The purchase and sale (P&S)

Upon completing (or waiving) your due diligence, the next step is to sign a Purchase and Sale Agreement (P&S). This step is somewhat unique to Massachusetts and is not commonly practiced in many other places. The P&S is a more detailed document that takes the initial offer, typically 4 to 5 pages long, and expands it into a comprehensive 20-page agreement prepared by attorneys.

By signing the P&S, you affirm that you have completed your due diligence and are committed to proceeding with the purchase. At this stage, you will also make a significant deposit, usually ranging from 5% to 20% of the purchase price, which signifies your commitment to the property as you await the closing date.

A notable aspect is the substantial deposit required, which can catch many buyers off guard due to the quick progression of events. We advise clients to have their P&S deposit funds readily available in cash or a near-cash equivalent before making an offer.

It’s crucial to discuss the source of these funds with your lender upfront and ensure the funds remain in the designated account without being moved. Any movement of funds will necessitate a detailed paper trail, which can complicate and delay the approval process. Therefore, to streamline the process and avoid unnecessary complications, place the funds where your lender directs and refrain from moving them.

Between signing the Purchase and Sale (P&S) agreement and the closing date, several important steps take place. First, the attorney conducts a title search to ensure that you can obtain an insurable title to the property. Concurrently, the bank performs an appraisal and reviews your loan application, including your employment and other financial information, to approve the loan.

After signing the P&S and making a substantial deposit, you progress toward closing. If your loan is not approved and you do not have a mortgage contingency, your deposit is forfeited. A mortgage contingency is crucial as it protects your deposit by allowing you to recover it if any issues arise with the loan approval process. Without this contingency, you must have an alternative means to purchase the property. This process ensures that both parties are protected and that the transaction proceeds smoothly.

For most people, the period between identifying a property, getting an offer signed, and signing the Purchase and Sale (P&S) agreement feels like taking on a new full-time job. This phase can be quite intense, stressful, and pressure-filled. However, this level of intensity usually subsides after signing the P&S agreement. Once this milestone is reached, the process typically becomes much quieter.

During this quieter phase, it’s crucial for buyers to remain cautious and behave responsibly. This means avoiding any major financial changes or activities that could jeopardize the loan approval process. The calm after signing the P&S agreement is an essential period for ensuring a smooth transition to closing.

Once you put down the deposit and have applied for your mortgage, it is crucial to maintain financial stability while waiting for the various due diligence processes to be completed. During this period, avoid any significant financial changes such as buying a car, a boat, or making large deposits on furniture or vacations. One of the most critical issues to avoid is applying for new credit. This includes signing up for store credit cards, new cable accounts, or new credit cards. 

At the time of writing your offer, it is essential to have your mortgage selected and to stick with that lender. Changing your mortgage or shopping for new rates after signing the Purchase and Sale agreement can put your deposit at risk. Your deposit is at risk if your mortgage isn’t approved by the contingency date. Even if things calm down and you feel bored, resist the urge to shop for better mortgage rates. We strongly advise against any actions that could jeopardize your deposit during this critical time.

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