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    The Anatomy of an Offer – Part 3

    Part I of this 3-part series on Offers discussed the offer price, while part 2 discussed the numerous dates associated with the offer. This final piece discusses the various contingencies, if any, that are associated with your offer.

    So what is a contingency? Simply put, it’s a condition that must be met in order for you to agree to proceed with the purchase of the property. There are some standard contingencies that are frequently included in offers, depending upon the Buyer’s circumstances and wishes. These include:

    • Inspection Contingency – The majority of Buyers opt to have the home inspected by a licensed home inspection professional before proceeding with the sale as originally written. If you are unhappy with the results of the home inspection, this contingency allows you to get your deposit money back and terminate the deal, or to attempt to renegotiate the offer based on new information that you had no way of knowing prior to the inspection.
    • Mortgage Contingency – If your purchase of the property requires you to take out a mortgage, the mortgage contingency protects your deposit money in the event you are turned down for the mortgage by the bank. You will not lose your deposit if your mortgage application is denied, as long as you have fulfilled the obligations in the Offer and/or Purchase & Sale Agreement.
    • Home Sale Contingency – While not as common as the inspection and mortgage contingency, a Buyer may have to include a home sale contingency if they are unable to purchase the property without first selling a home they already own. Sellers sometimes refuse offers with home sale contingencies because they don’t want to miss out on another “ready, willing and able” Buyer who could close more quickly. But there are ways of reducing the risk to the Seller, such as the incorporation of a “48-hour kickout clause”. The bottom line is that if you can’t afford the new home without first selling the old one, then you really have no choice but to include a home sale contingency. Thus, it is not a contingency of choice, but rather one of necessity.
    • Condo Docs Contingency – If you are buying a condominium, it is common to include a contingency that provides you with a specified timeframe to review the condo docs to be sure you are comfortable with the condominium association, its financial stability, rules & regulations, etc.

    The above are all common contingency clauses that are frequently included in offers. But you could place any contingency that you want on your offer. You could state that your offer is contingent upon not closing for 6 months. You could say it is contingent upon the dead tree in the front yard being removed prior to closing. You could stipulate that it’s contingent upon your mother approving of the house when she arrives from Italy in 3 weeks. The Seller, of course, does not have to agree to any of the conditions. The more “unusual” and uncertain, the less likely it is that the Seller will agree. Uncommon contingencies should be used sparingly if you want the Seller to accept your offer.

    Before closing, it’s important to highlight the most important quality of an offer, and that is its owner. This is YOUR offer, it is not your Realtor’s. YOU are the one buying the house. And while your Realtor may advise you on all aspects of the offer, it needs to reflect YOUR terms and YOUR wishes. So before you sign your name to the bottom and hand over a deposit check, be sure you’ve read everything carefully and that you understand and agree with everything stated therein. Good luck!

    Anatomy of an Offer – Part 2

    In Part 1 of this 3-part series, we discussed the most obviously important aspect of your offer – the PRICE! This month we’ll cover a less obvious but equally important topic – the DATES.

    Offer Dates

    When making an offer on your Cape Cod home, there are numerous dates that must be identified and all are important. Here’s a quick description of each.

    Expiration – This is the date and time at which the offer expires. The Seller must reply to you by this date and time, or technically, your offer is off the table.

    Inspections – This is the date by which you will complete your inspections of the property. A period of 2 weeks after the acceptance of the offer is usually allocated for any and all inspections.

    Inspections Response – This is the date by which you must respond to the Seller about the inspection if you wish to back out of the deal or request any concessions from the Seller.  If this date comes and goes and you do not say anything to the Seller, it is assumed that you are proceeding with the sale, and failure to do so could result in the forfeiture of your initial deposit. We will discuss this further next month.

    Purchase & Sale – This is the date by which you will sign a more elaborate and detailed contract with the Seller known as the Purchase & Sale Agreement (or P&S for short). This is typically done within 3 weeks of the initial offer being accepted and AFTER you have had your home inspection. But there are no firm rules and there are always exceptions. Your attorney is heavily involved with the preparation and review of the P&S on your behalf.

