transaction typically proceeds in two stages: an Offer to Purchase (often on a standardized form such as the Greater Boston Real Estate Board form) followed by the more comprehensive Purchase and Sale Agreement. The P&S supersedes and replaces the Offer to Purchase once signed; any terms agreed to in the Offer that are not included in the P&S are generally extinguished (the integration/merger doctrine). The P&S must be in writing to be enforceable under the Statute of Frauds.
A valid Massachusetts P&S must contain: identification of the parties (buyer and seller), a full legal description of the property, the purchase price and how it will be paid (down payment, financing, assumption), the closing date and location, the earnest money deposit amount and where it will be held, the condition in which the property will be delivered (personal property included or excluded), and the signatures of all parties. The P&S also specifies what title the seller must deliver: in Massachusetts, marketable title (title reasonably free from doubt and from the risk of litigation) is the standard. The buyer's attorney typically conducts a title search to confirm marketable title and clear the property of any clouds on title before closing.
The P&S deposit (sometimes called the down payment) is a significant portion of the purchase price — commonly 5–10% — paid when the P&S is signed. This deposit is held in the real estate broker's escrow account (not the seller's account). The deposit language in the P&S specifies what happens if the transaction does not close: in most Massachusetts P&S agreements, if the buyer defaults (fails to close without a valid contingency), the seller may retain the deposit as liquidated damages and the buyer's sole remedy is limited to return of the deposit if the seller defaults. Specific performance (court-ordered completion of the sale) is theoretically available but less commonly pursued in residential transactions.
Massachusetts P&S agreements typically contain standard contingencies: a mortgage contingency (the buyer has a specified period — commonly 15–30 days from the P&S date — to obtain a firm written mortgage commitment), an inspection contingency (the buyer has the right to conduct a professional home inspection and withdraw or negotiate repairs within a specified period), and sometimes a sale contingency (the buyer's purchase is contingent on the buyer's current home selling). The P&S also addresses title issues (seller's obligation to deliver insurable and marketable title), prorations (property taxes, condo fees), and closing adjustments. The parties are bound by the P&S from the date of signing until closing or termination.
Key Terms:
Quiz Questions:
Q1. A buyer and seller execute an Offer to Purchase that includes a provision for a $5,000 appliance credit. Two weeks later, they sign a P&S that does not mention the appliance credit. Is the buyer entitled to the credit at closing?
A) Yes — the Offer terms survive and supplement the P&S B) No — the P&S supersedes the Offer under the merger doctrine; terms not included in the P&S are extinguished C) Yes — oral side agreements supplement written P&S terms in Massachusetts D) The answer depends on which document was signed first
Answer: B — The integration/merger doctrine provides that the P&S replaces all prior agreements. Any term from the Offer not carried into the P&S is generally extinguished. The buyer's attorney should have ensured the appliance credit was included in the P&S.
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Q2. A buyer pays a $30,000 P&S deposit and later breaches the contract by refusing to close without a valid contingency reason. The P&S states the deposit is the seller's sole remedy for buyer default. What is the seller entitled to?
A) The full purchase price from the buyer B) The $30,000 deposit as liquidated damages C) Actual damages plus the deposit D) The deposit plus attorney's fees automatically
Answer: B — When the P&S designates the deposit as liquidated damages and the seller's sole remedy, the seller is entitled to retain the deposit upon buyer default but may not pursue additional damages. This is the most common Massachusetts residential P&S structure.
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Q3. A buyer's mortgage contingency in the P&S expires in 21 days. On day 25, the buyer has not obtained a mortgage commitment and the lender declines the application. Can the buyer withdraw and recover the deposit?
A) Yes — the buyer can withdraw any time before closing if financing is denied B) No — the mortgage contingency expired on day 21; the buyer is in default and the seller may retain the deposit C) Yes — mortgage denials always entitle the buyer to recover the deposit regardless of contingency timing D) No — the buyer must close using alternative financing or lose the deposit and face a lawsuit
Answer: B — The mortgage contingency provides protection only for the specified period (21 days). Once the contingency deadline passes without withdrawal, the contingency is waived. A mortgage denial after the contingency deadline does not entitle the buyer to recover the deposit — the buyer is in breach.
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Q4. A P&S requires the seller to deliver "marketable title" at closing. The title search reveals an old, unresolved mortgage from 1985 that the current seller did not place. What must the seller do?
A) Disclose the old mortgage and allow the buyer to accept it B) Obtain a release or discharge of the 1985 mortgage before closing to deliver marketable title C) Provide a survey showing the property boundaries, which cures old mortgage issues D) Nothing — mortgages more than 20 years old are automatically discharged
Answer: B — Marketable title requires the seller to clear all clouds on title, including old unresolved mortgages. The seller must obtain a discharge (release) of the 1985 mortgage from the lender or its successor before closing. Old mortgages do not automatically discharge with the passage of time.
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Q5. A Massachusetts P&S is signed with a closing date of March 15. The seller's property is destroyed by a fire on March 10, five days before closing. What is the most likely outcome under standard Massachusetts P&S terms?
A) The buyer must close and accept the insurance proceeds B) The buyer may withdraw and recover the deposit because the property was destroyed before closing C) The seller must rebuild and delay closing at the buyer's option D) The P&S automatically terminates and all parties walk away with no liability
Answer: B — Most Massachusetts P&S agreements provide that if the property is substantially damaged or destroyed before closing, the buyer may withdraw from the transaction and recover the deposit. This protects the buyer from being required to purchase a damaged property. Some agreements alternatively allow the buyer to accept the insurance proceeds.
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