As a homebuyer purchasing a property in the Greater Boston area, you will be submitting a deposit with your home purchase contract. It’s not uncommon for the amount to be up to 5% of the purchase price. This is a significant amount of money. Protecting escrow money during MA home purchases is therefore extremely important. Here are a few helpful tips on doing so.
Include Contingencies in Your Offer
Contingencies are specifically designed to protect your escrow money. They basically allow you to terminate the real estate contract and receive a refund of your escrow deposit. The two most common contingencies are home inspection and mortgage commitment.
Home Inspection Contingency
Home inspection contingencies are typically pretty broad. They allow buyers to terminate if the inspection is not to the buyer’s satisfaction. The only critical piece is the deadline. The buyer must notify the seller of the termination by a very specific date and time. As a buyer, be sure to enter a date that is reasonable. This may require contacting home inspection companies to determine their availability. In busy markets, such as the Spring and Summer, appointments may require a week or more advanced notice.
Additionally, if you plan to perform a radon air test, you will need extra time. Radon kits must remain in a home for at least 48 hours. It will take several more days for the kit to be mailed to and processed by the testing company. You may be able to shorten this timeframe by arranging to have the kit in place before the inspection date. By the deadline indicated in the contract to purchase, you should have all of the information needed to decide whether to move forward with the purchase. This includes receiving and reviewing inspection reports and test results.
Mortgage contingencies have two deadlines. The first deadline is for a mortgage application. You must formally apply for a mortgage by that date to preserve your rights. The second deadline is for a mortgage commitment. A commitment is typically a conditional approval by your mortgage company indicating that all major conditions are met and that they are fairly certain your loan will receive final approval. Be sure to check with your lender on how much time is needed to process your loan rather than arbitrarily entering a deadline. It is also extremely important to review all items listed on a conditional approval. If you are denied a loan after the mortgage commitment deadline, your deposit will be at risk.
Extend Contingency Deadlines
If you are unable to meet a contingency deadline, request an extension. Most sellers will approve reasonable extensions with good cause, rather than starting the process over with a new buyer. Of course, their approval is not guaranteed. Maintaining a good relationship with a seller throughout the process will improve your chances of getting approval.
Other Tips on Protecting Escrow Money During MA Home Purchases
Protecting escrow money during MA home purchases is of utmost importance. Escrow money disputes can be lengthy and stressful. Having your money tied up in a dispute could prevent you from moving forward with the purchase of an alternate property. To minimize your escrow deposit disputes, be sure to include appropriate contingencies in the first place. Secondly, enter deadlines that are reasonable. When needed, request extensions rather than allowing a deadline to pass.
The above are just general tips on protecting escrow money. Every real estate transaction is unique, so you should receive guidance and advice from an attorney regarding your particular situation. As Arlington MA real estate attorneys, we often help clients understand and minimize their risks through every stage of the home buying process. Contact us today for assistance.