Purchase and Sale Agreements

Cash Is Just As Good As Money: Massachusetts Cash Real Estate Purchase Advisory

by Rich Vetstein on March 21, 2012 · 1 comment

in Closings,Condominium Law,Deeds,Massachusetts Real Estate Law,Offer To Purchase,Purchase and Sale Agreements,Realtors

Tips For Massachusetts Real Estate Cash Buyers & Sellers

As Yogi Berra once humorously said, “cash is just as good as money.”

This is especially true in real estate transactions where a cash buyer is often perceived as better and less risky than a mortgage financed buyer. (Please note that we often encourage buyers to obtain a conventional mortgage where possible given the federal tax benefits through the mortgage interest deduction and also because of the low interest rates available).

What Is A Cash Buyer?

The term cash buyer means a buyer who plans to buy real estate without using a mortgage. The term can also apply to a buyer who plans on using a mortgage, but doesn’t plan on using a mortgage contingency with the purchase contract. (This carries significant financial risk, which we typically do not recommend except for rare instances).

Cash Deals On The Rise In Mass. and U.S.

Massachusetts cash real estate transactions have risen considerably in the last few years, as reported by the Boston Globe. Cash sales accounted for a surprising 34% of all Massachusetts residential real estate transactions in 2011, according to data provided by the Warren Group. According to the Globe, cash buyers include baby boomers downsizing to Boston condominiums with profits from the sales of their suburban houses, well-off parents purchasing homes for college-age children, and investors seeking discounted properties they can rent or sell. They are turning to cash for various reasons, including tighter lending guidelines that have made mortgages less attractive, dwindling bank financing for investment properties, and a volatile stock market that has sent people looking for other places to put their money.

Frequently Asked Questions For Cash Transactions

If you are a cash buyer, or considering selling to one, you may ask whether the transaction will proceed the same way as in a mortgage based transaction and whether there are any other special considerations involved. The short answer is that the transaction, for the most part, will proceed in the same manner, and often with a shorter time-frame than a mortgage financed deal, but there are a few special considerations that a cash buyer needs to be aware of, which I’ll outline below.

Do I Need A Real Estate Agent?

Absolutely. A cash buyer needs a real estate agent for the same reasons a financed buyer needs one. Those reasons include market knowledge and savvy; skilled negotiation; being a critical liaison between the parties; and keeping the transaction and all the players on target for a successful closing. Plus, as with all transactions in Massachusetts, including cash, the seller, not the buyer, pays for the real estate commission.

Do I Need A Real Estate Attorney?

Yes, it’s not only the smart choice but it’s the law. Massachusetts law now provides that only licensed attorneys can conduct real estate closings. In mortgage backed transactions, the lender will assign a closing attorney (who is often the same attorney working for the buyer) to close the transaction. With a cash transaction, however, there’s no lender, and thus, no lender appointed closing attorney to rely on. So a cash buyer must select his or her own attorney to close the transaction.

A cash buyer’s attorney will act as the closing attorney and legal “quarterback” on the deal, having the ultimate responsibility for the vast majority of legal work on the transaction. Here is an outline of all the responsibilities which will fall upon the attorney for a cash buyer:

Reviewing and editing the draft Purchase and Sale Agreement (“P&S”)
Drafting a “Rider” to the P&S to provide additional protections to the Buyer
Negotiating the P&S with the Seller’s attorney
Keeping the Buyer updated throughout the negotiations
Advising the Buyer about the provisions in the P&S
For condominiums, reviewing the condominium documents, including the Master Deed, the Declaration of Trust, and the Operating Budget
Conducting a 50 year title exam;
Ordering the Municipal Lien Certificate and Seller’s Payoff Statement(s)
Reviewing the 6(d) Certificate, Smoke Cert and Unit Deed
Preparing the HUD Settlement Statement
Procuring an Owner’s Policy of Title Insurance and Declaration of Homestead
Preparing Documents for Closing
Conducting the Closing;
Receiving and Disbursing Funds at Closing
Conducting final title run-down then recording the Deed, MLC and Homestead.
Post closing issues: mortgage discharge tracking, payment of outstanding real estate taxes

Without an attorney, the cash buyer is simply lost. I would never recommend that the buyer hire the same attorney who is representing the seller. Not only is this a huge conflict of interest, but the seller’s attorney allegiance will rest with the seller, not the buyer.

Do I Need Title Insurance?