    Mortgage – When a purchase involves a mortgage, the offer will specify a date by which you must have a mortgage commitment from your Lender. This is typically 3-4 weeks after the signing of the P&S, depending on how easy your loan is likely to be. A mortgage commitment is FAR different than a pre-approval. It is given to you by the Lender after they have completed a forensic review of your financial profile and background. Once you have a clean mortgage commitment from the Lender, you will soon be ready to close on the house. Another date specified in this section is the date by which you must have submitted at least one mortgage application. This date frequently coincides with the P&S signing date, since most lenders don’t start working on the application until they have a signed P&S.

    Closing – This is the date that you plan to close on your mortgage (if there is one) and take possession of the home.

    If your offer is accepted by the Seller, you should of course do your best to meet all the deadlines laid out in the offer. However, it is not always possible, and in those cases, the Buyer can request an extension to one or more dates. For example, after your standard home inspection, you may wish to order a pest inspection based on termite damage uncovered during the home inspection. This may require an extension to the inspection deadline. Or your mortgage lender may require a little more time before granting you a firm commitment, in which case you would need to request an extension to the mortgage commitment deadline. These are common occurrences, but keep in mind that the Seller doesn’t HAVE to agree to any extensions. So be sure you are always operating with the phrase “Time is of the essence” in mind.

    Stay tuned for the final part of this series which will further explore the various Contingencies associated with your offer.

    Anatomy of an Offer – Part 1

    You’ve been looking for months. You’re already pre-approved for a mortgage. You FINALLY found the right home. Now what? Well it’s time to put your money where your pen is and write up an offer!

    The offer tells the Seller the terms under which you would like to purchase his home. The key elements to an offer are price, dates, and contingencies. We’ll take a look at each separately in this 3-part blog series!

    The Offer Price

    The offer price tells the Seller how much you are willing to pay for his house. Unless you are deeply confident in your own knowledge and instincts, your Realtor should help you understand the market value of the home by providing you with sale prices of similar, nearby homes for comparative purposes. For example, let’s say the home is priced at $549K. Your Realtor may tell you that similar homes in the neighborhood have sold in the past six months within the range of $475K to $525K. Armed with this knowledge and an understanding of how your target home compares to the others, you may decide that this particular house seems to be worth around $515K. A Buyer typically makes an initial offer that is lower than what she is willing to pay, but there are times when that is not advisable, such as during a strong seller’s market (when inventory is low and buyer activity is high), or when the home appears to be priced right from the start.

    After confirming the offer price, you will fill in amounts for the first and second deposits. The first deposit, frequently called the “good faith” deposit, is a small deposit used to “bind” the offer and tells the Seller that you are serious. This check is generally a personal check, frequently for $1000, and is not deposited until your offer is actually accepted. If that never happens, the check is returned to you.

    The second deposit will be paid when you sign the Purchase and Sale Agreement, which is typically after you have had a professional home inspection and confirmed that you definitely want this house. The second deposit can be any amount you want, but is typically between 5 and 10% of the offer price. The Seller will take note of your second deposit amount when considering your overall offer. A strong second deposit tells the Seller you are very serious about this home, since you are willing to tie up a fair amount of cash while waiting for it. The Seller may consider this when evaluating multiple offers. The second deposit can also be a personal check, although many Seller’s Agents will insist that it is in the form of a cashier’s check – particularly if there is very little time between the second deposit and the closing.

    The final amount is the balance, and that is the offer price less the deposits. It is what you will owe to the Seller at the closing in order to complete the purchase of the house. Some or all of the balance may actually be covered by the mortgage – depending on how much you are financing and how much you are paying out of your own pocket.

    In the event that you back out of the deal after the home inspection, your first deposit will be returned to you, provided you comply with the inspection response date specified in the offer. If you move forward with the deal after the inspection and proceed to signing a P&S and paying a second deposit, the P&S will specify under what conditions you can still legally terminate the deal and receive all of your deposits back. The most common one is the mortgage contingency, which you would invoke if your lender turned you down for a mortgage.

