Smokey, Home Buyer in Caloosahatchee, Cape...

explain AS IS Contract and when it should be use

Asked by Smokey, Caloosahatchee, Cape Coral, FL Fri Dec 17, 2010

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Hello Smokey:
You know state of Florida did something this year to help "protect" all parties involved in a Real Estate Purchase. SO what did they do...They lengthened the contract from 5 pages to 11 pages, on an AS-IS contract. Yikes. Don't get me wrong they mean write when they do it, there are some favorable changes, but the fact remains, if you want to "force" a party to follow through with what they wrote on the contract and clearly communicated to the other side, you still have to bring them to court, which will costs you thousands, so contracts, as good as they are written are only as good person signing it. Sad way to look at it but it is true. In terms of AS-IS contracts they are used on the majority of sales in Lee County as over 90% of all sales are distressed properties, either bank REO's, or Short Sales. The As-Is protects the sellers 100%, they don't have to put a dime into the home when your instector goes through and says the roof needs $5000 in repairs they say, we "don't have to fix it." That being said, most As-Is contract have an Inspection clause that grants buyer right to cancel property upon unfavorable inspection, as might be the case in my example. NOW, here is where is gets tricky, if you are dealing with a less than moral realtor(they are out there). Generally a Lender has no working knowledge of the home because they are thousands of miles away, and it is illegal for anyone Except the OWNER of the property to complete a property disclosure, so the lender can’t hire someone to do this. Again Tricky, lenders contest they are NOT Obligated by law to complete a sellers disclosure, False statement. However in an As-Is contract it is written in Section (j)
Sellers Dislcosure: Seller knows of no facts materially affecting the value of the Real Property which are not readily observable and which have not been disclosed to buyer. Except as stated in preceding sentence or otherwise disclosed in writing: (1) Seller has received no written verbal notice from any governmental entity or agency as to the currently uncorrected building, environmental or safety code violation; and(2) Seller extends and intends no warranty and makes no representations of any type, either express or implied, as to the physical condition or history of the property.
So the question is begged, if the bank had a buyer cancel a contract due to roof inspection providing negative information, should the bank communicate that to new buyers? The short answer is YES, and I think most of the realtors out there follow that rule and keep the moral barometer pretty high, but there are some out there that wont. Be Careful. If you are working with a quality Sellers agent and a roof inspection or any inspection comes back with negative info, even though you have an AS-IS contract the seller, if it is an REO should and often will consider reducing the purchase price by some amount. To turn a short answer into a long one, you are protected in an As-Is contract as a buyer because of the inspection clause. If it is a short sale, well it is tough to ask the seller who doesn’t have money to pay for repairs at it is sometimes very difficult to provide enough documentation the lender approving the short sale to reduce the purchase price. But I have done it in the past with a bad inspection report that had excess of $3,000 needed in repairs.
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Thank you, Justin Ruzicka
Web Reference: http://house-guy.com
5 votes Thank Flag Link Tue Dec 28, 2010
Smokey,

Here in Florida there are essentially two purchase contracts that are most typically used and different circumstances help determine which contract is best to utilize. The "As-Is" contract has been with us a long time but was rarely used back in the day however now most contracts are written utilizing this form. One of the main reasons is that banks will typically require that any offer on a bank owned foreclosure or short sale be submitted using an "As-Is".

With an "As-Is" contract the buyer is obligated to purchase the property in it's current condition; as they say "warts and all". Typically, the contract is contingent on an inspection and during the inspection period the buyer has great latitude in canceling the contract and having their earnest money returned.

On a "traditional" sale I usually, but not always, will utilize the standard purchase contract unless the seller specifically states they will only accept an As-Is contract. The main difference is the standard contract calls for the seller to remain responsible for a pre-determined financial amount for repair of items discovered during the inspection period both for the general inspection and the inspection for wood destroying organisms.

Any contract negotiation has my thinking about the best way to proceed based on the information I have available at the time we are making an offer and each case is different based on the circumstances. Any good agent will utilize this data before making a recommendation as to what type of contract should be presented.

I hope this information helps answer your questions and if I can offer anything additional please feel free to contact me at your convenience.