As we always recommend, yes! There are two types of title insurance policies: lender’s and owner’s. In a cash transaction, there will be no lender’s policy, and the owner should always opt to obtain an owner’s owner’s title insurance policy. We’ve written extensively about owner’s title insurance here. It’s especially important in this day of paperwork irregularities with mortgage assignments and discharges, robo-signing, and botched foreclosures.

When Do I Need That Cash Again?

As with all transactions in Massachusetts, a cash buyer will put down between $500 – $1,000 with the Offer and 5% of the purchase price with the signing of the purchase and sale agreement. With no mortgage lender involved, the cash buyer must realize that at the closing they must have liquid funds for the remaining “cash to close” (usually hundreds of thousands) in the form of a cashier’s check or bank check at the closing. Accordingly, the cash buyer must make all investment withdrawals, transfers and receipt of gift funds well in advance of the closing date. Since cash deals proceed much quicker than financed deals, my advice to cash buyers is to have all necessary cash in hand and in a no-risk account when the purchase and sale agreement is signed. Don’t stick your cash in some stock fund which crashes weeks before the closing.

What Happens If I Have Second Thoughts or Don’t Have Enough Cash To Close?

This is where the cash buyer is at more risk than the mortgage financed buyer who has the benefit of a mortgage contingency. If the mortgage buyer cannot obtain financing within the agreed upon deadline, he can opt out of the deal with no penalty. By contrast, after signing the standard purchase and sale agreement, the cash buyer is locked in to going forward with the deal with little, if any, wiggle room to get out. Generally, if the cash buyer has to default, he will lose his deposit (5% of the purchase price). So for any cash buyer, make sure you don’t get any buyer’s remorse!

Best of luck on your Massachusetts cash real estate purchase…

_____________________________________________________

Richard D. Vetstein, Esq. and Marc Canner, Esq. are experienced Massachusetts real estate cash buyer’s attorneys. They can be reached by email at info@titlehub.com or 508-620-5352.

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Buyer Loses $31,000 Deposit After Refusing To List Current Residence For Sale As Financing Condition

by Rich Vetstein on January 30, 2012 · 2 comments

in Massachusetts Real Estate Law,Mortgages,Offer To Purchase,Purchase and Sale Agreements,Real Estate Litigation

Post image for Buyer Loses $31,000 Deposit After Refusing To List Current Residence For Sale As Financing Condition

Standard Mortgage Contingency Language At Issue

I recently came across a very interesting and scary case from the Appeals Court, Survillo v. McDonough No. 11–P–290. Dec. 2, 2011. (It’s technically an “unpublished” opinion but it’s available to the public). The case underscores how carefully attorneys must craft the mortgage contingency to protect the buyer’s deposit in case financing is approved with adverse conditions.

“Prevailing Rates, Terms and Conditions”

The buyers, Mr. and Mrs. Survillo, submitted the standard Offer To Purchase the sellers’ home in Walpole. The offer provided it was “Not subject to the Sale of any other home.” The sellers accepted the offer. The buyers received a conditional pre-approval from a local bank for a first mortgage in the amount of $492,000. The pre-approval also stated that anticipated loan was “[n]ot based on sale of any residence.”

The parties then entered into the standard form purchase and sale agreement (P & S), with the typical mortgage contingency provision for a $429,000 mortgage loan:

“In order to help finance the acquisition of said premises, the [buyers] shall apply for a conventional bank or other institutional mortgage loan of $492,000.00 at prevailing rates, terms and conditions. If despite the [buyers] diligent efforts a commitment for such loan cannot be obtained on or before October 5, 2009, the [buyers] may terminate this agreement by written notice to the [sellers] and/or the Broker(s), as agent(s) for the [sellers], prior to the expiration of such time, whereupon any payments made under this agreement shall be forthwith refunded and all other obligations of the parties hereto shall cease and this agreement shall be void without recourse to the parties hereto “

Change In Circumstances: Lender Requires Piggyback Loan & Buyers List Their Residence

Due to the buyers’ debt to income ratios, the lender required that the loan be structured as a “piggyback” — a first mortgage of $417,000 and second mortgage of $73,400, and with the condition that the buyers listing their primary residence for sale prior to the loan closing. The buyers absolutely did not want to list and seller their residence, so they wanted out of the deal.

On the last day of the extended financing deadline, the buyers timely notified the sellers that they had “not received a loan commitment with acceptable conditions,” and attempted to back out of the agreement under the mortgage contingency provision. Ultimately, with the buyers refusing to sell their home, the bank denied the buyer’s the mortgage application based on the fact that the “borrower would be carrying three mortgage payments and the debt to income is too high.”

