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The Basics of Buying Real Estate in Boston

Generally speaking, the pace of the American housing market is faster than in many other countries. In Italy, for example, a house might stay on the market for years before a buyer comes along. In the United States, however, things move at lightening speed. In boom years, a house may fleetingly appear on the market for just a few hours. During slower times, this may stretch to a few weeks or a handful of months. Rarely do houses languish on the market for years, and when they do it’s usually because they’re in bad condition or overpriced… or both. Know the complex machinations of the housing market in advance so you can be prepared to pounce when you find your dream house.

I want to buy a home in Boston. How do I begin looking?

The internet is the best way to get started. Many websites offer detailed listings of properties currently on the market. (Two of the best are www.ziprealty.com and www.redfin.com). The advantage of going online is that you can start your housing search from wherever you happen to be in the world — even from a beach in Bahrain!

Your next step will be contacting a realtor that handles your neighborhood. A real estate agent will talk with you about your needs and conduct a search of properties currently on the market. Your agent will then present you with a list of properties that meet your requirements. If you know that you’ll be in town June 4 and 5, your realtor can set up multiple appointments on those days to visit properties that you might like, one right after another.

How much will I spend?

That’s a difficult question to answer — especially in today’s housing market. However, if you’re looking for a place in central Boston (including the neighborhoods of Beacon Hill, the Back Bay, the South End, the North End, the Financial District, the Waterfront, Fort Point and The Fenway) you can expect to spend a minimum of about $350,000 for a small studio, all the way up to $3-5 million for a Beacon Hill mansion or a luxury Financial District loft. Those looking for sizable apartments and flats in characteristic brownstone buildings might also consider looking beyond downtown Boston to nearby Brookline, where a 1000-square foot, two-bedroom condo can generally be found for below $500,000 but where larger luxury houses and condos are also available for $1 to 2 million or more.

How does a realtor get paid?

There are buyers’ agents and sellers’ agents. Both of these types of realtors are generally paid through a commission of between 4 and 6 percent that is deducted from the proceeds of a final sale (5 percent is the most common commission.) This means that buyers usually DO NOT pay directly to work with a realtor. So for instance, if you buy a property for $500,000, the seller would pay his agent $25,000 out of that sales price. The seller’s agent would then split that commission with your agent and your agent would make $12,500 or 2.5 percent from the sale. There are several variations on this arrangement. For example, some realtors work as both sellers’ agents and buyers’ agents. If they list a property from a selling client and then introduce a property to a buying client, they get to keep the entire 5 percent commission. Other buyers’ agents will help clients find properties for a flat fee.

I love a condo I’ve just seen. How do I make an offer?

In the United States, people who are interested in a property make an offer, and the offer is usually something less than the asking price. How much less your offer is depends on the condition of the property and the state of the housing market. In rare instances, a buyer will offer a seller the full asking price. In some instances when there are multiple bids on a property, a buyer might offer a sum that is above the seller’s asking price. However, in general, it is a smart idea to negotiate, especially in a slow housing market. Your realtor will search for “comparable” houses that have sold recently in your neighborhood and will help you set an offer price based on this figure. Your realtor will also consider the unique value of the property you want, the general state of the housing market, and will factor in how eager the seller is to sell. International buyers are often all-cash buyers, and this should also enable you to negotiate a better price than if you need to obtain a mortgage. Once you’ve decided on a price you feel comfortable with, your agent will help you write a written offer that is often set to expire within a certain number of hours. At this time, it is also customary to offer a small sum of money that is meant to symbolize the seriousness of your offer. Usually this “earnest money” deposit is just a few hundred dollars. The offer is contingent on a signed purchase and sale agreement.

The offer will contain:
Address and sometimes a legal description of the property
Sale price
Terms — for example, all cash or subject to your obtaining a mortgage for a given amount
Seller’s promise to provide clear title (ownership)
Target date for closing (the actual sale)
Amount of earnest money deposit accompanying the offer, and whether it’s a check, cash or promissory note, and how it’s to be returned to you if the offer is rejected — or kept as damages if you later back out for no good reason
Method by which real estate taxes, rents, fuel, water bills and utilities are to be adjusted (prorated) between buyer and seller
Provisions about who will pay for title insurance, survey, termite inspections and the like
Type of deed to be given
A chance for attorney review of the contract, disclosure of specific environmental hazards or other state-specific clauses
A provision that the buyer may make a last-minute walk-through inspection of the property just before the closing
A time limit (preferably short) after which the offer will expire
Contingencies
Read more about making an offer here

How is a contract drawn up?