Always at Your Service,


Tom Priester e-PRO
"Results Driven Real Estate"

Keller Williams Realty
561 308-0175
Web Reference: http://www.tompriester.com
4 votes Thank Flag Link Sat Dec 18, 2010
Hello Smokey,

Congratulations on your quest to purchase a home in Caloosahatchee! I am curious if you are asking when "YOU" should use it, meaning, let's say you come in contact with a home that is in need of repairs, are you asking if you should state that your offer is X amount if the home remains in "as is" condition, meaning you are willing to offer a certain dollar figure if the seller does not make the necessary repairs? The reason why I state my question like that is because my firm deals with a lot of homes that are in distress and being you are a buyer and not a seller I wanted to be clear on what you mean by 'when it should be used".

The bottom line is the words "as is" is in a standard contract, but sometimes the seller will make it abundantly clear that they WILL NOT be making any repairs to the home, even after you inspect the home and more items are found that need repairing or replacing, and of course if you enter a contract like this you as the buyer always have the right to change your mind, given you make your decision during the time frame allocated after the home inspections are complete.

Make sure you get a copy of the Property Disclosure statement, this is a statement that is filled out by the seller which is quite detailed where they list everything they know about the home, age of roof, furnace, etc. etc.

Good answers here by other fellow real estate agents, I hope we answered to your satisfaction.

Kind Regards,
David Irwin
3 votes Thank Flag Link Fri Dec 17, 2010
Smokey - usually it's the SELLER who indicates that the home is being sold "as is", meaning that they have no plans to fix anything, regardless of what you may find.

Now, just 'cause they have no "plans" to fix anything, doesn't mean you can't inspect, nor does it mean that you can't ask them to make repairs. Just be prepared for a resounding "no". Although sometimes they'll surprise you.
1 vote Thank Flag Link Fri Dec 17, 2010
Alan May, Real Estate Pro in Evanston, IL
MVP'08
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Right now in Tampa virtually every property has multiple CASH offers so to compete your agent may recommend you go with a FAR/BAR As Is contract. Listing Realtors know this will prevent a buyer from trying to renegotiate after inspections and may recommend your offer to the Seller versus a higher offer with "exposure" to repairs.

So depending on the market in Cape Coral and if you are NOT paying cash you probably should go with an AS IS contract to be able to beat out competing offers.

Some investors are also putting down zero inspection days and do their inspection "before" bidding on REOs.

Good luck and again here in Tampa, a buyer getting a mortgage has very little chance of finding an owner to accept their "financed" offer over the multitude of investor CASH offers. Oh and the investor CASH offers are also above recent comps so a financed offer probably couldn't get an appraisal to reach the value required so that's another reason a Seller should go with an all cash, no nonsense offer.

All the best,
Alma
Alma Rose Kee, PA
Future Home Realty, Inc.
0 votes Thank Flag Link Tue Feb 5, 2013
Often the buyer has no choice regarding which contract is used in the purchase transaction. All foreclosure properties and 99% of all contracts in Lee County are probably AS IS. The seller (foreclosing lender) or seller's agent won't accept anything else. Because so many of the homes in the area are older, most sellers do not want to deal with having to make petty repairs or to renegotiate the contract because of repairs. It has pretty much become standard practice in that area not to accept any other type of offer from a buyer. As I mentioned there are a few exceptions.

In Collier County the Naples Board of REALTORS has created their own contract. However, more and more often we are seeing the Florida Association of Realtors AS IS contract used in this area because of the foreclosure bank requirements. The Naples contract has a separate addendum to be used with AS IS contracts.

AS IS simply means that the buyer has the option to do any inspections they want and then to make a decision based upon those inspections whether they will proceed with the contract or cancel because there is something in the inspection they do not like.

Buyer beware that some of the foreclosure banks contracts do not let the buyer cancel unless they approve the reason for the cancelation even when the AS IS contract is used. Read the bank’s foreclosure addendum carefully.

The most important thing a buyer can do is first of all work with a buyer broker. As stated by AARP and the Consumer Federation of America in REALTOR News.