Focus On “Prevailing Terms” Language

The sellers refused to return the deposit, and litigation over the deposit ensued.

The Court framed the case as follows: “Before the extended mortgage contingency deadline of October 21, the buyers received a commitment from the bank for two mortgages totaling $492,000. The P & S’s mortgage contingency was accordingly satisfied unless the bank’s requirement that the buyers list their home for sale was not a “prevailing” term or condition.”

The court started with the assumption that “the typical loan condition for most borrowers is to require them to sell an existing home before the new loan closes. The condition here required only that the buyers list, not sell, their home and it was accordingly not a typical condition.” The buyers argued that because the condition was unusual, it was not a “prevailing” condition within the meaning of the contingency clause of the P & S, despite the fact that the condition was more favorable to them than the standard condition. The court flat out rejected that argument, citing prior rulings that terms of a mortgage contingency presuppose that the buyers will accept commercially reasonable loan terms. If less is required, the condition becomes an option. The court also noted that the buyers failed to notified the sellers that they were unwilling to list or sell their existing home, nor did they insert a proviso to that effect into the mortgage contingency clause. Subsequent events suggested that if the buyers had timely disclosed their intentions to the bank, the loan would have been disapproved, which may well have given the buyers the shelter they sought under the mortgage contingency clause.

The court ruled against the buyers who had to forfeit their $31,000 deposit.

An Ounce of Prevention Is Worth A Pound of Cure

I’m not sure who is to blame here, the buyer’s attorney or the buyers themselves. Probably both.

From a legal drafting approach and as the court pointed out, the buyer’s attorney could have insisted on language into the mortgage contingency provision that the buyers’ financing could not be conditioned on the listing or sale of the buyers’ present residence. After all, the language was in the Offer, so it could have easily been carried over into the P&S. There was no indication from the decision that this was raised or negotiated.

It also seems apparent that the buyers were not particularly up front with anyone on their insistence that they would not list and sell their current residence. If they had been more forthcoming about that, perhaps they could have avoided this situation.

A commenter on Boston.com also places some blame on the loan officer: “Not all pre-approvals are created equal. For a few minutes of work and adherance to a common standard of practice by the mortgage professional, a true pre-approval is supported by a credit report, the main criteria for ability to qualify for a mortgage. This is generated in a few seconds, and the pre-approval letter usually states subject to verification of income, assets, and property appraisal. Had this been done, THE DEBT TO INCOME RATIO ISSUE WOULD HAVE SURFACED EARLY.”

Based on the loan amount, this mistake or gamble cost the buyers around $31,000 plus legal fees. Ouch!

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Richard D. Vetstein, Esq. is an experienced Massachusetts real estate attorney. Please contact him if you need assistance with a Massachusetts purchase or sale transaction.

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New Trends Emerging In Massachusetts Short Sale Legal Practice

by Rich Vetstein on January 24, 2012 · 6 comments

in Foreclosure,Massachusetts Real Estate Law,Offer To Purchase,Purchase and Sale Agreements,Realtors,Short Sales

The Offer to Purchase Has Become Much More Important

With a glut of distressed property still on the market and lenders realizing foreclosures aren’t very cost-effective, analysts are predicting a healthy spike in short sales for 2012. Short sales are quite unique in terms of deal dynamics, and should be handled differently than the typical transaction.

Massachusetts real estate attorneys and Realtors, however, are set in their ways when it comes to real estate contracts. For decades, we’ve been using the standard form Offer to Purchase and Purchase and Sale Agreement from the Greater Boston Real Estate Board or some variation thereof. We have also developed a predictable process in which the parties sign the Offer, conduct property inspections, sign the Purchase and Sale Agreement, obtain financing, order title, and get to closing.

With the recent proliferation of short sales, we have had to … yes, that dreaded word, CHANGE, the way we do things. Some agents and attorneys still do things the “old way” for short sale transactions, but they are doing themselves and their clients a disservice by doing so.

In this post, I will outline – and explain — the “newer and better” way of handling the legal contracts in a Massachusetts short sale transaction.

The Offer to Purchase: Now The Operative Contract Document

We are seeing a shift to making the offer the operative contract in a Massachusetts short sale transaction. And for good reason. A short sale, by definition, is subject to a critical contingency: obtaining short sale approval from the seller’s lender(s). No short sale approval, no deal. Experienced short sale attorneys and real estate agents (and their clients) don’t want to spend the time and incur the expense of drafting a comprehensive (and contingent) purchase and sale contract when there is no guaranty of getting short sale approval. Furthermore, short sale lenders will accept a signed offer from the buyer during the approval process.

