1. Who pays the Buyer’s Agent’s commission?
In most cases, the Listing Agent “co-brokes” the sale with the Buyer’s Agent, sharing a percentage of their commission. In the case of a For Sale by Owner (also known as a “FSBO”), the commission owed to the Buyer’s Agent is included as a condition of the offer, to be paid by the Seller from the proceeds of the sale.

2. If the commission is based on the sale price of the property, why wouldn’t a Buyer’s Agent try to get me to pay more for the property?
A professional, ethical agent is committed first and foremost to meeting the needs of their clients by assisting them in getting the property they desire for the lowest price possible. An agent is only as good as the reputation that precedes them. Client satisfaction is the underlying goal of any transaction.  A successful transaction results in client loyalty and referrals, which is most important to any successful agent.

3. How do I know how much I can afford to purchase?
This question can be answered by using the Affordability Calculator on our Finance Page. However, the best way to get an accurate and up to date assessment of purchasing power is to meet with a Lender who can provide a Pre-approval. Most Lenders do not charge for this service. It involves checking credit, verifying employment, assets and monthly expenses. They can also work “backwards” by starting with a monthly housing payment and letting a Buyer know how much mortgage that can carry. The pre-approval process should be done at the very beginning of the process so that the Buyer’s search can focus in the correct price range.

4. What is the difference between a Mortgage Broker and a Lender?
A Mortgage Broker is a person who works independent of any specific bank or lending institution and whose job it is to bring together lenders and borrowers. They are in essence a middle person. Sometimes the process can be more difficult for the Buyer because they are not working directly with the Lender.

A Lender, whether a portfolio lender, a correspondent lender, or a direct lender, originates and funds loans directly. There is no middle person involved.

5. What is the difference between a Pre-Qualification and a Pre-Approval?

A Pre-Qualification from a Lender indicates that based on a limited review of income and expenses (usually done over the telephone), the Buyer may be qualified for a stated loan amount. A Pre-Qualification is not a guarantee that the Buyer can obtain financing, but rather an estimate of what they can afford. The loan approval would be dependent upon a full credit check, verification of assets, income and debts, as well as a satisfactory review of the Purchase & Sales Agreement and an appraisal of the property.

A Pre-Approval usually indicates that the Lender has completed a more thorough review of the credit and financials and has confirmed that the Buyer would qualify for financing at a given loan amount. A full loan commitment would still be contingent upon a satisfactory review of the Purchase & Sales Agreement and an appraisal.

Most Sellers require a letter of financial viability from a Lender upon submission of an offer. Having a Pre-Approval letter, especially in times when the market may be more difficult, gives the Buyer a distinct advantage. Sellers always look favorably on an offer from a Buyer who has a strong financial position because it lowers one of the risk factors of the transaction.

6. Is there any correlation between the asking price of a property and the assessed value of the property?
Not necessarily - although a gap in those numbers is often disconcerting for Buyers.

The asking price of the property is one that has usually been determined by a Seller and their Listing Agent based on a Comparative Market Analysis. The assessed value of a property is what the City or Town Assessor’s office has determined the value of the property to be, in order to calculate the annual property taxes (See Appraisal vs. Assessment for more information on this topic). They may or may not be aware of any renovations or upgrades that have been done to the property that would influence the value since many times the Assessors have not had an opportunity to enter the property. And remember, the lower the assessed value, the lower your taxes!

7. How do you determine if it is a “Buyer’s Market” or a “Seller’s Market”?
A Buyer’s Market is when there are more houses for sale than there are Buyers interested in purchasing. This can give Buyers an advantage in the offer and negotiation process, if the Seller is motivated to sell.

A Seller’s Market is when there are more Buyers than available property to purchase. In this situation, the Seller may have an advantage because there are oftentimes multiple Buyers interested in and potentially bidding on the same property. The Seller can usually do well on their price and can oftentimes dictate the “terms.” By terms, we are referring to the downpayment amount, the closing date and other aspects of the offer.

Determining the status of the market will vary depending upon the type of property (single family, condo, multi-family), the location, and the price point of the property. It involves doing an analysis of the “absorption rate” of properties, comparing the current level of inventory to the number of sales in a given period. With this information, we can determine the months of available inventory. In this area, a “balanced market” is considered 4 months of available inventory. Above 4 months, therefore, is a Buyer’s Market and below 4 months is a Seller’s market.

8. Can I make a verbal offer to purchase a property?
In Massachusetts, all offers, whether verbal or in writing, must be presented. In practice, Listing Agents and Sellers much prefer a written offer because the “terms” of the offer are as important as the price. As mentioned earlier, it is best to present an offer with a Pre-approval Letter, which will help the Seller to feel comfortable with the Buyer’s ability to obtain financing. Also, according to Massachusetts law, an offer is not binding unless it is in writing, signed by both parties to the transaction and is accompanied by “consideration.” Consideration is defined as “the giving of something of value” and in this area, it is generally a check for $1,000. The Greater Boston Real Estate Board has developed a standard “Offer to Purchase” form that the Buyer’s Agent fills out with the Buyer and it is then delivered to the Listing Agent for presentation to the Seller.

9. What is an “earnest money” deposit?
This is the check (referred to above as “consideration”) that is submitted with the offer as a “good faith” deposit, letting the Seller know that the Buyer is serious about their offer. It is typically in the amount of $1,000. Once the offer is accepted, the earnest money is placed in an escrow account, usually held by the company listing the property, until the closing. This deposit becomes part of the down payment and will go toward offsetting the final payment at the closing.

