November 1, 2019
This is a Question I always get. WHAT IS THE Florida AS-IS CONTRACT? WHAT DOES IT DO FOR ME "BUYER?" The majority of residential real estate contracts in Florida these days are written on the F-R BAR- AS IS contract, This article will answer some frequently answered questions regarding this contract with a focus on how inspections and repairs are handled under the AS IS contract. AS IS is essentially a warranty disclaimer, Property is often sold AS IS in order to limit any liability relating to the condition of the property.
Aside from the general AS IS disclaimers the main difference is how inspections ans repairs are handled. Under the standard contract seller is obligated to a repair limit, If the cost of repairs exceeds the repair limit the buyer can elect to have seller repair certain defective items up to the repair limit. If neither election is made, either party can cancel the contract. The procedure is much simpler under the AS IS contract. Seller has no obligation to repair anything, but buyer can cancel the contract within the inspection period if buyer determines the property is not acceptable.
There are a couple other notable differences between the two contracts pertaining to inspections and repairs. First, the AS IS contract has no limitations on the type of inspections or who can do these inspections compared to the standard contract which limits the items that can be inspected and who can inspect them. For example, under the AS US contract a buyer can get a mold inspection which cannot be done under the standard contract ( unless there is a separate mold inspection). Second, under the AS IS contract anyone (including the buyer) can inspect the property, compared to the requirement of using a professional inspector under the standard contract.
Technically, yes. Practically, however, buyer's ability to cancel gives buyer significant leverage to negotiate for certain repairs, a price reduction, or a repair credit (often recaptioned a "closing cost"credit if buyer is getting a loan).
A major (and perhaps the only similarity) is that seller is not obligated to make any repairs. However, the parties under the standard contract must still follow the extensive inspection and repair provisions. These include:1- buyer must still give notice of defects, 2- seller must still obtain written repair estimates buyer cannot cancel if seller agrees to make all requested repairs, and 3- if seller does not agree to make all repairs, 4-seller can cancel if buyer fails to elect to take the property in its AS IS condition.
*Addendum K - Legally there is no distinction between the AS IS contract and the standard contract with addendum K attached. However, the AS I S contract is much cleaner and easier to use. A typical circumstance where it makes sense to use the AS IS addendum is when the parties as part of the contract negotiations decide to convert the standard contract into an AS IS sale. This usually occurs when seller agrees to a reduced price in exchange for buyer taking the property AS IS.
*Addendum L- Right to Inspect and Right to Cancel- From a buyer's perspective this is the best of both worlds. Buyer can cancel the contract if buyer is not satisfied with the condition of the property but seller is still obligated to repair defective items (up to the repair limit) if buyer does not cancel.
Does selling property AS IS relieve the seller of any disclosure obligations?
The simple answer is no. Seller and listing agent are still required to disclose known hidden defects that materially affect the value of the property,notwithstanding that the property is being sold AS IS.
Bank owned properties are always sold AS IS. Similarly, institutional trustees and fiduciaries typically sell property AS IS, A seller may also decide to sell a property AS IS if seller knows the property is in a state of disrepair, or if seller agrees to a significant price reduction, A buyer, on the other hand may use the AS IS contract to make buyers offer more attractive, or to tie up the property while buyer continues to look at other properties (often to the consternation of the seller and listing agent).
Presented to you by Kerin Realty.
Phone: (516) 909-9213 or at (813) 699-1800
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