When we were first doing short sales, there were several instances where we drafted up purchase and sale agreements and then the short sale approval fell through. We had to charge the client for the drafting work or eat the cost. No one was happy.

The better way has proven to be the following:

Build all contingencies into the Offer to Purchase, namely, Short Sale Approval and Financing (we’ll talk about home inspections later)
Use a standard rider with short sale contingency language, with a deficiency waiver
Seller to use best efforts in obtaining short sale approval
Buyer agrees to be bound for set approval period (60-90 days) in exchange for seller taking property off the market and not accepting back up offers. Negotiate deposit amount, usually 1% of purchase price. Buyer will obtain his financing and loan commitment during this approval period.
Negotiate extension rights, with corresponding protection for Buyer’s financing/rate lock
Upon short sale approval, purchase and sale agreement is signed within 5-7 days and full 5% deposit made
Closing within 30 days of short sale approval. (Most short sale approvals are only good for 30 days)
Waiver of home inspection or inspection prior to offer acceptance. Sellers should never agree to allow a home inspection contingency giving the Buyer a right to terminate. If the buyer doesn’t want to pay for an inspection up front, he is not a serious short sale buyer.

Change Is Hard…

I recognize that this is a departure from the “normal” way we document residential real estate contracts, but trust me, it’s a better way, and will actually decrease the time it will take to obtain short sale approval, because the parties are not waiting around for the P&S to be negotiated and signed and the buyer (and his attorney) don’t have to do unnecessary work.

Another important piece here is that the Buyer must get his financing in order, ready to go by the time short sale approval comes through. Lenders must recognize the unique short sale process and work with borrowers to get a firm loan commitment issued timely. Also, there’s no need for a lender to insist that the borrower have a signed purchase and sale agreement for underwriting approval. Under the process that I’ve outlined and under established Massachusetts case-law (McCarthy v. Tobin), the Offer is a legal and binding contract for the sale of the subject property and is sufficient for underwriting purposes. If it’s ok for the short sale lender, it should be ok for the buyer’s lender.

Help Is An Email Away

If you are a Realtor and need some guidance on the new Short Sale Offer, email me here and I will send you the form Rider. Also, if you need a referral for an excellent short sale negotiator, I highly recommend Andrew Coppo at Greater Boston Short Sales LLC.

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Richard Vetstein, Esq. is an experienced Massachusetts short sale attorney. For more information, please contact him at info@vetsteinlawgroup or 508-620-5352.

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From Asbestos to Radon: The Massachusetts Home Inspection Process, A Legal Perspective

by Rich Vetstein on January 13, 2012 · 5 comments

in Condominium Law,Construction Law,Disclosures,Home Inspections,Lead Paint,Massachusetts Real Estate Law,Offer To Purchase,Purchase and Sale Agreements,Realtors,Safety,Septic/Title V

Post image for From Asbestos to Radon: The Massachusetts Home Inspection Process, A Legal Perspective

The home inspection is one of the most critical aspects of every Massachusetts real estate transaction. Virtually every buyer in a standard purchase transaction (meaning not a short sale, foreclosure, or bank-owned property) will opt to perform a home inspection, and for good reason. You need to know whether there are any serious structural, mechanical or other defective conditions in the home before you close.

As always, I’m going to focus on the legal aspects of the home inspection as it impacts the overall transaction.

Buyer Beware

Let’s start out with the legal framework for what, if anything, a seller and his real estate agent are required to disclose to a prospective buyer. Surprisingly to most buyers, a private seller has no legal duty in Massachusetts to disclose any type of information, good or bad, about the property (except for the presence of lead paint). This is called caveat emptor, or buyer beware. Real estate agents stand on a heightened legal footing. Under Massachusetts consumer protection regulations governing real estate brokers, a broker must disclose to a buyer “any fact, the disclosure of which may have influenced the buyer or prospective buyer not to enter into the transaction.”

Nevertheless, I always advise buyers not to rely or trust anything the seller or his/her agent says about the property. This is exactly the reason why most buyers will choose to get an independent home inspection.

