Boston Condos for Sale and Apartments for Rent

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When can you cancel a Boston condo for sale contract?

When pandemic lockdowns hit the real estate industry, showings were halted, homes were yanked off the market, and municipal offices that process closing documents were shuttered. As a result, in March 2020, nearly 18% of purchase contracts in the United States were canceled — though it only took a few months to return to typical levels.

But in 2022, the frequency of canceled deals has begun to rise again, reaching nearly 15% in June — the highest rate since the pandemic peak, according to a recent report by Redfin, representing about 60,000 failed home sales across the nation.

The likely culprit: rising mortgage interest rates. The journey from accepted bid to closing day can take to two months or more, and interest rates sometimes shift in the interim. Buyers can lock in rates for certain periods of time but not all do, and even a small increase can stretch monthly payments out of range and kill a deal. And this year’s rate increases were substantial. Consider, for example, that the average rate for a 30-year, fixed-rate mortgage rose from 3.79% in January to 5.3% in July. That change would increase a monthly payment by about $90 for every $100,000 borrowed.

The locations where the highest percentage of deals fell through in June — many in the South and Southwest — are some of the most popular for buyers. In Las Vegas, just over 27% of deals collapsed in June, the highest rate among all markets, according to Redfin. Favored destinations in Florida followed, including Lakeland, just under 27%, and Cape Coral, just under 26%.

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So the question is, “When can I cancel my contract to buy a Boston condo for sale after I already signed it?” A quick answer is that there are scenarios where you can as a Boston Beacon Hill condo buyer back out of a signed deal. In a Boston real estate contract, there are so-called “contingencies”, which allow the transaction to cancel and the buyer will receive the full earnest money back from the seller. The big three contingencies are based on 1) home inspection, 2) financing, and 3) title condition of the home. You must carefully read the language in your contract to understand which situations you can back out of a deal and still receive the refund of your earnest money. In Boston, sales agreement forms used in real estate transactions are pre-printed and they tend to be very buyer friendly. Real estate agents use these forms to fill in and create addendum in a typical transaction. Boston condo agents and brokers are prohibited from drafting their own contracts so they always must use these pre-printed forms. 

Home Inspection

A competent buyer’s agent arranges will have a buyer sign a home inspection contingency. You have 10 days for home inspection unless you state more days on the contract. Having a professional home inspection done on the Boston condo for sale will truly reveal conditions of the home that are both obvious and latent. Having a home inspection done is usually the buyer’s responsibility and the buyer can choose which home inspection professional to do the job. It only makes sense that you hire an unbiased professional of your choosing.

After you receive the inspection reports, you are not totally happy with it. There are some minor issues with the Boston condo for sale. Most condominiums have minor issues. But are these minor issues enough for you to back out? According to the pre-printed forms in Massachusetts, they are enough for you to cancel the contract and receive all your deposit back. The buyer’s disapproval of any of the inspection report(s) is “unconditional” according to the contract. You must, however, notify the seller in writing your disapproval of the inspection report by 5:00 P.M. of the final day of the stated inspection period or the buyer shall be deemed to have accepted the condition of the property.

When there are issues with inspection reports,  Boston condos buyers often ask the seller to fix these problems before closing instead of backing out from the deal if the problem is fixable. Most sellers are willing to fix the problems because they want to sell their Boston Beacon Hill condo and they will be legally required to disclose any defects whether obvious and latent once they find out about them in their next transaction. So that means, if the buyer’s disapproval of the issue is reasonable, most sellers will want to fix the problems for the buyer because the seller will have to fix it for the next buyer if he/she refuses to fix it this time.

Failure to Obtain Financing

After you sign the contract to purchase a Boston Midtown condo, the deal will only go through if you are able to secure financing. That is called a financing contingency. Real estate agreements used to and still use the language “This contract is subject to financing. The Boston Real Estate forms have done a good job explaining what this contingency means in the contract. Basically, it says if the buyer receives actual notification that any financing contingencies identified above have failed, the buyer shall promptly notify the seller and the parties shall have two business days to cancel the contract and for the buyer will receive the earnest money back. 

Title Report Showing Defects

Real estate transactions are subject to a buyer’s review and approval of a preliminary title report showing the condition of title to the property. It is the seller’s responsibility to order such report and the buyer has five business days to object in writing the defects in the title and if the seller fails to provide a written assurance that those defects will be removed Even if the buyer fails to timely object these items, the seller must still provide a marketable title prior to closing. Basically, buyers have a right to a marketable title prior to closing including a right to seller’s written assurance that defects will be fixed prior to closing. As a result, its customers to obtain title insurance on a Boston condo so that the policy will pay for settlements of any title disputes that may arise.

It is the buyer’s right to receive a marketable title (not a clear and perfect title) and it means the buyer should be free from future lawsuits due to title defects. Title defects usually include liens on the property. The biggest lien is the seller’s mortgage, which will be removed at closing. Other liens and encumbrances could include judgment liens, utility liens, tax liens, property encroachment, and zoning violation  Liens can be paid off by the seller but the buyer should consider backing out on issues like major encroachment and zoning violation that cannot be fixed.

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