    You need to keep a very sharp eye on all the dates and contingencies laid out in your offer so that you don’t put your deposit monies at risk in the event you are unable or unwilling to complete the transaction. These will be discussed in subsequent blog posts.

    Why Buyers Need An Attorney

    If you’re in the process of shopping for a home on Cape Cod, you’re probably working very closely with your Realtor and have already engaged at least one mortgage lender.  Once you FIND a home and are ready to make an offer, your team of professionals will expand immediately to include a reputable, local real estate attorney to help guide you through the intricate process of closing on your loan and home.

    Many buyers of Cape Cod homes do not live in Massachusetts and are therefore unfamiliar with our closing process.  In many states, lawyers are not even involved in the closing process whereas in Massachusetts, a lawyer is actually REQUIRED to preside over any real estate closing that involves a mortgage.  This attorney is sometimes called the “Closing Attorney” and he or she represents the lender and usually the buyer as well, due to the common interests of the lender and buyer. So what exactly does the Closing Attorney do?  Here’s a brief summary of his/her typical functions:

    • Orders a municipal lien certificate to verify the status of all real estate taxes and other municipal charges applied to the property.
    • Orders the payoff of any and all mortgages applied to the property.
    • Examines the title to the property going back 50 years for all new purchases, and works with all involved parties to resolve any title defects.
    • Provides the buyer with certification of title.
    • Arranges for the issuance of title insurance for both the lender and the buyer.  (Most lawyers strongly recommend that buyers obtain their own title insurance policies to prevent title problems down the road.)
    • Works closely with the lender to prepare the buyer for the closing day by ensuring that the mortgage, promissory note, and closing disclosure (which replaced the HUD-1 in transactions involving a mortgage) are ready and accurate.
    • Works closely with the seller’s attorney and the Realtors to obtain the deed to the property, the final utility bills, the smoke detector/CO2 certificate, Title V septic certification, 6(d) condominium certificate (if appropriate), and other closing-related documents and information.
    • Oversees a number of issues at the actual closing, including payoff of mortgages, real estate taxes, utilities, and Realtor commissions, proper funding of escrow accounts, proper distribution of sale proceeds, and more.

    Earlier in the process, the buyer also needs an attorney to review his or her purchase and sale agreement, which is generally initiated by the seller’s attorney. If there will be a mortgage on the home, it is usually recommended that the buyer speak to the lender about using his/her own attorney to represent both the lender and the buyer.  This saves the buyer from paying for TWO sets of legal fees, since the lender will of course charge the buyer for its legal fees associated with the loan. The buyer’s chosen attorney typically must be on the lender’s list of approved closing attorneys.

    If you’re looking to purchase a home on the Cape (or anywhere else in Massachusetts!), be sure to get a local attorney involved early. Your Realtor or local lender can set you up with a trusted, reputable real estate attorney to ensure that your interests are fully protected from the initial offer to the final signature at the closing table.

    What’s This Home REALLY Worth?

    Congratulations! After months of searching, you FINALLY found the perfect Cape Cod home for you and your family. But the list price seems a bit high. How do you know what the home is really worth?

    First, let’s discuss the term “worth”. In most cases, a home’s market value is a range, not a precise number. You may feel a home is worth $700K while another buyer may be willing to go as high as $750K. Neither is necessarily right or wrong. Any given home could be worth more to one buyer than another. And if you’re paying cash, you are largely free to pay whatever you wish. But if you’re taking out a mortgage – especially one that is 80% or more of the sale price – the bank’s appraisal must agree with your offer.

    The single most important factor contributing to a home’s market value is the recent sale price of nearby, similar homes. These are called the home’s “comps”. The more RECENT – the more NEARBY – and the more SIMILAR the comps, the more credible the market value range will be. Take a condominium complex where every unit is the exact same size and layout and where there have been numerous recent sales. The only variables in the market value of these units will be factors such as views and updates, which could be substantial, but are easy to identify and quantify. A neighborhood of 3-bedroom 2-bath ranches built by the same builder at roughly the same time will also have somewhat predictable market values. But a neighborhood of diverse styles of homes built at different times and with few recent sales could be a bit tougher and may require looking at comps outside the ideal parameters.

