AS IS doesn't mean there's something wrong with the home
If you're buying or selling a piece of real estate in the state of Florida, you're likely going to see the contract written on what's known as the FAR/BAR Contract. This is essentially a warranty disclaimer. It's the seller's way of getting a potential buyer to acknowledge that the property is sold as is. This limits any liability the seller has as it relates to the condition of the property.
Don't let those two little words ruin your day. Potential real estate buyers sometimes think this means that there's something substantially wrong with the property. Depending on the circumstances, the AS IS version of this standard real estate contract might be the most beneficial. Here's what you need to know.
The big difference between the AS IS and the standard FAR/BAR contract
There's only one besides the general AS IS disclaimers, and that has to do with how inspections and repairs are going to be handled.
- If the standard contract is used: The seller is obligated to a repair limit. If the cost of repairs exceeds the limit, the buyer can choose to have the seller repair certain defective items up to the repair limit. Or, either party can cancel the contract.
- If the AS IS contract is used: The seller has no obligation to repair anything. However, the buyer can cancel the contract within the inspection period if they determine the property is not acceptable.
There are two more notable differences in these contracts.
- The AS IS contract has no limitations on the type of inspections, or who can do these inspections. The standard contract limits the items which can be inspected, as well as who can inspect them.
- Under the AS IS contract, anyone – including the buyer – can inspect the property. If the standard contract is used, only a professional inspector can do this.
Who does the AS IS contract favor?
It's equal protection for both the buyer and the seller. There are just a few things to keep in mind.
Under the AS IS contract, the buyer's only option is to cancel. But that can give the seller some leverage. The seller may, for example, choose to negotiate for certain repairs, a price reduction, or a repair credit.
If the standard contract with a zero-repair limit is used, the seller is not obligated to make any repairs. Even, so, both parties are required to follow the inspection and repair provisions in the contract.
- The buyer must still give notice of the discovered defects.
- The seller must still obtain written repair estimates.
- The buyer cannot cancel if the seller agrees to make all the requested repairs.
One important thing that all real estate buyers should keep in mind is that the AS IS contract does not relieve the seller of the disclosure. Both the seller and their listing agent are required to disclose all known hidden defects that materially impact the value of the property. This includes homeowner and condominium association compliance issues. The understanding is that the property is being sold AS IS, and the buyer can cancel if they inspect the property and find it not to their liking.
The FBAR/BAR AS IS contract is widely used because it features the most common contingencies that might impact a real estate transaction. The contract covers more than protection for buyers and sellers because of physical problems. It also offers contingencies for things like buyer financing, or even the ability for both parties to agree on a specified amount of time for an existing home to be sold so the proceeds can finance the transaction.
Who uses the FAR/BAR AS IS contract?
You'll find that all bank-owned properties are sold AS IS. Generally, any trustee or institutional organization will sell a property AS IS, too. A private individual may choose to sell a property AS IS if they know the property is in a state of disrepair. A buyer may offer an AS IS a contract to make their offer more attractive.
The attorneys at PeytonBolin understand real estate law and how it can affect buyers and sellers. Contact us today to see how can help guide you through the buying or selling process and help you understand the contracts involved.