In Massachusetts when a buyer finds property to purchase, the first step in the process is to make an offer that the seller will accept. The buyer binds his offer with a small deposit until a more formal Purchase & Sale Agreement (“P&S”) is executed and additional deposit funds are delivered. The offer generally outlines the overall meeting of the minds of the parties and serves as the basis for the P&S, which spells out in more detail the full agreement between the parties.

Currently, buyers are at a disadvantage because inventory is low. In order to be a successful bidder for limited properties, a buyer will try to make his bid more attractive by waiving inspections, foregoing the requirement to get a mortgage, or excluding other standard due diligence investigation. The buyer may try to reassert some of these contingencies that were waived in the offer as the parties move towards a mutually agreeable P&S, but the seller has no obligation to accept these changes and can force the buyer to move forward with the deal under the limitations outlined in the offer. This is particularly risky for a buyer who wants to confirm that the property to be purchased is free of encumbrances, lacks defects, and is in good condition and worth the agreed-upon price.

The concepts of an accepted offer and P&S are equally important for purchasers of personal property. Purchasing a houseboat, a motorboat, a recreational vehicle or mobile home follows this same pattern. The excited buyer may wish to be the successful bidder and makes an offer waiving inspections of the item sought to be bought. That buyer is bound by the terms of the accepted offer. Recently, a client purchaser of an expensive, luxurious houseboat located in a desirable slip in Boston made an offer that excluded any inspection of the boat, the condition of its hull, internal contents and mechanisms. In preparing the P&S, however, the buyer discovered that it would be important to know whether the houseboat was sturdy, in good working order, and free of any defects, as the houseboat would become her primary residence when in Massachusetts. She attempted to add an inspection contingency to the P&S and requested access to the houseboat to conduct an inspection. The seller refused to accommodate the request because the offer explicitly excluded an inspection contingency and made it clear that even if the buyer were to conduct an inspection that revealed defects, the seller would hold the buyer to the terms of the offer and force the sale of the houseboat or risk the loss of a significant security deposit that was given to bind the deal. The buyer opted to risk her deposit funds in return for the knowledge that the houseboat’s condition was good.

In this seller’s market, a buyer should weigh the risks they are willing to take in making an offer to purchase property. Contractually bound by the terms of the offer, a buyer will be unable to add provisions without the seller’s express approval. Before signing an offer, a buyer should think hard about managing risk and their willingness to purchase property that could have unknown problems that would have been discovered with proper due diligence.