Ever think about buying a home outside Massachusetts? The process is fairly similar across state lines, but even veteran home buyers may be surprised by some key — and potentially costly — differences. So whether you’re among the ranks of newly commute-free workers, or just longing for a vacation home for fear of further claustrophobic COVID confinement, here’s what to expect when purchasing a home elsewhere in New England.
The first big difference happens right off the bat. You always want to be prepared to pounce on a prime property, but you may need to be even more prepared than usual — because offers are submitted differently in neighboring states.
Instead of the two-step process we have in Massachusetts — where buyers first submit their offer as a very simple contract to purchase and only later finalize the full terms of the deal with a more detailed purchase and sale agreement — buyers in New Hampshire and Maine jump straight to the full “P&S’’ and include a full deposit. “A lot of times people who have bought and sold in Massachusetts say, ‘Wait a minute, everything’s happening all at once!’ ’’ said Sue Doyle, a realtor with Keller Williams Coastal Realty in Portsmouth, N.H., who’s licensed in all three states.
It may feel that way, but there’s room for negotiating addendums later — in the event of a failed inspection, for example. Still, it means your initial offer is a lot more detailed and thorough. “Instead of it being a one- or two-page offer in Massachusetts, in New Hampshire, it’s like a six-page document,’’ said Angela Harkins, a realtor with Lamacchia Realty in Westford who’s licensed in both states. While it’s typically a standard template, Harkins said, it can make sense to have an attorney review your basic purchase and sale agreement ahead of time, so you can act quickly and confidently on a home you like.
The same is true in southern Vermont, and even in the Berkshires, said Deb Trzcinski, a broker at Steepleview Realty in Adams. “We don’t do an offer; we go directly to purchase and sale, with an attorney review in three days,’’ said Trzcinski, who’s licensed in Massachusetts and Vermont. “The inspection, contingencies for mortgage, and so forth, they’re all built into that purchase agreement.’’
Speaking of inspections, you’ll want to have someone look at the septic tank if there is one. Other New England states don’t protect buyers the way Massachusetts’ Title 5 rules do, which require sellers to provide a certificate proving that their septic system is working. “You can buy a property up here and sell one with a failed septic system,’’ Doyle said of Maine, so it’s always worth getting a septic inspection. “You’re talking $20,000 to $24,000 if it’s truly failed.’’
In northeastern Connecticut, meanwhile, a more specialized inspection may be necessary to avoid an even bigger catastrophe. Between 1983 and 2015, about 35,000 homes in the area were built on concrete foundations that are at risk of crumbling. The concrete mix, supplied by the now-defunct J.J. Mottes Concrete Co. in Stafford Springs, contained pyrrhotite, a naturally occurring mineral that can cause concrete to deteriorate and even collapse when exposed to air and water. “So before anyone considers purchasing a home in Connecticut,’’ said Gary Moukhtarian, senior vice president of consumer finance at Webster Bank, “you should check the state housing website’’ for a list of affected communities.
If a home was built within that time frame in one of those communities, Moukhtarian said, buyers need to get a visual inspection of the foundation. If that turns up concerns, he said, “A core inspection engineer would go out and literally drill right into the foundation, pull out the core, and capture it and analyze it.’’ When a foundation is failing due to the presence of pyrrhotite, the only real remedy is to raise the home and completely replace the old foundation — a costly but inglamorous repair that can approach $200,000, according to a report in The Hartford Courant. The state of Connecticut offers financial assistance, including low interest loans and reimbursement of inspection fees.
Another surprise waiting for Bay State buyers who venture across state lines is the way property transfer taxes are handled. In fact, if you’ve never sold a home in Massachusetts, you might be blissfully unaware of the fact that each real estate transaction is taxed at roughly 0.456 percent of the sale price; it’s not something buyers typically need to worry about.
“There is a tax for transferring the property, and in Massachusetts, that’s borne right now by the seller 99.9 percent of the time,’’ Harkins said. In New Hampshire, the real estate transfer tax rate is about three times higher — 1.5 percent of the final sale price — and split evenly between the buyer and seller. On a $400,000 home, the buyer’s share works out to about $3,000, due at closing along with the usual mix of prepaid property taxes, insurance, and other fees. If buyers aren’t prepared for that, “All of a sudden closing comes, and they’re like, ‘What is this $3,200? I wasn’t expecting that!’ ’’ Harkins said. “And some folks are down to the penny when they’re closing — they’re putting their best offer forward.’’
