Comparing two popular contract types

Alternatives to standard Florida home purchase and sale contracts

As-is contracts in REALTALK™ #30
REALTALK™ #30 - As-is contracts

You find a home that you want to make an offer on but notice that the seller will only accept As-Is contracts. Is it a good thing or a bad thing? Or, the seller has a concept of using a repair limit. I discussed the As-is contract in my REALTALK™ #30 video and repair limit contracts last week in my REALTALK™ #181 video. These are contract tools that have advantages for the seller and the buyer.

The scenario in the as-is contract is that the seller feels the home shouldn’t require any repairs. If the seller is aware there may be required repairs that is noted on the disclosure form they may have made allowance for the repairs in the listing price. In the Longboat Key and Sarasota markets homes for sale may be a second home for a couple with their primary residence in the Midwest. In this situation they may want to sell the home as-is because they don’t want to deal with the repairs.

Lending institutions that are offering short sale or foreclosed homes for sale will often have the requirement that all offers have an As-is clause in the contract. They are not in the business of making home repairs. In any case the As-is requirement is usually noted in the realtor comments section of the listing.

Should the buyer hesitate to purchase a home As-is? To the contrary, they should accept it knowing they can decide later not to purchase the home if they find repairs they are not willing to fix themselves. A buyer will often schedule a home inspection soon after the contract is signed. This period of 10 to 15 days for the home inspection will determine if the repairs will be too costly. This can happen if the roof needs replacing, for instance.

The buyer may love the home they want to purchase. They may want to renegotiate the contract for a lower price that will cover the costs of a new home. This is where you have to check your emotions at the door. If the seller senses you are buying the home no matter what, they can hold strong on their initial contract price. If the home is a tear-down roof repairs are inconsequential. I have had home inspections in these situations for any number of reasons, maybe the buyer wants to have a good working knowledge of the utilities on the property. Some say an As-is contract offers more benefits to the buyer in that it is an easy contract to get out of before the inspection period ends.

The Midwest couple that hasn’t seen their southern home in months may want to exercise their right to place a repair limit in the contract. This is a protection from unforeseen repairs. The seller is basically stating that they are willing to make repairs up to the limit established in the contract.

Repair limit contracts
Repair limit contracts in REALTALK™ #181.

Repair limits are typically set up to one-and-a-half percent of the purchase price. The repair limit on a $500,000 home purchase contract will be set between zero and $7,500. The seller is obligated to repair a water heater that costs $500 since it is below the repair limit. However, there is no obligation for a roof replacement that is estimated to cost $30,000. This is where the fun begins.

The buyers are aware of the poor roof condition and know that it has to be repaired, if not replaced. If the roof had been leaking for a period of time there may also be a mold issue too. If the seller is unwilling to replace the roof, the buyer can walk away. The seller is going to have to fix the roof if he wants to continue listing the home, knowing the roof condition. It will certainly come up on the next inspection report, and the next one after that. The seller can issue a credit to the buyer at closing to cover the costs of a new roof. If I am representing the buyer I would also recommend a mold inspection.

We offer a pre-inspection when we list a home for sale. A certified inspector will come into the home for sale and note any conditions that will require repairs. This is a great time to be made aware of any unsatisfactory conditions. It is a great time to repair these problems before the home goes into contract. In a perfect world you would think all problems would be fixed. If all the repairs are made you may decide on an As-is contract or one with repair limits to protect yourself. Maybe the pool heater breaks in between the time of the first inspection and the inspection by the potential buyer.

We like to have a smooth process in all of our home sale transactions. As I discuss in REALTALK™ #181, I typically do not sell new homes. Older homes have a lot of appliances with limited life spans and at any time these can break down. You are not going to sell a home that does not have a working oven so it is fair to have it fixed for a smooth closing.

2675 Gulf of Mexico Dr, #501
Veinte community - 2675 Gulf of Mexico Dr, #501

Last week I listed a wonderful fifth-floor penthouse in the Veinte community on Longboat Key at 2675 Gulf of Mexico Dr, #501. This three-bedroom, three bath residence is in a great location on the Gulf beach and within walking distance to the Publix Shopping Plaza. St. Armands Circle and Sarasota is a short drive where the night life is fun and the cultural arts scene is world renown. Please contact me at (941) 387-1840 for an exclusive showing or if you have a property to sell or buy.

Address List Price Media Slideshow
2675 Gulf of Mexico Dr, #501 $1,250,000   Photo Slideshow

 

Call us at (941) 387-1840 for an exclusive showing