Found the house you are ready to make your new home. Now comes the time to put the contract together. Which one should you use? The AS-IS or the Residential Contract For Sale And Purchase.
We will explain some of the differences between the two contracts so you may be able to make the decision for yourself.
Contract which one to use?
The first part of the contract that we will discuss about purchasing a home in Florida is:
Section 9: of the Residential Contract For Sale And Purchase
CLOSING COSTS; TITLE INSURANCE; SURVEY; HOME WARRANTY; SPECIAL ASSESSMENTS:
Seller shall pay the following amounts/percentages of the Purchase Price for the following costs and expenses:
(i) up to $ _____________ or _________ % (1.5% if left blank) for General Repair Items (“General Repair Limit”);
And
(ii) up to $ _____________ or _________ % (1.5% if left blank) for WDO treatment and repairs (“WDO Repair
Limit”); and
(iii) up to $ _____________ or _________ % (1.5% if left blank) for costs associated with closing out open or
expired building permits and obtaining required building permits for any existing improvement for which a permit was not obtained (“Permit Limit”).
If, prior to Closing, Seller is unable to meet the Maintenance Requirement as required by Paragraph 11 or the repairs, replacements, treatments or permitting as required by Paragraph 12, then, sums equal to 125% of estimated costs to complete the applicable item(s) (but, not in excess of applicable General Repair, WDO Repair, and Permit Limits set forth above, if any) shall be escrowed at Closing. If actual costs of required repairs, replacements, treatment or permitting exceed applicable escrowed amounts, Seller shall pay such actual costs (but, not in excess of applicable General Repair, WDO Repair, and Permit Limits set forth above). Any unused portion of escrowed amount(s)
What this section is describing is as a buyer you can request that the seller be responsible for certain repairs that could be needed after discovery during your home inspection. You can put a Dollar amount or percentage amount which would be based on the sales price. So if you were in contract to purchase your home for $200,000 the repair limit at 1.5% would be $3,000 that the seller would be agreeing to repair items. This is the same with regards to Wood Destroying Organism treatment and repair. As well as permits that have not been closed out for any work that was done previously.
What you should always understand is that when an offer is submitted and let’s say you requested 1.5% for all three sections; you are asking the owner to be responsible for up to $9,000 in this section.
On the AS-IS contract the home is being purchased AS IS with the right to Inspect and Cancel Based on the Inspection Results. This is where things can become a little confusing.
Let’s say you submitted an AS IS contract to purchase and during the home inspection the AC was found to be not working the way it is intended to and the inspector recommended getting an AC Company out to diagnose the problem. Most people would think well I either accept the house the way it is or I cancel the contract. Not necessarily.
Let’s say it is determined that the AC System needs to replaced. Well this issue will not go away if you cancel the contract. The owner is kind of in a position where they really need to have the AC replaced, because here in Florida who is going to pay market value for home with no AC. So what we always suggest to our clients is that we submit an addendum to contract stating that the buyer and seller agree that the seller will have the AC System Replaced(provide documentation supporting this) as well as provide transferable warranty and that the inspection contingency time frame will be extended until 48 hours after the seller delivers receipt. This will allow us time to get the inspector back out to the house to check the AC to ensure that it is working the way it is intended. And make your decision whether you will proceed and make that house your new home.
We hope that this was informative to you. And we will continue in the future with other sections of the contract and explain the differences between them. You should always have someone who knows the differences between the contracts representing you so that you can be protected. Nick & Cindy Davis can always be reached at 813-300-7116 or by clicking here.