Explaining Maine Real Estate Purchase and Sale Agreements
**FULL DISCLOSURE- Pomerleau Realty Group is not an attorney and all information is for informational use only. The following information should not be considered legal advice. Buyers and sellers should consult an attorney with any questions.
Before we dive into a sample Maine Purchase and Sale Agreement (known from here on out as "the Agreement"), you will notice that directly below where where it states PURCHASE AND SALE AGREEMENT you will see “days means business days unless otherwise noted.” This means that Saturdays, Sundays and state and federal holidays are not considered “days” when it comes to this agreement.
Offer Date- When the offer is written, the date goes here (from the buyer).
- PARTIES- Full names of all buyers and full names of all sellers.
- DESCRIPTION- Is all of the property being conveyed, or just part of the property? The municipality and county are self explanatory. The book and page numbers of the current deed being conveyed.
- FIXTURES- The Agreement does a good job of listing everything that is included as a fixture. There is a section to include anything that could be questionable as a fixture and also a spot to remove any items that a seller wishes to keep. An important distinction between fixtures and personal property (see below) is that the “seller represents that all mechanical components of fixtures will be operational at closing” unless otherwise noted. This is something that buyers can insist upon prior to closing on the property. When in doubt, put it in writing. Remove items in the contract that the seller wants, regardless of fixture or not and add buyer wants in the contract, regardless of whether it’s a fixture or not.
- PERSONAL PROPERTY- Typically, items such as furniture, lawn mowers, appliances, etc. are included in this section, but they are in “as-is” condition and the seller is not obligated to have these items operational at the time of closing. Side note: some lenders don’t like to see major items in this section (ex: an expensive car that could potentially be a “side deal”.)
- PURCHASE PRICE/EARNEST MONEY- This is the price that the buyer is offering and a box to check whether the earnest money has been delivered, or will be delivered within ___ business days. Money is what holds real estate deals together. As a seller, the more earnest money, the better and more likely that the deal stays together.
- ESCROW AGENT/ACCEPTANCE- The name of who will hold the earnest money and act as escrow agent until closing. In general, less time to accept the offer benefits buyers, while more time to accept the offer could benefit sellers. In this day and age, offers should be accepted, rejected or countered in hours, not days (multiple offer situations, foreclosures, estate sales, etc could require more time for acceptance.)
- TITLE AND CLOSING- There is a fill in the blank for a closing date. Brokers should check with lenders and title agents to confirm that they can accommodate this date. Tip: If a lender tells you that they can close on March 3rd, do yourself a favor and put March 10th to account for unforeseen obstacles that could delay things. Important: Buyers should understand the difference between “good and merchantable title” and insurable title. Also, sellers have up to 30 days to clear up any title defects. A potential consequence of this is that could affect the buyer’s rate lock with a lender.
- DEED- The property shall be conveyed by a ___ deed. Typically, it benefits sellers to offer a quit-claim deed and benefits buyers to get a warranty deed. A seller can warranty the title and offer a warranty deed, even if their current deed is a quit-claim deed. There are other specialty type deeds, but that is another discussion.
- POSSESSION, OCCUPANCY, AND CONDITION- Sometimes, what is in a contract is not always what happens in real life. The possession date belongs to the buyer. As noted, the property shall be empty, broom clean and in substantially the same condition at closing as when the contract was written, unless otherwise noted. Buyers should expect the property to look different from when the property was staged, lights on, and 72 degrees. Sellers should do the best that they can with final cleaning; buyers always appreciate it.
- RISK OF LOSS, DAMAGE, DESTRUCTION AND INSURANCE- Sellers carry this responsibility until closing. Buyers carry the responsibility immediately upon closing.
- FUEL/UTILITIES/PRORATIONS- Do yourself a favor and either work the fuel into the purchase price, or let it go with the sale. Fuel prorations are typically handled outside of closing and can also cause hiccups with lenders. All other prorations are self explanatory and make sense to title companies handling tax, collected rents, association dues, utilities, etc. A good real estate agent will be supportive and helpful with providing the title company supporting information to properly figure these prorations.
- DUE DILIGENCE- If the buyer selects to have inspections, with the way that the Agreement is written, then they can essentially back out of the deal for any reason. As a selling broker, especially in a seller’s market, you would ideally like to receive multiple offers and convince one of the offers to drop their inspection contingency. In Maine, building inspectors do not need to be licensed and an inspection can literally be done by any third party. Sellers should be aware of this.
- PROPERTY DISCLOSURE FORM- This is fairly self explanatory.