Inspection Contingencies

The standard form Offer to Purchase (click for form) will include several inspection related contingencies: the general home inspection contingency, radon, lead paint, and pest contingencies. The buyer typically has between 5 and 10 days to complete these inspections. If the inspections reveals any problems requiring repair or remediation, the parties will negotiate repairs during this inspection period, and the agreement will be reflected in the standard purchase and sale agreement or sometimes a separate repair agreement which is signed around 14 days after the accepted offer. Typically, the Realtors do the heavy lifting on home inspection negotiations, and by the time it gets to the attorneys, there is an agreement in place.

The attorneys can craft the language for repairs. I always insist that repairs are performed by licensed contractors with evidence of completion provided prior to or at closing. Also, buyers should know that repairs provided in the purchase and sale agreement may trigger a second property inspection by the lender’s underwriters which could add another layer of oversight into the deal.

If the problems are so serious that the buyer wants to walk away from the deal, there is a mechanism for where the buyer provides notice to the seller and a copy of the inspection report. It’s very important to provide proper notice in order to get the buyer’s deposit returned. An attorney should be consulted for this situation.

Home Inspector License Requirements

Since 1999, Massachusetts has required that home inspectors be licensed by the state Board of Registration of Home Inspectors. You can search for home inspector licenses here: Massachusetts Home Inspector License Search.

Buyers should recognize the limits of the home inspection. The state regulations requires inspection of “readily accessible” components of a dwelling. Most modestly priced inspections are visual inspections of the property. The inspector is trained to identify defects in the systems of a house but cannot be expected to have x-ray vision. Moreover, property inspectors are not generally trained civil engineers. Structural defects and weaknesses may not be readily apparent, and may require follow up by a licensed structural engineer. In many cases, however, evidence of inappropriate settling or structural failure can be observed during a visual inspection. An experienced inspector will summarize the “big picture,” but inspectors are not required to identify the exact nature and extent of structural deficiencies. Regulations specifying the elements of a dwelling to be observed and reported on by the home inspector may be found here at 266 C.M.R. § 6.00.

Condominiums

When you buy a condo, you not only buy the unit, but the common areas such as the common roof, mechanical and HVAC systems, grounds, etc. Good home inspectors will ensure that the inspection of a condominium includes the common areas as well as the unit itself. The common area inspection may reveal deferred maintenance needs and inadequately performed repairs that may result in increased condominium fees and special assessments.

Radon

The Environmental Protection Agency (EPA) has established an “action level” of 4.0 pico-curies per liter (4.0 pCi/l) of radon present in indoor air. Although not established as an unsafe level, this figure has been established as the point at which protective measures are recommended. Prospective purchasers and home inspectors frequently use commercially available canisters to collect radon data. This method is cost-effective but may not give accurate results. The canisters are ordinarily placed for twenty-four to forty-eight hours in the basement and on the first floor of the dwelling. The canisters must be placed away from drafts and should not be disturbed. After the test period, the canisters are sealed and forwarded to a testing laboratory. Sometimes, the radon results are not ready by the time the purchase and sale agreement has to be signed. In this situation, the parties can either agree to extend the deadline or agree to a radon contingency.

If the radon results come back over 4.0 pCi/l, depending on the language of the radon contingency, the buyer can typically opt out of the deal altogether or require the seller to install a radon remediation system. Often the sellers will attempt to cap the cost of the system.

Pests

Most home inspectors are also qualified to perform inspections for wood-boring insects, such as termites, powder post beetles, and carpenter ants. All properties should be inspected for such pests. Properties financed by certain government-sponsored loan programs, such as the Federal Housing Authority, require a pest inspection as a condition of obtaining a loan. It’s a good idea to ask the sellers if they have an existing pest control contract that can be transferred to the new buyers.

Lead Paint

The Massachusetts Lead Law requires the buyer to be given the opportunity to inspect for lead paint. The seller or broker is required to provide potential purchasers of homes built before 1978 with the notification package prepared by the Massachusetts Department of Public Health.

Sellers and real estate agents are required by law to disclose any information about known lead paint hazards in their properties, and to provide copies of any documentation relating to the lead paint status of the properties (i.e., a lead inspection report or risk assessment report). The seller must grant a ten-day contingency period from the date the buyer receives the property transfer notification to conduct a lead paint inspection. If the buyer discovers lead paint in the dwelling during the inspection period, the contingency required by the statute permits the buyer to withdraw from the agreement without further obligation.

Although a seller is under no obligation to actually abate the lead paint, a lead-free house may be more valuable and marketable. This is particularly true for multi-family properties where tenants with children under six years of age may trigger the abatement requirements of the law. Sellers are required to provide any documentation they have of the estimated costs to abate the lead paint. Should a seller refuse to make a price concession based on the presence of a lead paint hazard, a buyer could argue that any subsequent buyer also should be made aware of the hazards and related costs. As a result, the availability of a lead paint inspection and cost estimate can become a powerful negotiating tool for the buyer.