    Although the sale price of good comps is the single most important factor, there are other factors to consider when determining market value. Homes that are under agreement can also be informative, especially if they sold quickly. A home that went under agreement quickly most likely will sell for pretty close to its asking price. A home that went under agreement soon after a price reduction may sell close to that price. A home that had been on the market at the current list price for more than a few months before going under agreement may sell for 4-8% less than the asking price. These are just general rules of thumb, but on average, they tend to be substantiated.

    Nearby, similar homes that are currently listed for sale may also be considered, although it’s important to remember that these homes haven’t actually SOLD. So there is no validation that the home is worth its current list price. The longer the home has been on the market, the more likely it is that it is either overpriced, or has a relatively small pool of ideal buyers. If there is a nearby, similar home listed for $50K less than the one you’re looking at and even IT hasn’t sold, you need to look carefully at both to determine what might justify the price difference.

    There are many other less significant factors to consider. What is the assessed value compared to the assessed values of the comps? Is there anything happening in the community that is likely to impact short-term value? You may also wonder about the Seller’s personal circumstances and motivation level. While these don’t really translate into market value, they MAY impact what the Seller is willing to accept. But in general, homes tend to sell for their actual market value.

    Unless you have lots of free time on your hands and are very resourceful when it comes to real estate research, you should find a Realtor with whom you feel comfortable who can do all of this research for you, and at no cost to you.  This Realtor would be your “Buyer’s Agent” and as such, owes you his or her complete fiduciary responsibility. If you are not already working with a trusted Realtor, I would welcome the opportunity to represent you as your Buyer’s Agent.  To get started, visit my website and Register for an account.  Or you can go directly to the Cape Cod MLS Search page and begin looking at available homes immediately.  I look forward to the privilege of working with you.

    Using a Reverse Mortgage to BUY a Home?

    Most of us are familiar with the concept of using a reverse mortgage to extract equity from our existing home to help pay for daily living expenses or just make life more enjoyable and comfortable.  But did you know that you may be able to use a reverse mortgage to help BUY your dream home on Cape Cod?

    Consider the following example.  You and your spouse, both age 62 or over, have just sold your primary residence in Winchester.  The sale netted you $800K which you plan to use to buy your retirement home on Cape Cod.  While searching the available Cape Cod homes for sale, you spot a stunning 3500 sqft contemporary Cape in Harwich Port on a half-acre, beautifully manicured lot within walking distance to the ocean. Your Realtor believes you could probably get it for $1 million.  This is more than you had planned to spend, but you can’t get the home out of your mind.  You and your spouse discuss taking out a $200K mortgage to cover the difference, but the mortgage payments would place a greater burden on your fixed retirement income than you care to assume.  So what can you do?

    Well for one thing, you could consider taking out a lump-sum reverse mortgage for the extra $200K.  With a reverse mortgage, you do not need to make payments on the loan.  It would be paid in full, along with all applicable fees and interest, from the proceeds of the home after the home is sold by you or your heirs.  The benefit to you?  You get to live your retirement years in a much nicer home than you had originally planned, without impacting your available income and quality of life in the least.  For some people, it certainly is an attractive option.

    The vast majority of reverse mortgages are part of the Federal Housing Administration’s reverse mortgage program and are also called Home Equity Conversion Mortgages (HECM). They are backed by the government and made available through approved FHA lenders. But with that said, reverse mortgages aren’t for everyone, and you should fully understand all of their implications before getting one.  The government helps you do this by insisting that you meet with a HUD-approved counseling representative before being approved for one.  But for many older adults, reverse mortgages help them enjoy a more comfortable, fulfilling retirement by tapping into a portion of their home’s equity without having to make payments while they still live there.

    If you are considering using a reverse mortgage to help purchase your Cape Cod dream home, you should consult with your financial advisor to be sure it is the best solution to help you achieve your objectives, and also speak with an approved HECM lender. For more information about government-backed reverse mortgages, please visit the HUD HECM for Purchase website. To search the entire Cape Cod MLS for available homes, please visit OUR website. We look forward to helping you find the retirement home of your dreams.

