Massachusetts is what’s known as a caveat emptor, or “buyer beware,” state when it comes to real estate transactions. That puts the burden on buyers to gather as much information about the property as they can before closing the purchase. If you don’t find out about the property pre-closing -- for example, its basement is prone to flooding during rainstorms -- you have no recourse against the seller.
The four most likely ways a prospective home buyer can obtain information on a Massachusetts property are by:
This article will discuss these four methods.
In Massachusetts, home sellers are required to disclose to prospective buyers the presence of lead paint and the existence, if any, of a septic system. The lead paint law applies only to homes built before 1978 and requires disclosure of the presence of lead paint. It does not extend to requiring that the homeoowner actually de-lead if lead paint is present.
The practical importance of the disclosure of a septic system is to make you, the buyer, aware that the home has a septic system as opposed to being connected to the town sewer. It also requires sellers to provide a Title 5 Certificate showing the septic system has passed inspection.
Sellers are not legally required to disclose anything else. This represents a huge difference from other U.S. states, in most of which sellers must fill out a lengthy form disclosing everything from a leaky roof to a flooded basement to the presence of hazardous substances. As discussed below, however, you can, as part of your purchase negotiations, require the home seller to provide this type of disclosure.
Standard Massachusetts Offers to Purchase Real Estate contain home inspection contingencies, which grant you, the buyer, an opportunity to have the property inspected by a licensed home inspector prior to signing the lengthier, more formal Purchase and Sale Agreement.
The purpose of a home inspection, according to Massachusetts Law, is to provide the buyer “with an inspection Report that forthrightly discloses the physical conditions of the systems and components” listed in the statute, which include but are not limited to the roof, the exterior of the home, the structural components of the home, and the electrical, plumbing and HVAC systems. It is important to note that a home inspection is not a “comprehensive Architectural and/or an Engineering study of the dwelling”, but is still a very important step for you, the buyer, as it gives you the opportunity to methodically and thoroughly examine a property with a licensed professional.
From a practical perspective, the reason to pay for a home inspection is to find out the flaws in the home, from an old roof to evidence of past water damage in the basement to an out-of-code railing on the front steps.
Some of the issues raised may be important enough to cause you to consider walking away from the purchase, such as evidence of structural damage. Other issues may warrant asking for repairs, negotiating the price down, or asking for a closing-cost credit. Examples might include damaged ductwork or a furnace in need of servicing.
Other issues may not concern you at all, such as scuff marks on a hardwood floor, a squeaky door, or an older, but still effective, electrical system.
The home inspection is especially important in a “buyer beware” state such as Massachusetts because it could be your only opportunity to spend an extended period time inspecting your soon-to-be new home.
While not legally required, many real estate agents in Massachusetts ask home sellers to complete a Seller’s Statement of Property Condition. The seller typically completes this form between accepting the Offer and signing the Purchase and Sales Agreement.
This statement of property condition essentially provides the buyer with more disclosures from the seller. The first section asks the seller to make disclosures and representations about title problems or concerns and zoning and building items or violations. It also asks the seller whether or not the property has ever been in a flood zone.
The second section asks for information on the various systems in the property. For example, it asks whether there has ever been an underground storage tank (which are now illegal in Massachusetts) and for information and problems on the heating, plumbing, and electrical systems, as well as security and A/C systems, if any. This section also asks the seller whether or not the property has a sewage system (which is one of the two Massachusetts mandatory seller disclosures) that would require a Title 5 Certificate, and the source of drinking water. If the source is a well, you’ll want to have the water quality tested.
This section also asks the seller to list any appliances that will be transferred to you as part of the transaction (which should be listed on the offer as well as included in the forthcoming purchase and sale agreement) and whether or not seller has had any “problems” with these appliances.
The third and final section of this document asks the seller to make representations about the building, including the presence of lead paint, asbestos, insects, and radon. This section also asks the seller questions on the structure of the property, including whether or not the seller has noted any foundational problems, basement water damage, types of floors, and whether seller has had any issues and information on the chimney, including the last time it has been cleaned.
Oftentimes, sellers will not know the answer to some of the questions included in this form, or will not be confident in their knowledge, and will answer “unknown.” The document also includes language that seller is answering these questions “to the best of their knowledge” and asks buyer to independently verify any information. This just reinforces the importance of conducting a home inspection. While a seller’s Statement of Property Condition can alert you to a potential issue to have the home inspector pay careful attention to, it is important to realize this statement is just a piece of the information puzzle.
After the seller has accepted your offer and you have conducted a home inspection (and possibly reviewed a Seller’s Statement of Property Condition), it’s time to negotiate and sign a purchase and sale agreement. In Massachusetts, this form has been standardized, and clearly states that buyers are purchasing a property “as is”— seller has made no specific warranties or representations about the property and the buyer has had an opportunity to conduct a home inspection. In other words, what you see is what you get.
As a savvy buyer, you’ll want to hire an attorney who specializes in real estate transactions to negotiate the purchase and sale agreement — and ask that the attorney add what’s called a “Buyer’s Addendum.”
A Buyer’s Addendum to a purchase and sale agreement will ask the home seller to make additional representations about a property, some similar to the Seller’s Statement of Property Condition. It acts as an additional layer of protection for a Massachusetts home buyer.
For example, in a typical Buyer’s Addendum, the seller will be asked to represent that there are no boundary or encroachment issues (such as a separate garage crossing into a neighbor’s yard), that seller has the legal authority to sell the property, that there are no tenancies in the property unless disclosed (such as for a multi-family or investment property purchase), that there are no pending bankruptcies foreclosures or anything similar that would affect the seller’s ability to legally transfer the property, and that there are no environmental violations or issues (such as an underground storage tank).
Other important items often included in a Buyer’s Addendum include the seller certifying that he or she is not a “foreign person” as defined by the IRS, that seller owns all fixtures, appliances, and so forth that are part of the transaction (in certain situations a seller might have leased a fixture, such as a water heater), and that seller agrees to assign any warranties (on, say, an appliance or heating system) and any service contracts or agreements to the buyer.
Lastly, in addition to asking the home seller to make additional representations about the property, a well-crafted Buyer’s Addendum will provide a few measures allowing you to walk away from the contract if (1) an encroachment or zoning violation is discovered (this could be discovered during a title search or when a plot plan is done) or (2) a serious title issue turns up during the title search, which makes the property uninsurable by a title insurance company.
By gathering all of this information in the course of your home purchase, you’ll be in a good position to ask for price reductions or repairs, pull out of the deal if the home is in much poorer shape than you expected, or at least know what you’re taking on in the coming years.