Lead paint testing is typically not done as part of a standard home inspection, and must be separately arranged by a certified lead paint assessor.

Mold and Mildew

Mold and mildew are tricky subjects for home inspectors. The presence of excessive amounts of mold spores has been linked to asthma and other respiratory ailments and is claimed to cause permanent injuries. Mold grows in warm, moist environments and can be present behind walls and ceilings, in heating and cooling ducts, and in other difficult-to-inspect parts of a house or condominium building. As noted, although a building inspector cannot peer behind walls, a thorough inspection can detect water penetration, which is the precursor and necessary condition for a mold problem. Where mold is suspected, a buyer can always request that his home inspector be allowed to drill small exploratory holes to test for the presence of mold/mildew.

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Richard D. Vetstein, Esq. is an experienced Massachusetts real estate attorney. Please contact him if you need assistance with a home purchase or sale.

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Electronic Signatures Gaining Acceptance and Popularity In Massachusetts Real Estate Transactions

by Rich Vetstein on November 12, 2011 · 2 comments

in Closings,Electronic Closings,Massachusetts Real Estate Law,Purchase and Sale Agreements,Realtors,Technology

Post image for Electronic Signatures Gaining Acceptance and Popularity In Massachusetts Real Estate Transactions

Compliance Concerns Unwarranted

Electronic signature technology has been quickly gaining steam throughout the U.S. real estate community, and has now arrived in earnest in Massachusetts. Electronic signature software lets you send legally binding documents and get signatures anytime, anywhere from any Internet-connected device. It’s mostly used in Massachusetts on Offers and Purchase and Sale Agreements. I’ve been using DocuSign, and with a little learning curve, it’s been fantastic.

Realtors and attorneys who use electronic signature software can simply email encrypted contracts to their clients for signatures, rather than deal with travel, signing 4 original copies, and coordinating all the signatures. It’s especially helpful for out of state clients.

The Massachusetts real estate industry, traditionally conservative and slower to adopt new technology, has been lagging behind more progressive states such as California when it comes to adopting electronic signature technology. Plus, it hasn’t helped that technologically challenged attorneys are often involved in the drafting of the purchase and sale agreement.

In my informal survey of Realtors, the biggest questions were (1) are electronically signed contracts legal and valid, (2) how does it work: and (3) will lenders accept them?

Are Electronic Signatures Valid For Massachusetts Real Estate Contracts?

The answer is yes. Under the Massachusetts Uniform Electronic Transactions Act (UETA), real estate contracts which are electronically signed in compliance with the law are legal and valid.

Electronic signature legislation was adopted over 10 years ago. In 2000, Congress enacted the E-SIGN law which validates certain contracts in electronic form and electronic signatures across the country. In 2004, Massachusetts adopted its UETA, codified in Mass. General Laws Chapter 100G, which is essentially adopts and updates the federal E-SIGN law. Lawmakers designed UETA and E-Sign to recognize that “a signature, contract, or other record relating to a transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form.” The Massachusetts UETA provides, simply, that “In a legal proceeding, evidence of a record or signature may not be excluded solely because it is in electronic form.”

For offers and purchase and sale agreements, I have formulated the following rider provision to ensure electronic signature validity and enforceability. Feel free to use it.

This Agreement may be executed by and through electronic signature technology which is in compliance with Massachusetts law governing electronic signatures, including but not limited to, DocuSign®. Electronic signatures shall be considered as valid and binding as original, wet signatures. Signatures, originally signed by hand, but transmitted via e-mail or fax shall also be deemed valid and binding original signatures.

How Does It Work?

There are several electronic signature systems out there, including EchoSign, eOriginal, and DocuSign, which I use. All three providers warrant full compliance with federal E-SIGN and state UETA law and their European counterparts.

Since I’ve been using DocuSign, here is a quick video overview how it works.

As the individual requesting that a document be DocuSigned, you control who signs by providing the signer’s email address and other contact information. The document is routed to the signer’s email with a request to sign. DocuSign records the signer’s IP address and a time stamp of the signing activity. In addition, a signer can opt to provide geo-location information at the time of signing. If you require deeper levels of identity management, DocuSign offers additional authentication options, including: access code, knowledge-based ID check and biometric phone identification, among others.

