Legal Question in Real Estate Law in Massachusetts

My husband and I hope to purchase a two family property in Massachusetts as an investment property. We currently reside in a single family home in NY. The investment is deeded to my cousins and they would like to keep the house in the family. They will list the house for $575000 but are willing to sell to us for $475000. We are seeking financing and the down payment for an investment property is 20% which we don't have. The sellers are willing to hold back paper at closing to help us out. What does that mean and how does that work? Is there is typical percentage of the sales price that sellers typically hold back?

Thank you.


Asked on 3/11/14, 2:56 pm

2 Answers from Attorneys

Christopher Vaughn-Martel Charles River Law Partners, LLC

If you do not yet have counsel, I strongly recommend that you retain a real estate attorney here in Massachusetts to assist you. What the seller is offering to do is to loan you some of the purchase price in exchange for a promissory note and, most likely, a second mortgage. There is no typical percentage. A seller can completely finance the transaction for 0% in cash and 100% in a loan, or any percentage in between. Here, it sounds like you will be paying the seller with a combination of (1) some amount of cash, (2) a traditional loan, and (3) a loan from the seller.

You just need to work this out with the seller and make sure that all the numbers add up. I'm a little concerned when I hear that property is being deeded to anybody other than the person who is paying for it. You absolutely must have a property ownership agreement if you are doing anything other than buying a home with your spouse and living in it!

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Answered on 3/11/14, 4:29 pm
James Hall Qua, Hall, Harvey & Walsh

I recommend that you get counsel as well. The bank likely will not allow a second mortgage on the property- as you likely will have to agree not to further mortgage it in the bank's loan agreements and/or show where you will come up with the 20% down.

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Answered on 3/11/14, 5:02 pm


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