    What is Title V and Why Do I Care?

    When searching the Cape & Islands MLS, you’ll frequently encounter references to something known in Massachusetts as “Title V”, a state regulation pertaining to septic systems. Many buyers of Cape Cod homes live off-Cape in metropolitan areas such as Boston and New York City and are unfamiliar with septic systems. If you are one of these people, here’s a brief summary of what you need to know when buying a home on Cape Cod.

    The Journey of Waste

    Nearly very home has a large drain pipe in the basement or under the house that passes through the foundation and exits the home.  Every toilet, sink, shower, bathtub, and washing machine drains into this primary drain pipe, so that all water and waste exits the home.  But where does it go once it leaves?  That depends on where you live.

    The majority of Americans are serviced by sewer systems.  Sewage exits the home and connects to the municipal sewer system where it is drained, treated at a treatment plant, and returned to the environment.  In some rural areas like Cape Cod, sewers are just starting to be installed.  Instead, each home is serviced by a private sewage system located on its own property.  SepticSystemOlder systems are typically the cesspool variety, whereas newer systems are referred to as septic systems (see diagram) that must meet current state regulations known as Title V.

    In both cases, the system is buried in the ground outside the house.  Homeowners have the tank pumped periodically to remove the solids that accumulate over time.

    Enter Title V

    In the mid-70’s, in an attempt to protect especially groundwater from being adversely effected by sewage, Massachusetts adopted Title V, a set of regulations governing the proper siting, construction, upgrade, and maintenance of septic systems and the transport and disposal of sanitary sewage.  Local Boards of Health are tasked with the enforcement of Title V.  One of the key rules related to Title V and effecting both homeowners and home buyers is that all homes with private sewage systems must pass a Title V inspection before being sold.  The inspection is generally initiated and paid for by the seller, and typically costs in the neighborhood of $400.  It should be noted that in many Cape Cod towns, presence of a cesspool system is an automatic failure, so no test is needed.

    If the system passes, the homeowner is issued a Title V certificate by the town that is good for 2 years. If the home is sold again in 2.5 years, another inspection must take place.  If the system fails, a new septic system MAY need to be installed, but not always. A brand new system typically costs in the neighborhood of ten thousand dollars, but could run as high as FIFTY thousand dollars, depending on a variety of factors, such as being located in a flood zone.

    There is no law dictating who pays for the new septic system, although the cost is generally absorbed by the seller.  Ideally, the new system should be completely installed and approved prior to the sale, although there are situations when the town will allow the sale to take place prior to the final installation and approval.  Financial assistance, in the form of low interest rate loans, is available to help homeowners finance the cost of a new septic system.

    In summary, if you are a Cape Cod homeowner who is thinking of selling your home and you are serviced by a cesspool or septic system, it may be in your best interest to have the system tested BEFORE you list your home so that you’ll at least know whether or not you need to factor in a brand new septic system.  If you are a buyer looking to purchase a home on the Cape, one of the first questions you should ask is whether or not the Title V inspection has been done and if so, if it passed.  Whether you are the buyer or seller, your real estate agent should be able to assist you with Title V compliance issues.

    For more information on Title V, click here.

    For more information on Title V financing assistance, click here.

    Shopping For Your New Cape Cod Home

    House hunting can be the most exciting and enjoyable activity of the year – or it can be the most frustrating. Your level of preparation directly impacts where on the Fun/Frustration spectrum your experience will fall. So here are some tips to be sure you are heavily weighted toward the Fun side!

