MA RE SALESPERSON: CONTRACTS CHEAT SHEET

PURCHASE & SALE AGREEMENT (P&S) ESSENTIALS

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Key Doctrine: Merger/Integration

• P&S supersedes & extinguishes all prior agreements (Offer to Purchase, oral terms)

• Terms from Offer not in P&S are gone

• Protection: ensure all agreed terms are written into P&S

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DEPOSIT & DEFAULT RULES

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Liquidated Damages Rule: Deposit amount must be reasonable pre-estimate of actual damages, not a penalty.

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CONTINGENCIES: THREE CRITICAL TYPES

1. MORTGAGE (FINANCING) CONTINGENCY

What it does: Buyer may terminate if mortgage commitment not obtained by deadline.

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Exam Trap: Buyer must exercise good faith—passively waiting for denial ≠ valid contingency use.

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2. INSPECTION CONTINGENCY

What it does: Buyer may inspect property; options depend on findings & P&S language.

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Types of Inspections Under Contingency:

• Home/building inspection

• Pest (termite)

• Radon

• Oil tank sweep

• Title 5 septic (if applicable)

• Lead paint

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3. SALE CONTINGENCY

What it does: Buyer may terminate if current home doesn't sell by deadline.

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Kick-Out Clause (Right of First Refusal / 72-Hour Clause):

• If seller receives another acceptable offer, original buyer gets 72-hour notice

• Buyer must waive sale contingency OR lose deal

• Seller then free to accept competing offer

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CONTINGENCY DEADLINES: CRITICAL EXAM CONCEPT

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High-Yield Rule: Missing a contingency deadline = losing that protection. Dates are non-negotiable.

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TITLE & CLOSING

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"Clouds on Title": Unresolved mortgages, liens, easements, judgment = NOT marketable; seller must clear.

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EASILY CONFUSED PAIRS

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Required Element	Details
Parties	Buyer & seller clearly identified
Legal Description	Full property address & parcel ID
Purchase Price	Total amount + payment method (down payment, financing, assumption)
Closing Date & Location	Specific date and where closing occurs
Earnest Money Deposit	Typically 5–10% of purchase price; held in broker's escrow (NOT seller's)
Title Standard	Marketable title = free from doubt & litigation risk
Signatures	All parties must sign; Statute of Frauds requires writing
Scenario	Outcome
Buyer defaults (no valid contingency)	Seller retains deposit as liquidated damages (pre-agreed damages)
Seller defaults	Buyer recovers deposit + may pursue specific performance (court-ordered sale) or actual damages
Deposit forfeited	Typically seller's sole remedy in residential P&S
Must Know	Rule
Deadline	Typically 15–30 days from P&S date
Buyer's duty	Diligent good-faith effort—must actually apply; can't just not try
Financing terms specified	Loan amount, interest rate, loan type must match commitment
Commitment expires	Contingency waived if deadline passes unsigned
Lender revokes	Depends on reason & P&S language; buyer may lose protection
Recovery	If contingency valid & not satisfied: buyer gets deposit back
Timeline	Buyer Rights
Inspection period	Typically 7–14 days from P&S or offer date
If defects found	(a) Terminate & recover deposit (most buyer-friendly)
(b) Negotiate repairs or price reduction
(c) Accept "as is" and proceed
"Satisfactory inspection"	Buyer discretion, but must act in good faith
Waived contingency	Buyer takes property "as is"; no further inspection rights
For Buyers	For Sellers
Protects buyer from dual mortgages	Seller's home stays on market longer
Can terminate if home doesn't sell	Often rejected in hot markets
Sellers may demand "kick-out clause"
Contingency Expires	What Happens
Before deadline, not satisfied	Protected party can invoke; withdraw & recover deposit
Deadline passes	Contingency waived automatically (unless extended in writing)
Party does NOT timely terminate	Contingency is waived by inaction
Buyer fails to withdraw on time	In default if financing denied after contingency date
Seller's Obligation	Buyer's Protection
Deliver marketable title	Buyer's attorney conducts title search
Clear all clouds on title	Title insurance issued at closing
Discharge old liens/mortgages	If title defect: buyer may renegotiate or terminate
Provide proof of discharge	Record discharge before closing
Term A	Term B	Key Difference
Earnest money deposit	Down payment at closing	Deposit paid at P&S signing; down payment at closing
Broker's escrow	Seller's account	Deposit held by broker; seller has no access until closing/default
Specific performance	Liquidated damages	Specific performance = court orders sale; LD = seller keeps deposit
Mortgage contingency waived	Financing denied after waiver	Buyer loses right to terminate; in default; loses deposit
Kick-out clause	Sale contingency	Kick-out = seller's tool to escape; sale contingency = buyer's protection