It is as it is...'AS-IS' !

This was an article in my June '09 newsletter and I'm publishing it to the blog for a more permanent record. If you've already seen it, then hopefully it will refresh your knowledge of the ever growing trend to buy and sell property AS-IS.

During the past month I’ve written more purchase offers than ever before in such a short time period. Most of them have been negotiated successfully and now sit in ‘contingency’ limbo, awaiting the results of inspections, appraisals or loan approvals, or in the ‘pending’ file, waiting for the paperwork and closing date to come. But, two fell out immediately upon inspection, clearly demonstrating the true buyer benefit of contracting for properties in ‘As-Is’ condition, while reserving the right to inspections of the property.

The Florida Association of Realtors (FAR) and the Florida Bar Association (BAR) work together on the compilation of standard contract forms that are relatively easy to understand, even if the print is small and the terminology isn’t familiar to the general public. One of the most widely used and best, from the buyers standpoint, is the FAR-BAR ‘As-Is’ Contract for Sale and Purchase.

I know it sounds like there’s something amiss when you hear the phrase, ‘As-Is’, but that isn’t always the case. Many home sellers list their properties ‘As-Is’ in order to bring them to the market at a lower price, and for fear of being ‘nickeled and dimed to death’. And often Realtors recommend making purchase offers ‘As-Is’, since it allows the buyer to conduct inspections during an agreed upon time period (often 10 consecutive days from the date the contract is signed), and gives them the option to walk away, without penalty of any type. If those inspections reveal anything that isn’t acceptable, at the buyer’s sole discretion, the buyer can halt the sale process. All that is required to ‘bail out’ is a letter of cancellation, delivered to the seller within that inspection time period. It’s a buyer’s ‘loop-hole’ and it saved further cost and hassle for two of my buyer clients this month.

One buyer couple found numerous structural and building code issues when their chosen property was inspected. They decided that those repairs, plus all the desperately needed cosmetic work, made the house much too expensive in the long haul. (I had my doubts that the home would have appraised anyway, but that’s a topic for another time). The other buyer clients were dissuaded from going ahead with a cash purchase of a newly remodeled oceanfront condo when the initial inspection found environmental issues (which could have cost hundreds of thousands to mitigate), necessitating multiple additional, invasive inspections to arrive at a definitive answer. Both of these contracts were cancelled within the prescribed time frame and the buyer’s deposits were returned.

In some instances both the buyer and seller will agree to negotiate a new sale price and the deal can be resurrected. When contracts are cancelled, sellers are disappointed, especially if they aren’t aware of anything seriously wrong with their properties. And the buyer is disappointed because their ‘dream home’ wasn’t a dream after all.

No house is perfect, not even if it’s new, and realistic buyers understand they have to assume some responsibility. Most of the home inspections reveal only minor or cosmetic issues that buyers agree to fix or redo once they own the property. But when there is an unforeseen problem revealed by the inspections, the As-Is contract gives the buyer a clear advantage. Those inspection costs are money well spent to avoid years of problems and discontent.

For me as the Realtor, well, sure I’m disappointed when that happens. It’s a lot of time and energy expended without compensation. Hopefully, we’ll try again, and both of these clients will work with me to look for another property.

If at first you don’t succeed…it ain’t over ‘til it’s over!