    • Get Pre-Approved For A Mortgage. We discussed this in last month’s Blog post on the home buying process, but it’s worth mentioning again. If you don’t know precisely how much home you can afford, you’re not ready to be out touring homes other than those hosting Open Houses. If a Seller grants you a private appointment to view her home, both she and her Realtor assume you are in a financial position to purchase that home. Be sure you are confident of your pre-approval status before requesting any private showings.
    • Select a Buyer’s Agent. We discussed this at length in a previous post as well. Be sure you are working with an experienced Realtor who is representing YOU as you shop for a home.  Most Realtors do not charge buyers for their services and the benefits are many.
    • Know Your “Must Haves”. If you have a list of features that you absolutely must have, be sure your Realtor knows about them. There are thousands of homes for sale on the Cape. You don’t want to look at all of them! In our Cape & Islands MLS, we have access to hundreds of data points about each and every home that will help you focus on the best homes for YOU. If a first-level Master suite is critically important to you, or you MUST have a 2-car garage, or you insist on natural gas heat over oil, we can send you ONLY homes that have these features. Your shopping experience will be far more efficient and effective if you are viewing only homes that meet your needs and wish-list.
    • Register For Daily Property Alerts. Unless you do not wish to preview homes online, you should be sure you are receiving Daily Property Alerts from your Realtor that show all the new MLS listings that meet your criteria. As noted above, there are thousands of homes for sale on the Cape. Having online access to the MLS allows you to read about them, preview the pictures, look at the property on a map, and hence, narrow down your selection. To receive Daily Property Alerts from my website, please register.
    • Request Your Showing Appointments. When the time comes that you are actually ready to buy, let your Realtor know the properties that interest you. He will contact the various listing agents and set up the showings for you. You should try to do this at LEAST 3 days in advance – particularly if you will be seeing numerous properties. Remember that your Realtor needs to be available, the Seller’s Realtor likely needs to be available, and the Seller must have the house ready for viewing and vacate the premises during the showing. Those conditions take coordination and it generally takes more than a day to set up all appointments successfully.
    • Visit Open Houses. If a house you like is having an Open House, that’s an easy way to see it without much coordination. However, if you are working with a Realtor as your Buyer’s Agent, be sure she knows that you are going to the Open House and be sure to provide her name to the agent hosting the Open House. If there is a sign-in sheet, put your Realtor’s name next to yours on the sheet. Otherwise, if you decide to purchase that house, your Realtor may not be able to assist you as your Buyer’s Agent. This is not common but possible.
    • Keep Good Notes. As you tour each home, take notes IMMEDIATELY about what you liked and didn’t like about each. You’ll be surprised how much you forget about each house by the end of the day if you do not take notes. A good Buyer’s Agent will provide you with a Property Tour Book that makes it easy for you to take quality notes at each house.
    • Compare Properties. When you’re through viewing homes (which may take days or even weeks!), compare the ones you liked best to decide which is your favorite. If you like it enough to buy it, your Realtor should provide you with a report showing the sale prices of comparable homes, which will help you decide on a fair market price. She can also help you do further research to answer any outstanding questions you may have that could impact your interest and offer.

    Once you and your Realtor have successfully negotiated an offer on a home, there is much to do before the Seller hands you the keys!  Be sure you’re working with a knowledgeable, full-time Realtor who can help you navigate the waters ahead.

    Home Buying 101

    Many Cape Cod home buyers haven’t bought a home in a very long time and possibly NEVER in Massachusetts.  Others may be first-time home buyers altogether.  Below is a list of the basic steps involved in a typical home purchase in Massachusetts.  To assist you throughout each of these steps, be sure you are working with a reputable, knowledgeable Buyer’s Agent.  Not only does it not cost you anything, but it will save you significant time, frustration, and in many cases, money as well.  Please don’t hesitate to contact me for expert, personalized assistance.  It would be my privilege to assist you.


    Obtain a current pre-approval letter or proof-of-funds.

    Before you begin actually visiting homes with a Realtor, you should be certain how much home you can afford.  There is no point wasting your time looking at homes you cannot afford.  If you do not have a pre-approval letter in-hand, you will realistically not be able to make an offer on a home, in which case you are not quite ready to be viewing homes in person.  Speak to your lender and ask him/her for a pre-approval letter.  If you don’t have a lender, contact me and I will provide you with some trusted contacts.

    Shop for homes with your Buyer’s Agent.