10. If I change my mind about being interested in purchasing the property after I have submitted my offer, can I get my money back?
Once a Buyer submits a written offer, they are communicating to the Seller that they are seriously interested in pursuing the purchase of the property. However, there are several contingencies put in place to protect the Buyer should new information come to light and the Buyer is no longer interested, or unable, to purchase the property. There is an “Addendum to Offer” form that can be submitted along with the Offer that outlines these contingencies. It includes the following:

a. Inspection Contingency: This states that the Buyer has the option to hire a licensed Home Inspector and if the Inspector finds a “serious structural, mechanical, or other defect” the Buyer has the right to revoke their offer and get their earnest money deposit returned. Note that the revocation MUST be in writing and must be submitted by a date that is agreed upon up front (usually 1 week from the accepted offer).

b. Pest Contingency: This states that the Buyer, at their own expense, has the right to hire a Pest Inspector. If there is a significant problem with pests, they can revoke their offer with written notice to the Seller and receive their initial deposit back.

c. Radon Contingency: Radon is an invisible radioactive gas that seeps up from the ground when there is ledge in the area. It is not very common in our market area and only affects basement and first floor properties. This contingency allows for the Buyer, at their own expense, to have a test for radon gas conducted (this can be done by the Home Inspector). Should the results come back outside the EPA acceptable range, they can revoke their offer with written notice to the Seller and receive their initial deposit back.

d. Mortgage Contingency: This protects the Buyer in case they are unable to secure a loan by the agreed upon date (usually about 3-4 weeks from the accepted offer). It states that if, after diligent efforts to secure a loan, the Buyer is denied, they can revoke their offer with written notice to the Seller and have their deposit refunded in full. At this point, the Buyer will have signed the Purchase & Sales Agreement so they likely will have between 5% and 10% of the purchase price deposited in an escrow account.

e. Lead Paint: This gives the Buyer the option to do a Lead Paint inspection within 10 days of the accepted offer to determine if there is lead paint present. Once completed, the report must be furnished to the Seller. If the property tests positive for lead paint, the Buyer has the option of revoking their offer with written notice to the Seller and they will be able to have their initial deposit returned.

f. Condominium Document/Attorney Review: This contingency applies if purchasing a condominium. This gives the Buyer the opportunity to review and have their Attorney review the full set of condominium documents and financial statements of the association. If the Buyer or their Attorney is not satisfied with these documents, the Buyer may receive their deposit back upon written notice to the Seller.

If the Buyer decides, after having submitted an offer, that they are no longer interested in the property, and it does not have to do with an inspection issue, a mortgage issue or the condominium documents, it would be the Seller’s choice to return the deposit.

11. What is a P&S Agreement?
A Purchase and Sales Agreement (P&S Agreement) is a legal contract that outlines the conditions of the real estate transaction in more detail than the original offer. It restates all of the dates, the contingencies and financial terms that were agreed upon in the offer and outlines additional performance requirements that apply to the Seller and the Buyer prior to closing. It is drafted by the Seller’s Attorney and then passed on to the Buyer’s Attorney for further review and revision. It is typically completed and signed by both parties approximately 2 weeks after the Offer to Purchase was signed. At this time, it is customary for the Buyer to provide an additional 5-10% deposit (calculated on the sale price of the property, minus the original earnest money, which is usually $1,000) to be held in an escrow account.

12. Do I need to hire an attorney for this transaction?
In Massachusetts, it is common practice for both parties in the real estate transaction to be represented by an Attorney. The Buyer’s Attorney is responsible for representing the Buyer’s interests throughout the transaction, reviewing all relevant documents and contracts and assisting with negotiations as needed.

13. What is the difference between a property “assessment” and an “appraisal”?
A property assessment is done by the City or Town Assessor’s Office and determines the value of a property in order to calculate the annual property taxes. (See Appraisal vs. Assessment for more information on this topic.)

An appraisal of a property is done by a licensed Appraiser who analyzes recent comparable sales and current market conditions to determine a current market value for the property. Once a Buyer has submitted an application for their loan, the Lender will send an Appraiser to the property to ensure that the Buyer has not overpaid for the property and that there are not factors that would negatively affect the “resale value.” The appraisal acts as an additional safeguard for the Buyer.

14. What is a mortgage “commitment letter”?
This is the letter that is sent out to the Buyer by their Lender stating that they have completed their review of the Buyer’s financials and the property and that they have been approved for their loan. There may be a few remaining conditions that need to be met at the time of the closing, so reading the letter carefully is important.

15. How much of a deposit do I have to put down on the property prior to the closing?
Typically, the Buyer provides a $1,000 “earnest money” deposit when they submit their offer. The next deposit occurs at the time the Purchase and Sales agreement is signed, which is approximately 2 weeks after the accepted offer. At this time, the Buyer puts down an additional 5-10% of the sale price, minus the initial $1,000. The deposit money is usually held in an interest-bearing escrow account with the agency listing the property, until the time of the closing. At closing, the deposit is applied toward the final amount that the Buyer is required to bring to complete their purchase. If there is interest that has accrued on the money while it was in the escrow account, it is split evenly between the Buyer and the Seller and is disbursed at the closing.

16. What does the Closing Attorney do and who do they represent?
The Closing Attorney represents the Lender’s interests. This includes doing the title search on the property to ensure there are no outstanding liens against the property, as well as preparing all of the paperwork that is signed at the closing.

17. Who attends the closing?
It can vary. The key players are the Buyer’s Attorney, the Seller’s Attorney, the Closing Attorney (also known as the Bank or Lender’s Attorney), the Buyer and the Seller. Although the Buyer and the Seller usually attend the closing, sometimes the Seller gives their “Power of Attorney” to their lawyer, who then signs the documents for them. Oftentimes, the Buyer’s Attorney can also act as the Closing Attorney. If you do have your Attorney work as the Lender’s Attorney, be sure to ask about any potential “conflicts of interest.”