Hurry, We Need to Sign…

When discussing a potential purchase with a client, you may hear, “It does not make a difference to us what type of contract we sign, we love the house and just want to make sure that we don’t lose it”. Stop! There are two standard forms, the FAR/BAR “AS IS” Contract and the FAR/BAR Standard Contract. The FAR/BAR “AS IS” Contract, while definitely different from the FAR/BAR Standard Contract, is not a lesser document.

• While both contracts have a maintenance requirement provided for in Paragraph 11, the “AS IS” Contract places no repair obligations on the seller. The Standard Contract requires that the seller make certain types of repairs up to a certain dollar amount.

• The second major difference between the contracts is as it relates to the “Inspection Clause”, Paragraph 12 of the “As Is” Contract*. In the FAR/BAR Standard Contract*, the buyer has 15 days, unless specified, after the effective date of the contract, to complete inspections of the property and notify the seller. Once the notice has been received, the seller has 10 days from notification to either obtain repair estimates for the buyer, or to order a second inspection if there is disagreement with the buyer’s inspection report. If there is a discrepancy between the two inspections and the parties cannot come to an agreement, then the contract will have both parties share the cost of a third inspection, and the results of which will be binding on both parties. In contrast, the “As Is” Contract allows the buyer to get a “free look” during the inspection period, which by default lasts for 15 days following the effective date of the Contract. If the buyer decides they no longer want the property, they can notify the seller prior to the 15-day inspection deadline and cancel the contract without penalty. The “As Is” Contract gives buyers greater discretion in deciding whether to proceed with the purchase.

• As part of the Inspection, Paragraph 12 (d) of the FAR/BAR Standard Contract, if the buyer gives notice of permit issues, the seller is obligated to resolve any open or expired permits as well as obtain permits for any unpermitted improvements up to a certain dollar amount. By contrast, under Paragraph 12 (c) of the “As Is” Contract, the seller must only assist the buyer with closing out of the permit and is not obligated to spend any money to do the same.

• The third major difference is the Seller Disclosure, found at Paragraph 7 of the FAR/BAR Standard Contract* and Paragraph 10 of the “As Is” Contract*. There is an important disclosure which states, “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.” Florida law imposes this duty on all sellers of Florida real estate. But in the “As Is” Contract, there is additional language stating that other than this duty to disclose, the seller “extends and intends no warranty and makes no representation of any type, either express or implied, as to the physical condition or history of the Property.” That is why a thorough property inspection is even more vital with the “AS IS” Contract.

• The fourth major difference is Buyer Waiver of Claims, Paragraph 18 (X) of the “As Is” Contract* stipulates that the buyer waives any claims against the seller and any realtor involved in the transaction for any defect or damage that existed at closing but is discovered later by the buyer. This provision survives the Closing. No such waiver exists in the FAR/BAR Standard Contract.

So when you get that call, “we just want to sign”, neither contract is objectively better than the other. It will depend on the nature of the transaction and the type of property involved. As always, should you have any questions with regard to choosing the appropriate contract, please contact your local real estate attorney, for additional guidance.

* The FR/BAR Residential Contract For Sale and Purchase, and the “AS IS” Residential Contract For Sale and Purchase (approved by The Florida Realtors and The Florida Bar, version (6/19) © 2017)

Sincerely,
Anastasia M. Stefanou, Esq.,astefanou@berlinpatten.com
Berlin Patten Ebling, PLLC

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.

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