    A Realtor who is acting as your Buyer’s Agent owes his/her complete fiduciary responsibility to YOU, and therefore can provide you with information and assistance that the agent representing the seller cannot.  And best of all, it doesn’t cost you a dime.  If your Realtor has a good website with full MLS property search capabilities, you can browse homes initially at your leisure from the comfort of your own home.  When you’re truly ready to buy, your Realtor can help you narrow down your choices, set up all of your appointments, and provide you with valuable information about the local market and area.

    Find out from your Buyer’s Agent what the home is REALLY worth.

    One of the most important services a Buyer’s Agent can provide is information that will help you decide the REAL value of the homes you like.  A seller can ask whatever (s)he wants for a home and the Seller’s Agent is obligated to do what the seller requests.  But a good Buyer’s Agent knows the market and will provide you with a detailed report showing the actual sale prices of similar properties that have recently sold.  This will help you arrive at the best offer price for the home.

    Make an offer and negotiate final price & terms.

    Once you’ve decided on an offer price, your Realtor (Buyer’s Agent) will prepare all the paperwork, have you sign it, and submit it to the Seller’s Agent, along with a good faith deposit, which is typically $500-$1000.  Usually, there is some back and forth that takes place before both parties agree to a final price and terms.  Your Buyer’s Agent will assist you throughout this process until you and the seller have come to an agreement (or not).  If an agreement is reached, many wheels are suddenly set in motion, as described below.  If you could not come to an agreement, you take back your good faith deposit and resume house shopping with your Realtor!

    Apply for a mortgage (unless paying cash).

    Once your offer is accepted, and assuming you are not paying cash for the home, you should submit a completed application for your mortgage.  It will take a while for the bank to collect ALL the information they need from you, and the sooner you begin this process, the better.  Plus, the offer you submitted most likely has a date by which you must have applied for your mortgage.  Be sure to read all dates very carefully and be sure to comply with each deadline! A good Buyer’s Agent will keep track of all this for you to ensure that you do not inadvertently lose your deposit.

    Conduct your inspections.

    Next, you must immediately schedule your home inspection and any other inspections you requested (such as termite, lead paint, radon, etc.)  A buyer typically has about 2 weeks to complete these inspections from the acceptance of the offer.  If you are happy with the results of the inspection, you continue with the process.  If you are not, you typically can either back out of the deal and get your deposit back, or you can try to renegotiate with the seller to address any inspection issues that concern you.  For example, if you learned the roof is at the end of its life and you had no way of knowing this prior to the inspection, you may want to negotiate a lower price to reflect the condition of the roof.

    Execute a Purchase & Sale Agreement.

    If you are proceeding with the sale after all inspections are complete, you will typically then sign a Purchase & Sale Agreement (aka P&S).  This is a longer and more detailed contract than the initial offer form that spells out all of the terms of the sale.  It is typically prepared by the seller’s attorney and you should have your own attorney review it and make any necessary changes on your behalf.  Your Buyer’s Agent can assist you with selecting a reputable Cape Cod real estate attorney if you do not already have one.  A buyer typically makes a second and much larger deposit at this time.  This deposit is completely negotiable but is typically at least 5% of the sale price.  10% is more common.  ALL deposits are typically and completely refunded if the buyer is unable to obtain a mortgage according to the terms of the P&S.

    Bank conducts appraisal.

    If you are applying for a mortgage, the bank will conduct an appraisal to be sure they agree with you regarding the value of the home.  Since they are loaning you the money to buy it, they want to be sure it is a sound investment for them to make.  This is actually very good for you, since it helps to reassure you that you are not overpaying for the home.  In some cases, it might reveal that you are getting a very good deal — at least in the bank’s eyes.

    Wait for final loan commitment.

    It typically takes 4-6 weeks to receive your loan commitment from the moment you submit a completed application.  During this time, you should stay in touch with your lender and be sure you are providing them everything they requested in the most timely manner possible.  This will help you get your commitment as soon as possible.  The seller will be very anxious for you to receive your commitment so that (s)he can be sure the sale is going through.

    Confirm passing Title V and Smoke inspections with Seller.

