While Florida law requires no particular form of contract for a real estate transaction, the FR/BAR Contract forms are the most utilized and well-recognized residential contract forms in Florida. The FR/BAR Contracts, created and approved by a collaboration between the Florida Association of Realtors and the Florida Bar, include two Contract forms: the Residential Contract for Sale and Purchase (the “Standard Contract”) and the “AS-IS” Residential Contract for Sale and Purchase (the “As-Is Contract”). So which Contract form should you use and when?
In my practice, I have found that the As-Is Contract is more commonly used over the Standard Contract. This is most likely due to the As-Is Contract being more user friendly and easier for the parties to navigate. However, this does not mean that the As-Is Contract is always the best Contract form to use for your client.
The As-Is Contract differs from the Standard Contract in several significant ways. The most obvious distinction is found in the way that the As-Is Contract handles the buyer’s and seller’s obligations as to the condition and inspection of the property. Under the Standard Contract, the seller has repair requirements that are set-forth in Section 9 of the Contract, while under the As-Is Contract, the seller is only responsible for maintaining the property in the same condition that it was in as of the effective date of the Contract.
Section 12 of the Standard Contract establishes the inspection process and gives the Buyer the ability to conduct inspections and deliver a written report to the Seller within the inspection period. Parties rarely follow this procedure as it can be a complicated process as you can see: Within 10 days (or other period of time agreed upon by the parties) of the delivery of the report to the Seller, the Seller shall either: (a) have the reported repairs estimated and deliver a copy to the Buyer, or (b) have a second inspection completed and provide a copy of such report and estimates to the Buyer. If the inspection reports differ, a third inspector can be hired by the Buyer and the Seller and that inspection report will be binding. If the cost to repair the items is equal to or less than the repair limit, the Seller has to make the repairs prior to closing. If the cost to repair exceeds the general repair limit, then within 5 days after a party’s receipt of the last estimate: (a) the Seller may elect to pay the excess by delivering written notice to Buyer, or (b) the Buyer may deliver written notice to the Seller designating which repairs the Seller shall make with the cost not to exceed the general repair limit. If neither party delivers such written notice to the other, then either party may terminate the Contract.
The As-Is Contract is much simpler and is often times more attractive to sellers as the Seller has no repair obligations beyond the maintenance requirement set-forth in Section 11. However, the As-Is Contract gives the Buyer the ability to get a “free look” at the property during the Buyer’s inspection period as the Buyer can cancel the Contract if the Buyer determines that the property is unacceptable for any reason during the inspection period. While it may appear as though the Seller has an advantage because the Buyer cannot require repairs to be made, the Buyer can, and often times will, make a demand for repairs and price concessions during the inspection period and threaten to terminate the Contract if the Seller does not agree to the requests.
So which Contract form should you use? A Seller with a well-maintained property and no expectation of significant repair requirements may want to use the Standard Contract to lock-in the Buyer. On the other hand, the Buyer may prefer to use the As-Is Contract so that the Buyer can use the unilateral right to terminate to demand the Seller concessions during the inspection period. Ultimately, both Contract forms can be great tools for achieving the desired results for the client and the above factors should be reviewed with the Buyer or Seller before choosing which Contract for to use and submitting or accepting an offer.
Berlin Patten Ebling, PLLC
Article Authored by William C. McComb, Esq., email@example.com
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