- FINANCING- Ideally, a seller would like to receive a cash offer every time (yeah, right!). The first question here: is there financing; yes or no? If it’s cash, it’s a no. What if someone wants to utilize financing but does not want the offer contingent upon financing? Then you would check no, but the buyer would need to prove that they have the ability to purchase the property with cash, if their financing were to fall apart. If the purchase is subject to financing, then it’s important to put the exact financing info that the lender has provided for you: type of loan (FHA, conventional, RD, etc.), what percentage of the purchase price is being financed (ex: 80, 90, 100%), the buyer is obtaining a ___ rate (ex: market) and amortized over ___ years (ex: 30 years). All of this information should come directly from the lender and be on a buyer’s pre qualification letter that they have gotten. The letter needs to match these terms exactly or the seller could make the contract null and void.
- BROKERAGE DISCLOSURE- This explains if any brokers are representing anyone involved in the transaction.
- DEFAULT/RETURN OF EARNEST MONEY- This section covers what happens if a buyer or seller defaults. While most consumers (and many agents) think that a default means that you just lose your earnest money, that is not the case. Sellers and buyers “may employ all legal and equitable remedies.” Here is a real world example: Mr. Buyer is under contract to buy from Mrs. Seller for $400,000. Mr. Buyer changes his mind and decides not to buy the property. Mrs. Seller puts the property back on the market and 90 days later sells the property for $375,000. The seller is now out $25,000, plus any costs associated with owning the property for the additional time. Bottom line: prior to committing to buying or selling, make sure that you are committed to the sale.
- MEDIATION- This section covers the process for any disputes that have arisen as a result of the property sale and survives the closing of the transaction.
- PRIOR STATEMENTS- If it’s not in writing in the Agreement, then it doesn’t exist. The Agreement is the agreement and it doesn’t matter what was said beforehand.
- HEIRS/ASSIGNS- “Agreement shall extend to and be obligatory upon heirs, personal representatives, successors, and assigns of the Seller and the assigns of the Buyer.” Seller example: The seller dies and their heirs are now obligated to continue with the agreement. Buyer example: Husband divorces their wife and ends up with the property. Husband is selling property. A straw buyer comes along and puts the property under contract, then assigns the contract to the divorced wife. Husband is obligated to fulfill the terms of the contract.
- COUNTERPARTS- The same agreement signed bu all parties on different contracts stands and original, faxed and e’signatures are binding.
- SHORELAND ZONE SEPTIC SYSTEMS- Is there a septic system located within the Shoreland Zone; yes or no? If yes, then the seller agrees to certify whether or not the system has or has not malfunctioned within 180 days prior to closing. Buyers should get a septic inspection on shoreland properties 100% of the time
- NOTICE- Notice should be in writing, although withdrawals of offers and counter-offers may be verbal. It may be a good idea to have these in writing, also.
- EFFECTIVE DATE/ BUSINESS DAYS- The Effective Date of the Agreement (located at the top of page 1) is when all parties have signed and also received a copy of the Agreement. “Days” in the Agreement means business days and a business day ends at 5:00. This paragraph can be confusing and doesn’t make a lot of sense, but all days in the contract are business days, unless otherwise noted.
- CONFIDENTIALITY- Buyers and Sellers authorize the disclosure of information in the Agreement to essentially anyone involved with the transaction to help to close the sale.
- ADDENDA- Are there any additional addendums associated with the contract? They should be listed here. Note: the Property Disclosure Form is not an addendum.
- OTHER CONDITIONS- This section would be where other conditions to the sale would go. This broker would typically use an addendum, as opposed to writing anything here. Also, if something is written here, then what are the consequences of the “other conditions” not being met? All possible outcomes should be addressed.
- GENERAL PROVISIONS- A copy of the Agreement should be received by all parties. If you aren’t sure of something in the Agreement, then speak with an attorney. Out of state sellers will be hit with a 2.5% withholding tax on all capital gains at closing. Property taxes get prorated to the day of closing. Any backup offers are to be communicated to the seller. If the earnest money is to be returned or released, then the escrow agent must follow the Maine Real Estate Commission rules.
- ELECTRONIC SIGNATURES- Electronic signatures are allowed.
Signatures, date signed and mailing addresses of all parties- Finally we have a place for all parties involved to sign and date their consent to the Agreement.
There you have it! That is everything that you need to know about Maine Real Purchase and Sale Agreements. **Again, if you have any questions then you should speak with a licensed Maine attorney.**