Understanding the Home Purchase Contract
There are two main versions of the Florida Residential Sale Contract. They are titled, “Florida Residential Contract for Sale and Purchase” and “Florida Residential Contract for Sale and Purchase AS-IS”. Both are periodically reviewed, updated, and approved by Florida REALTORS® and the Florida BAR.
Choosing which contract to use and what that contract means for negotiation both before and after execution can be confusing for buyers. One subject that often confuses many people is the issue of repair requests on an “AS-IS” contract. This can be made clearer by examining the differences between the standard , as they relate to inspections and repairs.
Key Differences Between Standard and “AS-IS” Contracts
Standard FR/BAR-2 Contract
The standard FR/BAR-2 contract includes in Section 9 three additional seller costs that the buyer and seller agree upon during initial negotiations: general repairs, WDO repairs, and open permits. Each has a line for a dollar amount or percentage. This amount is agreed upon and built into the offer before the buyer has an opportunity to perform inspections. It is a “guesstimate” of what may be needed for repairs.
“AS-IS” Contract
On the “AS-IS” contract, Section 9 does not contain these additional lines for buyer and seller to predetermine the amount a seller may or may not be willing to concede for repairs. This does not exclude the buyer from making requests of the seller after inspections have been performed (within the negotiated inspection period). Essentially, the standard contract sets the amount for repairs, while the “AS-IS” contract allows for repair amounts to be negotiated after inspections. Does the seller have the right to say no to any inspection requests? Certainly, but does the buyer have the right to ask? Of course.
Inspection Periods and Obligations
Standard Contract
Section 12 of both contracts deals specifically with the inspection periods, types of inspections, etc. On the standard contract, the wording is very specific as to what kinds of repairs the seller would be obligated to make to comply with Section 9. It also defines what items or issues would be considered “cosmetic” and would not be a seller’s obligation to repair. As an agent writing an offer on a standard contract, I would be very careful to discuss with my potential buyer the types of repairs the seller would be required to make under the terms of that contract. Unfortunately, often with a standard contract, the buyer will go through the home looking for items to add up to the predetermined repair limit. In my opinion, that type of nitpicking is not in the spirit of the agreed-upon terms of the contract.
“AS-IS” Contract
Section 12 (Property Inspection; Right to Cancel) on the “AS-IS” contract is short and sweet. If the buyer determines for any reason that the property is unacceptable, they may terminate the contract. The actual wording from the contract is as follows: “If Buyer determines, in Buyer’s sole discretion, that the Property is not acceptable to Buyer, Buyer may terminate this Contract by delivering written notice of such election to the Seller prior to the expiration of the inspection period”. The buyer can make inspection repair requests, but the sellers are not obligated to accept, and there is no predetermined repair limit. Since the “AS-IS” contract essentially provides the opportunity for the buyer to cancel for any reason within the inspection period, negotiating any repair requests the buyer would make in good faith can be a win-win for both parties to the transaction.
Educating Clients for a Successful Transaction
Our job as REALTORS® is not only to represent our client to the best of our ability but also to educate them along the way. A listing agent who does not prepare their seller for the possibility of repair requests on an “AS-IS” contract may unintentionally cause bad feelings all around when those requests are received. Conversely, the listing agent who advises their seller that every home has some issues and that they should be prepared for the buyer to request either repairs or a cash concession is setting the stage for a win-win transaction.
