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Real Estate Purchase Agreement: Essential Guide for Landlords, Investors, and Tenants

Comprehensive guide to understanding real estate purchase agreements for tenants living in properties being sold, real estate investors with multiple rentals, and individual landlords selling rental properties.

Introduction

A Real Estate Purchase Agreement is a legally binding contract that outlines the terms and conditions of a property sale between a buyer and seller. Whether you're a tenant concerned about your living situation when your landlord decides to sell, a real estate investor expanding your portfolio, or a landlord looking to sell your rental property, understanding this document is crucial to protecting your interests and ensuring a smooth transaction. This guide breaks down the key components of a Real Estate Purchase Agreement and provides specific insights for tenants, investors, and landlords navigating property sales.

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Key Things to Know

  1. 1

    A Real Estate Purchase Agreement is legally binding once signed by all parties, so review it carefully or have an attorney review it before signing.

  2. 2

    Tenants generally maintain their rights under existing leases when a property is sold, as the new owner must honor the terms until the lease expires.

  3. 3

    Contingencies protect buyers by allowing them to back out of the deal under specific circumstances without losing their earnest money.

  4. 4

    Landlords selling rental properties must disclose existing leases, security deposits, and any known property defects to potential buyers.

  5. 5

    Real estate investors should include contingencies for reviewing tenant payment histories, lease agreements, and property financial records.

  6. 6

    The purchase agreement should clearly state whether the property will be delivered vacant or with tenants in place at closing.

  7. 7

    Security deposits must be transferred from the seller to the buyer at closing, with proper accounting and notification to tenants.

  8. 8

    Financing for investment properties typically requires larger down payments and carries higher interest rates than primary residence loans.

  9. 9

    Local landlord-tenant laws may impact how a property sale can proceed, including requirements for tenant notification and rights of first refusal.

  10. 10

    Tax implications of selling rental property differ significantly from selling a primary residence, including potential capital gains tax and depreciation recapture.

Key decisions before you file

Before you file a Real Estate Purchase Agreement in Massachusetts, a few decisions shape the document: which option to choose and what each one means. The Real Estate Purchase Agreement guide walks through them.

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Massachusetts Requirements for Real Estate Purchase Agreement

  • Statute of Frauds (Massachusetts General Laws Chapter 259, Section 1)

    Real estate purchase agreements must be in writing to be enforceable under the Statute of Frauds, which requires certain contracts to be written and signed by the parties to be bound.

  • Property Disclosure Requirements (Massachusetts General Laws Chapter 93A (Consumer Protection Act) and 105 CMR 460.000 (Lead Poisoning Prevention and Control))

    Sellers must disclose known material defects about the property, including the presence of lead paint in homes built before 1978.

  • Lead Paint Disclosure (Residential Lead-Based Paint Hazard Reduction Act of 1992 (Title X))

    For properties built before 1978, sellers must provide buyers with a lead paint disclosure form and the federal lead paint pamphlet.

  • Smoke and Carbon Monoxide Detector Compliance (Massachusetts General Laws Chapter 148, Section 26F and 527 CMR 1.00)

    Sellers must ensure the property complies with Massachusetts smoke and carbon monoxide detector laws and provide a certificate of compliance from the local fire department.

  • Title V Septic System Compliance (Massachusetts General Laws Chapter 21A and 310 CMR 15.00)

    For properties with septic systems, sellers must provide a Title V inspection certificate showing the system is in compliance with state regulations.

  • Real Estate Transfer Tax (Massachusetts General Laws Chapter 64D)

    The agreement should address payment of the Massachusetts deed excise tax, which is typically paid by the seller.

  • Attorney Review Period (Massachusetts common law and practice)

    Massachusetts practice often includes an attorney review period allowing legal counsel to review and propose modifications to the agreement.

  • Mortgage Contingency (Massachusetts common law and practice)

    The agreement should include a mortgage contingency clause allowing the buyer to terminate if unable to secure financing under specified terms.

  • Home Inspection Contingency (Massachusetts common law and practice)

    The agreement should include provisions for a home inspection period and the buyer's rights if defects are discovered.

  • Fair Housing Compliance (Fair Housing Act and Massachusetts General Laws Chapter 151B)

    The agreement must comply with federal and state fair housing laws prohibiting discrimination based on protected characteristics.

  • Closing Date and Possession (Massachusetts common law and practice)

    The agreement must specify the closing date and when the buyer will take possession of the property, in compliance with Massachusetts conveyancing practices.

  • Escrow Requirements (Massachusetts General Laws Chapter 184, Section 17C)

    The agreement should address escrow requirements for the deposit and any other funds held in escrow during the transaction.

  • TILA-RESPA Integrated Disclosure Compliance (Truth in Lending Act and Real Estate Settlement Procedures Act (Regulation Z))

    For transactions involving mortgage financing, the agreement should acknowledge compliance with federal disclosure requirements.

  • Condominium or HOA Disclosure (Massachusetts General Laws Chapter 183A (Condominiums))

    For condominiums or properties subject to homeowners associations, sellers must provide governing documents, financial statements, and other required disclosures.

  • Marketable Title (Massachusetts common law and practice)

    The agreement should include provisions requiring the seller to convey marketable title free from encumbrances except those specified in the agreement.

  • Recording Requirements (Massachusetts General Laws Chapter 183 (Alienation of Land))

    The agreement should acknowledge that the deed and other documents will be recorded at the appropriate Registry of Deeds in compliance with Massachusetts recording statutes.

  • Foreign Investment in Real Property Tax Act Compliance (Foreign Investment in Real Property Tax Act, 26 U.S.C. § 1445)

    The agreement should address FIRPTA withholding requirements if the seller is a foreign person.

  • Tenant Rights Protection (Massachusetts General Laws Chapter 186 (Landlord and Tenant))

    If the property is tenant-occupied, the agreement must address tenant rights and notice requirements under Massachusetts law.

  • Environmental Hazards Disclosure (Massachusetts General Laws Chapter 21E (Massachusetts Oil and Hazardous Material Release Prevention Act))

    The agreement should address disclosure of known environmental hazards such as underground storage tanks, asbestos, or contamination.

  • Electronic Signatures (Electronic Signatures in Global and National Commerce Act (E-SIGN) and Massachusetts Uniform Electronic Transactions Act)

    The agreement may include provisions for electronic signatures in compliance with federal and state law.

Frequently Asked Questions