As you can see, in many respects, an electronically signed contract is more secure and less susceptible to fraud and forgery than a traditional “wet” signature.

Are Lenders Accepting Electronically Signed Contracts?

Most are now. In fact, starting in 2012, FHA and the IRS will formally allow electronic signatures on loan and tax documents. However, I hear that some short sale lenders are still requiring wet signatures.

This is always the problem with adopting new technology. It’s disappointing because electronic signatures have been legal and valid for 10 years now. The law was passed by Congress and now all the states. As more and more agents and attorneys embrace the technology, we will see objections falling by the wayside, just as we did with faxed signatures.

Agents, are you using electronic signatures, and if so, how has it helped your business and clients? Have you run into issues or objections from lenders or attorneys?

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Richard D. Vetstein, Esq. is an experienced Massachusetts real estate closing attorney who’s handled over 1,000 closings. Please contact him if you need legal assistance purchasing residential or commercial real estate.

How Will Real Estate Closings Look In 2021?

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Upcoming Free Webinar (Nov. 1, 11:00AM): An Ounce of Prevention Is Worth A Pound Of Cure: Strategies & Teamwork To Avoid Deal Disasters

by Rich Vetstein on October 24, 2011 · 0 comments

in Closings,Condominium Law,Massachusetts Real Estate Law,Offer To Purchase,Purchase and Sale Agreements

Realtors, are you using the most current contingencies and language in your Offers? Do you know the most current Fannie Mae/FHA condo rules and how they will impact your condo sale? Want to know the latest on the U.S. Bank v. Ibanez ruling and the foreclosure title mess? How can you avoid last minute crises? All these questions and more will be answered in our upcoming free webinar.

One Hour Complementary Webinar: An Ounce of Prevention Is Worth A Pound Of Cure: Strategies & Teamwork To Avoid Deal Disasters

November 1, 2011, starting at 11:00am EST.

Presented by: Richard Vetstein, Esq. and Marc Canner, Esq. of TitleHub Closing Services and Brian Cavanaugh of MetLife Loans.

Click Here To Register

Facebook Event Invite Here

Topics Include:

1. Must Have Language For Your Offers
a. Fannie/FHA condo compliance
b. Realistic deadlines
c. Beyond the standard contingencies

2. Early Lending Intervention
a. Coordinating with Mortgage Partners
b. Pre-quals and pre-approvals
c. Current underwriting concerns

3. The Attorney’s Role: Purchase and Sale Agreement
a. Common Pitfalls & Solutions
b. New buyer rider provisions
c. Ibanez Foreclosure Title Issues

4. Dealing with 11th Hour Problems
a. Extensions for financing
b. Title issues & title insurance
c. Use and occupancy agreements

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Death and Taxes: Estate Sales & Probate Issues In Massachusetts Real Estate Practice

by Rich Vetstein 10.13.2011 Deeds

Benjamin Franklin once said famously that “the only certainties in life are death and taxes.” That’s certainly true in real estate practice. Today, I will go over how real estate passes when the owner dies – with a will or without a will – and how the probate process affects the real estate process. Tenancy [...]

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Court Upholds Oral Handshake Deal In Land Swap

by Rich Vetstein 08.22.2011 Commercial Real Estate

Seller Couldn’t Sit Back & Watch Construction Project Unfold Massachusetts appeals judges have been mighty busy this summer issuing real estate decisions. From the forced removal of condo buildings to toxic mold, to foreclosure eviction defense, it’s been no summer vacation in Massachusetts real estate law. Handed down today is a case right from a [...]

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Is “Buyer Beware” Alive and Well? An Overview of Massachusetts Real Estate Disclosure Law

by Rich Vetstein 06.21.2011 Condominium Law

Caveat Emptor: “Let The Buyer Beware” Caveat Emptor is an old common law rule which means “Let the Buyer Beware.” In plain English, it means that home buyers are on their own when it comes to the condition of the property. If there is a defect of any kind, it becomes the buyer’s problem, not [...]

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Massachusetts Tornado Disaster: Hope For The Best, Plan For The Worst In Your Purchase and Sale Agreement

by Rich Vetstein 06.02.2011 Closings

What happens if the property you have under agreement is wiped out by a tornado, burns down or is otherwise subject to a casualty? Yesterday’s horrific tornadoes — which leveled parts of Springfield and Central Massachusetts — demonstrate the power and fury of Mother Nature and how little control we have over natural disasters. Our [...]

