Massachusetts Real Estate Contracts: Exam Study Guide

Contracts are the largest single topic on the national section of the Massachusetts exam (approximately 17%). The state section also tests Massachusetts-specific contract practices — particularly the Offer to Purchase and Purchase and Sale Agreement sequence unique to Massachusetts real estate.

National Contract Principles

Every valid real estate contract requires: 1. Mutual assent (offer + acceptance of identical terms) 2. Consideration (something of value exchanged) 3. Legally competent parties (adults, not under duress) 4. Lawful purpose 5. In writing (Statute of Frauds applies to real estate)

The Massachusetts Two-Stage Contract Process

Massachusetts uses a two-step contract process that does not exist in most states:

Stage 1: Offer to Purchase (OTP) The Offer to Purchase is a binding pre-contract that identifies: - The property address - Proposed purchase price - Earnest money amount - Target closing date - Basic contingencies

Once signed by both parties, the OTP is legally binding. If the buyer backs out without a contingency protecting them, they may lose their earnest money deposit. This is not a letter of intent — it is an enforceable contract.

Stage 2: Purchase and Sale Agreement (P&S) The P&S is a comprehensive contract signed after the OTP, typically after the home inspection period. It includes: - All detailed terms and conditions - Specific contingencies (financing, inspection, title) - Legal descriptions - Closing mechanics

The P&S supersedes the Offer to Purchase. Once the P&S is signed, the OTP no longer governs the transaction.

Exam key: The OTP is binding. Missing this distinction is the most common Massachusetts state section error.

Listing Agreement Types

Exclusive Right to Sell — Commission paid regardless of who finds the buyer. Most protection for the broker. Most common type.

Exclusive Agency — Commission paid unless the seller finds the buyer without broker involvement.

Open Listing — Multiple brokers can market; commission only to the broker who procures the buyer.

Net Listing — The broker's compensation is anything above a net price set by the seller. Prohibited in Massachusetts because of the inherent conflict of interest.

Key Terms

Contingency — A condition that must be met for the contract to proceed. Common contingencies: financing, home inspection, clear title, sale of buyer's current home.

Earnest money — Held in escrow. If buyer defaults without cause, seller may keep it. If seller defaults, buyer typically receives it back plus may pursue additional damages.

Option contract — Buyer pays for the exclusive right to purchase at a set price within a set time. Buyer is not obligated to buy; seller is obligated to sell if the buyer exercises the option.

Counteroffer — Rejects the original offer and creates a new offer. The original offer is legally dead once a counteroffer is made.

Common Exam Mistakes

Treating the Massachusetts Offer to Purchase as non-binding (it is binding)
Forgetting that net listings are prohibited
Confusing which document supersedes the other (P&S supersedes OTP)
Forgetting that a counteroffer terminates the original offer

Practice Massachusetts Contract Questions

[CARealestate.com/states/massachusetts](https://carealestate.com/states/massachusetts) has contract practice questions with Massachusetts-specific context. 5 free questions — no signup needed.

Massachusetts Real Estate Contracts: Exam Study Guide