Massachusetts Real Estate Law: What Homebuyers Need to Know
Understanding Massachusetts real estate laws is a big part of protecting your rights as a homebuyer. We’ve been helping home buyers and sellers in Walpole and surrounding townships make these transactions smoothly for over 30 years.
If you’d like to be better prepared, we’d like to offer this guide as a first step in understanding the process. We’ll cover everything from property rights and title searches to the nuances of real estate transactions in our state. While this isn’t legal advice, it does help you understand the commonly used terms and the steps involved in a successful real estate transaction.
Understanding Property Rights in Massachusetts
In our state of Massachusetts, real estate transactions are governed by a set of laws written to make sure property rights are clearly defined and protected. When you invest in property, you are agreeing to take on the ownership and the legal responsibility for the land and all the structures on it.
Title and Deed: The Foundation of Property Ownership
A deed is a legal document that recognizes an individual’s, individuals’, or legal entity’s ownership of a property. A deed includes a detailed description of the property, including property lines, the name of the seller (grantor), and the buyer (grantee). Both the buyer and the seller must sign a deed to make it official. The ‘title’ to a property is the abstract concept of rightful ownership.
One of the first things you’ll need to learn about property rights is the concept of a title—the legal ownership of the property. A title isn’t just a piece of paper; it represents your legal rights to use, control, and sell the property.
When you hold the title, you are the recognized owner in the eyes of the law and responsible for all liabilities, such as paying property taxes and following local zoning regulations. However, a title can be contested if there are any unresolved claims, such as liens on the property or disputes over inheritance.
A deed, on the other hand, is a document that transfers ownership (the title) from the seller to the buyer. Before finalizing any purchase, a thorough title search is essential to ensure there are no legal disputes, liens, or claims on the property. This protects your right to fully own, occupy, and eventually sell the property without issues.
One client we helped made the disastrous decision to buy a house with a partner who insisted on being on the title but not the mortgage papers. When he stopped making his part of the house payment, the other partner couldn’t cover the whole amount and lost the house. This happened during the 2008 housing crisis. This arrangement complicated her attempts to renegotiate with the mortgage company or sign up for assistance programs.
But Do You Really Need a Title Search?
A title search goes beyond checking the current deed. It involves reviewing historical records, including past deeds, wills, court judgments, and any liens or mortgages on the property. Title insurance is often recommended, as it provides protection in case any undiscovered issues arise after the purchase.
Recently, there was an alarming attempt to fraudulently sell Graceland, Elvis Presley's iconic Memphis estate, through title fraud. In this case, scammers falsely claimed that Lisa Marie Presley had defaulted on a $3.8 million loan, using Graceland as collateral. They set up an illegitimate auction and forged documents to make the transaction seem genuine. This bold effort to sell such a well-known property highlighted a growing trend in title and mortgage fraud.
Why Do You Need a Lawyer and a Real Estate Agent?
In Massachusetts, real estate transactions can be complex, and working with professionals is essential. Real estate agents can help guide you through the home-buying process, but it’s important to understand their role. The state requires agents to disclose their relationship with you—whether they represent your interests as a buyer's agent or are acting on behalf of the seller.
However, real estate agents can’t provide legal advice unless they are also licensed attorneys. Consulting with a real estate attorney is always best for legal matters such as reviewing contracts, conducting title searches, and understanding one's property rights.
Massachusetts Disclosure Laws: What You Need to Know
Massachusetts is a "buyer beware" or caveat emptor state, and that means it’s pretty much up to the buyer to uncover potential issues with the property. Sellers are generally not required to disclose every defect, so homebuyers need to be diligent during inspections. However, there are specific disclosure requirements for issues such as:
Lead Paint: Homes built before 1978 must disclose the presence of lead paint due to health risks.
Septic Systems: If the home has a septic system, a recent Title V inspection must be provided to ensure it complies with state standards.
Buyer’s Questions: Sellers are required to provide honey answers to prospective buyers’ questions.
The Home Inspection Process
Given the "buyer beware" nature of Massachusetts real estate transactions, a home inspection is an absolute must. This is your only chance to suss out any structural or mechanical problems before you finalize the purchase. If the inspection reveals significant issues, you should try to negotiate repairs or adjust the purchase price accordingly. It’s so important that there are new Massachusetts laws that protect buyers by removing the option for sellers to waive the buyer's right to a home inspection.
The Importance of the Purchase and Sale Agreement
Once you find the home you want to buy, you'll sign a Purchase and Sale Agreement (P&S). This legally binding document outlines the final sale price, terms, contingencies (such as the home inspection or financing), and closing date. We recommend you have an attorney review the P&S to ensure that it protects your interests and covers all contingencies.
Financing and Mortgage Considerations
Most Massachusetts homebuyers need a mortgage to buy their house. We recommend that you meet with a mortgage broker well before you start house hunting, as much as 1-2 years before you’re ready to buy. The broker will look at your credit and make suggestions on how to improve your score before you apply. This kind of preparation helps you get the best rates, secure pre-approval, and offer a rapid closing period - all of which makes your bid more attractive to sellers.
Work with them to gather and prepare the documents you’ll need for the application. Ask them to explain both what you should and should not be doing once you start the application process. For example, one homeowner we worked with had a preapproval above the final purchase price, and their offer was accepted. Only during the closing period was it uncovered that they had purchased a new Mercedes between the time they received their pre-approval and when the bid was accepted. Sadly, this changed their financials, and the pre-approval became null and void. Someone else bought their dream home.
There are also several mortgage programs available, especially for first-time homebuyers, including:
MassHousing Loans: Offers affordable mortgage programs with down payment assistance for first-time buyers.
FHA Loans: These government-backed loans offer lower down payments and are popular among first-time buyers.
Closing Costs and Other Fees
When budgeting for your new home, don’t forget to factor in closing costs, which typically include loan origination fees, title insurance, appraisal fees, and attorney fees. These can add up to 2-5% of the purchase price.
Zoning and Land Use Regulations
Before purchasing a home, it's also important to understand zoning laws that regulate how land can be used. Zoning laws in Massachusetts dictate whether a property can be used for residential, commercial, or mixed purposes. If you plan on making renovations or changes to the property, make sure your plans comply with local zoning regulations.
Protecting Your Rights After Closing
Once the deal is closed, your property rights are secured, but it’s still important to be vigilant. Ensuring that you have title insurance protects you against any future claims or defects in the title that may arise after closing.
Additionally, stay informed about property tax obligations in Massachusetts, as failing to pay these can result in liens against your property. Taxes are based on the assessed value of the property and can vary by location.
Conclusion
Buying a home in Massachusetts is a major financial commitment, but understanding the legal landscape helps you protect your investment. From conducting thorough title searches to navigating the P&S Agreement and understanding disclosure laws, it’s essential to approach each step with care and legal advice. By staying informed and working with qualified professionals, you can confidently navigate the Massachusetts real estate market and know that your property rights are secured.
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Disclaimer: This blog article is for informational purposes only and should not be considered a substitute for formal legal advice from Attorneys Jim and Steve Brady and Associates P.C. Please consult a qualified professional for personalized advice tailored to your needs.