After you make an offer on a house, the seller will probably make a counter offer. If you make an offer of $450,000 on a $500,000 condo, the seller may make a counter offer lowering his asking price to $490,000. It is then up to you to either raise your offer, if you think the house is worth it, or abandon the deal altogether. It is very common for several offers and counteroffers to be made before an offer is accepted. If a seller agrees to all your demands, and you agree to theirs, then a Purchase and Sale document is then written up — usually a few days after the offer is made. At this point, you should probably hire a real estate attorney who can draw up a tightly-written agreement to protect your interests. A purchase and sale (commonly called a “P & S”) is a legally binding document that obligates you to buy the house and the seller to sell the house. At the time you sign a Purchase and Sale Agreement you will also leave a deposit with your realtor — usually about five percent of the purchase price. If you require a mortgage to buy the property you should have already contacted a mortgage broker who can help find financing for your venture. Many other contingencies will be part of your purchase and sale agreement, including that the property be conveyed to you without liens or constraints of any sort,

What is an “inspection”?

Once you buy a piece of property in the United States, it’s yours, flaws and all. For that reason, most people hire home inspectors to check out a property for structural problems. Most people ask inspectors to look at a property once an offer has been accepted but before a final purchase and sale agreement has been drawn up. If it turns out that there are major flaws in the property or important repairs need to be done, a buyer can renegotiate an offer taking into account those costs. A home inspection can sometimes bring problems to light which convince a buyer to withdraw an offer. This is allowed if an offer has been written contingent on a home inspection. An inspection usually costs about $300 to $500 for a typical Boston condo. Larger houses and townhouses will cost more. Your inspector will send you a report after inspection that details your home’s condition, structural elements, heating and cooling systems (very important in Boston!) and appliances. Your inspector will also let you know if he or she has uncovered problems, such as insect infestations, the presence of lead paint and radon, septic tank issues, plumbing problems, electrical issues or a problem with a damp basement or a building’s foundations. Reputable home inspectors can be found through the phone book.

What should I know about carbon monoxide, lead paint and mold?

When you buy a home in Massachusetts, you’ll hear a lot of talk about these three toxic substances.

Carbon Monoxide. Massachusetts was the ninth state in the U.S. to require carbon monoxide detectors in single and multifamily housing units, as well as large complexes like hotels, motels and college dormitories.  Housing units that have enclosed parking or equipment such as boilers, furnaces or hot water heaters powered by gas, coal, oil or wood are required to have a working CO detector.  If you’re buying a house, you don’t have to worry much about this. Your seller will have installed, by law, a battery-powered or plug-in detector.  Hard-wired detectors are mandated for large buildings with multiple units and other special cases.  Before your unit is sold, the local fire department will come to the property to conduct an inspection of both the carbon monoxide detector and smoke alarm.

Lead. By state law, whenever a property built before 1978 is occupied by a child under age 6, the owner has an obligation to remove, cover or encapsulate lead paint up to a level of 5 feet. If the seller of a home does not have children under age 6 but you, as the prospective buyer, do, it becomes YOUR obligation to abate the hazard. If the seller of a property knows for a fact that there is lead in a home, he or she must disclose this information. All sales contracts must include a seller’s disclosure form. More often than not, sellers do not know whether a home contains lead or not and this is what they disclose to you. If you are concerned about lead, it’s up to you to have a licensed lead inspector test the surfaces of your potential home. If there is lead, a licensed de-leader can delead the home and retest.

Mold. Often, the presence of mold turns up during a routine home inspection. It is incumbent on you as the buyer to inspect and test for mold. Although sellers are required by law to disclose any known defects about a property, it may be hard to prove that a seller actually knew about the presence of mold prior to a sale.  

What is a “closing” all about?

A closing is your final hurdle to home ownership. It is the day that you present the seller or seller’s attorneys with the money to buy your new house and the seller presents you with the deed to the house. At the closing, your attorney determines whether all the terms of the purchase and sale were satisfied. There will also be many other documents to sign to finalize the sale. Your attorney will attend the closing with you to help you understand exactly what is taking place. After the closing your attorney will examine the title one last time and record the deed and mortgage at City Hall. By the time your transaction is completed you will have paid fees for title examination of your property to be sure it is owned by your seller, mortgage financing charges, adjustments for taxes, water, sewer, and condo fees, recording fees, your attorney’s fee, inspection fees and homeowner’s insurance.

Congratulations, you’ve got a new home!

What’s a condo fee?
In Boston, most condominium associations collect a monthly fee from condominium owners for maintenance, heating, building insurance, trash collection, etc. Many out-of-town buyers will opt for a condominium precisely because the existence of a condo association means a property is cared for, even in a buyer’s absence. Condo fees are often higher than similar fees in Europe because most condo associations hire outside property managers to manage their buildings. Self-managed buildings usually have lower fees that are similar to fees you might see in Europe. The risk, however, is that maintenance will not be as rigorous as it might be under a hired, professional manager since homeowners rarely have the time to do all the chores necessary to keep a building looking good. Luxury buildings with more services to keep up— such as a concierge, swimming pool, gym, roofdeck, etc. — usually have condo fees that are quite a bit higher than condominiums with fewer amenities. Condo fees are often higher in small buildings that are professionally managed. Buyers of single family houses and townhouses luckily avoid paying a condo fee, but they must unfortunately grapple with ongoing maintenance themselves. Condo fees can range from about $350 a month to as much as $1200 or more in high-priced luxury buildings. Fees are set within a building on square footage, unit placement and whether a unit is on a higher or lower floor.