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Buyer & Seller Closing Checklist: What You Need To Bring To Closing

by Rich Vetstein 05.14.2011 Closings

Buyer’s Closing Checklist The day has finally come and it’s time to close on the purchase of your property. You will need to bring the following to the closing: Funds For Closing. If you need to bring cash to the closing, you must bring to closing a bank or certified check PAYABLE TO YOURSELF for [...]

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REBA v. NREIS Ruling: Massachusetts Real Estate Attorneys Required To Conduct Closings; Notaries Shut Out

by Rich Vetstein 04.25.2011 Closings

Ruling Mandates That Attorneys Take “Substantive Participation” In All Massachusetts Residential Transactions The long awaited ruling from the Massachusetts Supreme Judicial Court in case of Real Estate Bar Association (REBA) v. National Estate Information Services (NREIS) has just come down. The ruling can be read below. The net effect of the Court’s ruling is to [...]

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Massachusetts Purchase & Sale Agreement Contingencies In A Changed Market

by Rich Vetstein 03.25.2011 Appraisals

The “Standard Form” In Massachusetts, buyers and sellers typically use the standard form purchase and sale agreement created by the Greater Boston Board of Real Estate. This form has been around since the late 1970′s and last updated in 1999–which might as well be 100 years ago in real estate life. Along with the standard [...]

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New Fannie Mae Condo Rules Over Pending Litigation Make Condos Harder To Sell

by Rich Vetstein 03.18.2011 Condominium Law

Litigation Over Condominium Construction Can Derail Financing It’s always humbling to be quoted in a major real estate publication such as Inman News. Last summer, I wrote about the nasty effect of the newer pending litigation Fannie Mae condo rules. Steve Bergsman, from Inman, was gracious enough to retell a story about how these rules [...]

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Buy/Sell “Piggyback” Transactions In A Changed Market

by Rich Vetstein 03.15.2011 Closings

This is a summary of a recent presentation given by Jon Ufland and Chuck Silverston of Prudential Unlimited Realty, Attorneys Richard Vetstein & Marc Canner of TitleHub Closing Services, and Mark Maiocca of Mortgage Network. Selling & Buying Simultaneously Many home buyers today still need to sell their current homes and use the sale proceeds [...]

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How Will Real Estate Closings Look In 2021?

by Rich Vetstein 03.02.2011 Closings

Are Electronic Contracts And E-Signatures On The Way? Catching my eye this week was a recent New York Times article discussing a New York state court opinion regarding the legal effect of e-mail in real estate contracts. The ruling reaffirmed that e-mail may carry the same weight as traditional ink on paper contracts. It made [...]

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Massachusetts Real Estate Law Year In Review & Outlook For 2011

by Rich Vetstein 12.27.2010 Condominium Law

It’s that time again for our annual review of hot topics and top posts for the last year, 2010. #5. The Great Flood of 2010. Ah, who can forget the flooding in the spring of 2010. I sure remember bailing out my flooded basement every 30 minutes through the night, into exhaustion. Good times… FEMA [...]

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Listing Broker Hit With Triple Damages For Breaching Escrow Duties

by Rich Vetstein 12.14.2010 Massachusetts Real Estate Law

This post is a continuation of my discussion about the recent Massachusetts Appeals Court case of NRT New England, Inc. v. Moncure (click for link). Last week I talked about why the decision was very important in upholding the standard liquidated damages clause in the the typical purchase and sale agreement. This week I’ll talk [...]

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Even In Hot Real Estate Market, Seller Entitled To Entire 5% Deposit When Buyer Lost Financing

by Rich Vetstein 12.10.2010 Massachusetts Real Estate Law

This week the Massachusetts Appeals Court handed down an important decision involving the standard form purchase and sale agreement and a listing broker’s fiduciary duties as the escrow agent. The case is NRT New England, Inc. v. Moncure (click for link). I’m going to break this decision down into 2 blog posts because it’s a [...]

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Can’t We All Just Get Along? A Realtor’s Expert Advice On Civility, Emotions And Not Taking The Massachusetts Real Estate Market Personally

by Rich Vetstein 09.19.2010 Appraisals

Welcome back Guest Blogger, Realtor Gabrielle Daniels Brennan, from Coldwell Banker Residential Brokerage, Sudbury, MA! Gabrielle and her mother-partner, Carole Daniels, just launched a fantastic blog, Living In Sudbury (www.liveinsudburyma.com), which our company, HubConnected, designed and created. Having grown up in Sudbury and now settled there with her family, Gabby’s knowledge of the Sudbury and [...]

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