Maine treats its more modest transfer tax (about 0.44 percent of the sale price) similarly, splitting the obligation between buyer and seller. In Vermont, meanwhile, the property transfer tax of 1.25 percent, plus a 0.2 percent clean water surcharge, is paid entirely by the buyer. On a $400,000 home, that amounts to an additional $5,800 or so due at closing (though the rate is slightly lower for primary residences).
As in Massachusetts, sellers in Rhode Island are expected to pay the transfer tax. But higher property taxes can catch out-of-state buyers by surprise, said Jennifer Mello, managing broker at the Mello Group in Seekonk who is licensed in both states. “Rhode Island property taxes are significantly more than the Massachusetts taxes,’’ she said. So when seeking preapproval for a mortgage in the Ocean State, it’s important to make sure your lender is using an accurate estimate that factors in those higher taxes — “which, to be honest, can literally be double sometimes,’’ Mello said. The same goes for New Hampshire, which boasts some of the highest property tax rates in the country despite having no sales or state income tax (though Granite State residents who work in Massachusetts are still required to pay state income taxes to the latter).
Other unexpected issues aren’t necessarily state-specific, but tend to crop up more often as you get farther from the Boston area. For example, reliable broadband access isn’t always a given, including in the Berkshires. In southern Vermont, outside the Bennington area, Trzcinski said, “You’re going to have, in some places, a little bit less Internet access, and you’ve got to be able to deal with that.’’
The type of home loan you’re able to get might change outside Eastern Massachusetts, too. In the Boston area, the upper limit for a conforming mortgage — one that can be backed by Fannie Mae or Freddie Mac — is $690,000. But those limits vary by county, depending on local home values. Once you get into Rhode Island, Maine, Vermont, and most of New Hampshire, the threshold is $510,400.
“If you’re financing more than that, then it goes into a jumbo loan product, which means that now your interest rate is a little bit different, maybe a point higher, or you may actually have to kick in some money and put more money down,’’ Mello said. Sometimes that curveball is enough to kill a transaction, she said, “because all of a sudden, your numbers are completely out of whack.’’
And of course, buyers financing a vacation home might need to make a bigger down payment, no matter what state the property is in. “If you’re not a first-time buyer, you can expect to put down at least 5 percent for a primary residence,’’ Moukhtarian said. “On a second home, the minimum requirement would be 10 percent.’’ If you’re planning to offset that mortgage by renting out the home on Airbnb when you’re not using it, pay attention not just to the differing state lodging taxes, but also to local restrictions — which can vary within a state and change abruptly. “Every single town is different,’’ Doyle said.
Unfortunately for buyers, the pandemic real estate boom has established one striking new similarity in the home-buying process throughout much of New England: If you’re hoping to escape the stress of the competitive Boston market, you’re unlikely to find much relief in neighboring states right now.
“We have never seen inventory this low,’’ Harkins said. Competition is particularly fierce for entry-level and mid-priced homes in New Hampshire, she added. “When you’re competing against five to 15 offers, it’s hard.’’
Trzcinski said a huge influx in second-home buyers and couples planning for their retirement made things harder for her local first-time home buyers in both the Berkshires and Vermont this summer. “It’s just what the Boston area sees —bidding wars and so forth. We’ve not really seen that in the past, but we are now,’’ she said. “We would go to a house, and there would be seven, eight, ten offers. We don’t even have a chance.’’
Doyle says multiple-offer situations have become the norm in southern Maine, too. The region’s popularity “has skyrocketed,’’ Doyle said, with more buyers coming from New York, New Jersey, Pennsylvania, and Connecticut — but especially Boston. According to a third-quarter report by the national brokerage Redfin, fully two-thirds of online home searches in the Portland, Maine, metro area this summer came from out of state — more than half of them from the Boston area.
While you may not escape the competition, there is at least one pleasant surprise awaiting those who break out of Boston’s gravitational field: how much farther your real estate dollars go. “You always have people that start off in Massachusetts, not realizing how little house they get for the money,’’ Harkins said. “They cross the border, and they realize they can get a bigger house.’’