I hope you will take time to review the important information for all buyer on my homepage at http://www.FloridaBuyerBroker.com then call me with your questions.
0 votes Thank Flag Link Mon Feb 4, 2013
Smokey,
AS IS means that the seller is selling the home in it's current condition and usually will not make any repairs. This can work against your seller because often buyers fell that something must be wrong with the property and they may decide not to make an offer on this property. The truth is that often sellers just don't want to bother to make any repairs even if they are minor and in some cases the sellers can be trustees, or the property may be a foreclosure where the sellers may not have any knowledge of any issues. Other times the sellers don't want to be bothered with a buyer making unreasonable requests for repairs.

All the Best,
Gary Geer

http://www.GaryGeer.com
0 votes Thank Flag Link Wed Dec 22, 2010
as its name implies AS IS, you should not use it as a buyer, but all the foreclosure and short sale is used
0 votes Thank Flag Link Wed Dec 22, 2010
In simple terms an AS IS Contract is a contract that allows the seller to sell the property in its current condition, without any further financial investment into repairing its condition, and without representing any knowledge of the property. The buyer is allowed to walk away from the contract in the inspection period for any reason, without any financial penalty. It basically is a buyer beware contract, and the buyer should be very deligent in the inspection period to understand the condition of the home.

It is used primarily in our area due to the large amount of vacated homes, that the banks have taken back, without any knowledge of the condition of the homes, and without any financial responsiblity.

I hope this helps, I am availabe at 239-322-0309, for more explanations. I am a realtor with Sand Castle Realty Group, Inc, located in Cape Coral Florida
0 votes Thank Flag Link Sat Dec 18, 2010
Hi Smokey,

I like the AS IS FAR/BAR contract when I work with a buyer because it allows the buyer to cancel without jumping through a bunch of hoops. For a Seller, I also like the FAR BAR As Is contract because it doesn't obligate the Seller to make repairs and allows the Buyer to somewhat "renegotiate" the contract after the inspections. Wtih an As Is, the buyer can just take it or leave it. I know some Realtors prefer to use a regular non-As Is contract because usually they are much harder to cancel and more likely to close (although possibly with an unhappy buyer and/or seller!)
0 votes Thank Flag Link Fri Dec 17, 2010
As-Is is simple......you are purchasing the property in the condition which you see it......no repairs from the seller can be expected. you will see this in foreclosures/short sales......there are other situations as well depending on how you negotiate.

jessemcgreevy@gmail.com
239-898-5329
http://www.Bonita-Estero-RealEstate.com
0 votes Thank Flag Link Fri Dec 17, 2010
The property is being conveyed to you in it's existing condition. You are entitled to inspect the property (and you should do this) with a right to cancel if you are not satisfied with the results. Any repairs would, in most cased, be on your dime.
As-is contracts are used when purchasing a short-sale or a foreclosure; but there are instances where this is used for a private sale.
Web Reference: http://www.321property.com
0 votes Thank Flag Link Fri Dec 17, 2010
There are two that are popular in Florida. There is the FAR (Florida Association of Realtors) As-Is. AND there is the FAR-BAR (Florida Association of Realtors and the Florida Bar Association). They are different contracts, both being As Is Contracts. The major difference in them is how to count days.

There are also contracts that are NOT as is.

The seller should dictate the contract that they want to use. Most people do not understand the differences, even some Realtors do not understand the differences.

Basically the AS IS is just that, you are buying a property as it is~ and you can and should get your own home inspection. You will have (X) number of days to do just that. If you discover problems with the property you are contracting, you can cancell the contract.

Hope this helps unmuddle the situation for you.

Debbie Albert, PA
Keller Williams Realty of the Treasure Coast
Web Reference: http://www.ronanddebbie.net
0 votes Thank Flag Link Fri Dec 17, 2010
The "As Is" Contract is pretty standard in todays market. It basically means you are purchasing the property "As Is" and the seller is not required to make any repairs. It is critical that you include the inspection contingency which means you are purchasing the property "As Is" with the right to have inspections done. If the inspector finds problems that are more than you care to deal with you can cancel the purchase agreement.

Make sure you work with a Realtor® that will protect your interest including making sure the inspections are done within the contract timeframes so you don't find yourself at risk of losing your earnest money. Feel free to contact me if I can be of assistance.

Terry McCarley / Remax Realty Team
cell: 239-707-4575
email: leecountyrealtor@earthlink.net
0 votes Thank Flag Link Fri Dec 17, 2010
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