    While you are waiting on your mortgage commitment and planning paint colors for your new home, the Seller will be busy ensuring that the septic system passes Massachusetts Title V regulations and that the smoke and carbon monoxide detectors are up to code.  Both of these are typically required in order for the home to be sold.  Your Realtor can provide you with more information about each of these.

    Obtain homeowner’s insurance (& flood insurance, if required/desired).

    At least 2 weeks before the scheduled closing, you should contact an insurance company to obtain a homeowner’s policy for your new home.  You will not be allowed to close on your mortgage without it.  If the property is in a flood zone, flood insurance may also be required.  Insurance on the Cape can be tricky, so I recommend you contact John Curley at Dowling and O’Neil, one of the Cape’s premier property and casualty insurance agencies. He can be reached via email at or by phone at (508) 957-4235.

    Close on your new home!

    By the time your actual closing date arrives, nearly everything has already been done, except for final mortgage signatures, final payment, and transfer of the deed!  The closing attorney (also called the bank’s attorney and sometimes, yet erroneously, called the buyer’s attorney) will contact you a couple of days before the closing to let you know exactly what funds you — the buyer — need to bring to the closing.  The closing typically takes place either at the Barnstable Registry of Deeds or in the closing attorney’s office.  But this differs from closing to closing.  The buyer leaves the closing table with the keys to the home and the seller leaves with a big fat check!

    And VOILA — a new Cape Cod Homeowner is born!  I, for one, have never been so happy and have never looked back.

    Author’s Disclaimer:  This post is intended to provide a general overview of the home buying process. However every transaction can have its own special situations or circumstances and might not be covered in this post. This post is intended for educational use only. The author does not accept responsibility for any misinterpretation or misapplication of the information contained in this post. The publishing of this material does not constitute the practice of law nor does it attempt to provide legal advice concerning any specific factual situation. FOR ADVICE ON SPECIFIC LEGAL PROBLEMS CONSULT LEGAL COUNSEL.

    Buying a Cape Cod Investment Property

    The newsletter goofed!  Click the link below for the blog article on the Home Buying Process.

    Review of the Home Buying Process


    Cape Cod is a peninsula off the east coast of Massachusetts boasting 550 miles of coastline. Much of that coastline is occupied by gorgeous, sandy beaches and picturesque harbors — making Cape Cod an ideal vacation spot and a perfect location for purchasing a second home. If the thought of owning a home on the Cape appeals to you, but you just don’t see how you can afford it until later in life, perhaps you’re not considering the fact that most homes on the Cape go a long way toward paying for themselves through summer rentals.

    Consider the following example. A woman wishes to buy a relatively young 3-bedroom 2-bath home in Harwich for $400K. The home is a short drive or bike ride to the beach and to downtown Harwich Port, but not close enough to walk. The weekly summer rental rate is estimated at $2500. The woman plans to rent it for just 8 peak weeks in the summer, and use it herself the rest of the year. Her gross rental income will be $20,000 annually. If we deduct from that the estimated rental agency fee of $3,000, and another $2000 for cleaning and utilities during the rental period, the net rental income is roughly $15,000.

    If the buyer puts 20% down ($80,000), she will be mortgaging $320,000, which will result in an estimated monthly payment of $2000 — taxes and homeowner’s insurance included. So her annual mortgage, tax and insurance payment will be $24,000, or roughly $9,000 more than the gross rental income. She’ll be able to deduct her mortgage interest, real estate taxes, and some other expenses on her taxes, resulting in further subtractions from the $9000. In the end, owning her new Cape home might only cost her in the neighborhood of $6,000 annually. And this does not factor in the money she will save by not renting someone else’s home, nor the fact that she will now have a Cape house that she and her family and friends can use 44 weeks out of the year.

    So if you’ve been putting off buying the beach house because you think you can’t afford it, don’t forget that a home on the Cape is one of those few investments that can help pay for itself, and that you can actually enjoy in the meantime. For details and for expert advice, contact your accountant or financial advisor. And remember — nobody on their deathbed ever said they wished they’d spent less time relaxing on Cape Cod. Happy Holidays!