By Elliott Topkins, Esquire
3/24/11
What every real estate professional in Massachusetts needs to take note of is that there are Massachusetts Supreme Judicial Court decisions, which clearly hold that the offer to purchase (OTP), if it includes the basic facts of the transaction (like purchase price, closing date and the like), can be viewed as an enforceable contract, upon which the buyer can sue the seller for specific performance, even if the parties are never able to work out a mutually satisfactory purchase-and-sale agreement (PNS).

That being the case, I thought I would make some observations about what I believe makes an OTP “workable” and useful in moving the transaction along to a point where a mutually satisfactory PNS can be drafted, which reflects the more specific facts concerning the transaction and enables the purchase to move forward.

1. Make sure the OTP is legible. This may sound like a basic truism on a document as important as the OTP, but I am amazed at how many times, I receive OTP’s to review, where I cannot read some of the important terms therein, because of strike-overs or substitutions in the margins. The OTP should really be written very neatly, and precisely, because it is from this document that an accurate PNS can be drafted by the attorneys representing the buyer and seller.

2. Think long and hard about who will hold the PNS deposit and under what terms. More often than not, the listing agent for the property will hold the deposit. If this is a transaction without Realtors (commonly called a FSBO), the deposit should be held by someone other than the seller. Usually, the attorney representing the seller will agree to hold the deposit in a FSBO transaction. Unless the closing is way off in the future, it rarely makes sense to require that the deposit be placed in an interest-bearing account. Current interest rates do not justify the administrative expense involved.

3. Be precise about what is “included” and “excluded” in the sale. The OTP is the place to be specific in this area. Many disputes at the PNS level can be avoided if there is definition of the inclusions and exclusions.

4. Be realistic in terms of date for mortgage commitment and submission. I have seen many OTP’s where the date to submit the mortgage application has passed by the time I start working on the PNS. Make the dates comport with reality. Similarly, put in a realistic time frame for the receipt of a mortgage commitment. Lenders are understaffed, and appraisals are taking longer than in the past. Give all parties a chance to do what is possible.

If you are a buyer or seller entering into a real estate sale transaction, take the time to make your OTP accurate and realistic. It will make your transactions move more smoothly, and the extra time spent at the outset of the transaction will almost always bear fruit somewhere down the line.