3.1 Massachusetts Purchase Contracts

The Two-Step Contract Process

Massachusetts is one of the few states that routinely uses two sequential contracts. A buyer first signs an Offer to Purchase (often the standard Greater Boston Real Estate Board form), and after acceptance the parties sign a more detailed Purchase and Sale Agreement (P&S). A common exam trap: students assume the offer is just a non-binding letter of intent. It is not — under McCarthy v. Tobin (Mass. SJC, 1999), a signed Offer to Purchase with essential terms is an enforceable contract, even before the P&S is executed.

What each document does

Essential terms that make the offer binding

For McCarthy v. Tobin enforceability, the offer must fix the parties, the property, the price, the deposit, and the closing date. Listing brokers should not advise a seller that they can keep shopping after acceptance — accepting a written offer creates contractual obligations.

The Standard Timeline

A typical residential deal runs on a predictable clock that licensees must track:

• Day 0 — Seller accepts the Offer to Purchase; buyer delivers the initial deposit.
• Days 1-10 — Home inspection contingency period (often 5-10 business days).
• Days 7-14 — Attorneys draft, negotiate, and execute the P&S; the additional deposit (typically bringing the total to 5% of price) is delivered.
• ~Day 21-30 — Mortgage commitment deadline (financing contingency); the lender must issue a written commitment by this date.
• Closing — Usually 30-60 days after the P&S, when the deed is delivered and recorded at the Registry of Deeds.

Worked example

A buyer offers $600,000 with a $1,000 offer deposit and a 5% total deposit at P&S. At the P&S signing the buyer must deliver an additional $29,000 ($30,000 total minus the $1,000 already paid). If the financing contingency is not satisfied and the buyer gives timely written notice, the buyer is generally entitled to a refund of the full $30,000.

Contingencies and How They Protect the Buyer

A contingency is a condition that must be satisfied or the buyer may withdraw and recover the deposit. Each contingency in a Massachusetts P&S carries a specific deadline; missing the deadline usually waives the protection.

The mortgage contingency trap

The most-tested contingency on the Massachusetts exam is the mortgage contingency. The buyer must (1) apply for a loan promptly and in good faith, and (2) give the seller written notice by the deadline if financing is denied. A buyer who simply walks away without timely written notice can forfeit the deposit. Conversely, a buyer who is denied despite a diligent application and gives timely notice recovers the full deposit.

Earnest Money and Escrow Duties

Massachusetts licensees who hold deposits are governed by 254 CMR (Board of Registration of Real Estate Brokers and Salespersons) and must place funds in a separate escrow account — never commingle them with personal or operating funds.

Who holds the deposit

At the offer stage the listing broker commonly holds the initial deposit; by the P&S stage the funds are often transferred to the seller's or buyer's attorney. Title companies hold deposits less often in Massachusetts than in title-company states. A frequent exam mistake is assuming a disputed deposit can simply be returned to the buyer — the broker must hold it pending mutual written release or a court order.

Liquidated Damages, Time Is of the Essence, and Title

The Massachusetts P&S typically includes a liquidated damages clause: if the buyer defaults without a valid contingency, the seller's sole remedy is to retain the deposit as agreed damages, rather than suing for actual losses. Because the standard deposit is around 5% of price, this caps the buyer's downside but also limits the seller's recovery. Students often wrongly assume a defaulting buyer can be sued for the full price difference on resale — under a liquidated-damages clause, the deposit is usually the ceiling.

Most P&S agreements state that time is of the essence, meaning the closing date and contingency deadlines are strictly enforced. A party who is not ready on the stated date may be in breach. Skilled attorneys negotiate short written extensions when a lender or title issue causes delay.

Marketable title and the title exam

The seller must convey good, clear, record, and marketable title free of undisclosed encumbrances. The buyer's attorney runs a title examination at the Registry of Deeds (typically a 50-year search for recorded land) to find liens, easements, restrictions, or boundary problems. If a defect appears, the seller is usually given time to cure it; if it cannot be cured, the buyer may void the agreement and recover the deposit.

Recorded vs. registered land

Massachusetts has two land systems. Most property is recorded land, searched chronologically. A minority is registered (Torrens) land, where the Land Court guarantees title and issues a certificate. Knowing which system applies determines how the title search and the deed recording are handled — a Massachusetts-specific wrinkle the exam may reference. Standard Massachusetts deeds are the quitclaim deed (the customary form, conveying with limited covenants against the grantor's own acts) and, less commonly, the warranty deed.