Welcome to Waypoint Real Talk! On this episode, Crystal Brady and Waypoint discussed the As Is Real Estate Contract and what you need to know!
Thank you as always to Crystal Brady for joining us! We have the video below as well as a written portion of it for you.
As Is Real Estate Contact Explained Full Podcast[powerpress]
As Is Real Estate Contact Explained Blog
What Buyers Need To Know
Disclaimer: I am not an attorney nor am I providing legal advice. I am just reviewing some of the terms in the contract and explaining some of the common contingencies.
The AS IS sales contract is the most commonly used real estate contract in the Greater Tampa Bay market. It’s important buyer’s are familiar with the timelines, contingencies and know their rights when entering into a real estate transaction.
First, we will do a general overview of the contract and some of the main points along with timelines. Then we will discuss the AS IS component in more detail as it pertains to inspections and repairs specifically.
General Overview of AS-IS Real Estate Contract
Timelines: The first important point to note about this contract is all time periods are in calendar days- not business days.
Why timelines are important: As a buyer if you do not adhere to the timelines in the contract then you are in breach of contract. Then, you could be putting your deposit at risk or exposing yourself to a potential lawsuit. Contracts are legally binding.
Effective date: This is the term we use to describe the date that the contract begins (when the clock starts ticking). It is defined as “the date when the last one of the buyer and seller has signed or initialed and delivered this offer or final counter-offer”.
Escrow/deposit: This is your initial deposit that is required when your offer is accepted. Typically on the contract in most cases this is due within 3 days of accepted offer.
Loan application: Under the financing section of the contract buyers are required to make their loan application within 5 days of the effective date. Your lender must prepare and present the loan application to you so you will need them to complete this step.
As a buyer, it’s important to make sure your lender has an executed copy of your contract immediately so they can begin preparing the loan application. Buyers should follow up to make sure their lender completes this critical step in a timely fashion.
Loan approval: Loan approval is typically required within 30 days after the effective date. After that, the financing contingency is expired and buyer’s deposit could be at risk.
There are other potential situations after loan approval that may warrant a buyer’s deposit being refunded or retained – your realtor can provide guidance. Generally speaking though, buyers should be focused on obtaining loan approval as soon as possible, even before the expiration of financing contingency. This way, they can protect themselves and ensure the transaction will close.
The following is one of the contingencies in the contract that can protect buyers under certain conditions if loan approval is denied during the loan approval period.
Inspection period: The contract defaults to a 15 day inspection period but most agents prefer a 10 day or less when negotiating. Your inspection period is typically 10-15 days (whatever you negotiated on the contract) and that is the amount of time you have to complete any and all inspections. Also, you can cancel the contract if you elect to walk away due to home inspection results.
This is the most protective contingency in the contract for buyers. We will discuss in more detail later.
Closing date: The closing date is agreed upon up front on the contract. Contractually you are required to close on this day. If a buyer does not meet that day or needs more time this may not be guaranteed and could cause them to lose their deposit.
AS-IS Component and Inspections
What does the as is real estate contract mean?
AS-IS means that the house is being sold exactly how you see it at the time you made an offer. The Seller is obligated to maintain the property in the condition existing as of the effective date.
An oven suddenly breaks 3 days prior to closing then the Seller needs to fix it because at the time we signed the contract it was functional. It also means Seller is not obligated to fix or do any repairs found during the home inspection.
If the oven was broken when you agreed to purchase and during home inspection then seller does not have to remedy per the contract.
Side note: Seller is also not obligated to close open permits OR obtain permits for items that were previously unpermitted or expend any money toward closing out permits.
What is the Buyer’s recourse?
The contract expressly states that a buyer can cancel the contract “at their sole discretion” during the home inspection period. If a buyer is unhappy with the results of the inspection then can cancel the contract and get their deposit back.
So even though the seller has no obligation to do repairs there are times when it may be necessary to move forward with the transaction and in the seller’s best interest in order to close the deal.
A buyer who is financing will need to get homeowners insurance in order to get loan approval and purchase the property. If the home has certain deficiencies that prevent it from getting homeowners insurance, then those items may need to be corrected. The most common area we deal with this is with older homes that require a 4 point inspection.
The four points are: HVAC, Plumbing, Electrical and Roofing. If there are problems with these components that are preventing a buyer from getting insurance then they should ask for those repairs to be completed by the seller with an agreement in writing (while still in their inspection period). We call this an inspection contingency release.
The seller is still not obligated to say yes so buyer’s need to protect themselves by making sure negotiations are done in a timely manner in case they need to terminate the contract in order to get their deposit back.
Summing It Up
That wraps up the as is real estate contract for buyers!
I want to personally give Crystal Brady another huge thank you for being such a great contributor to our podcasts! If you are an agent in the Greater Tampa Bay area and are interested in coming on the podcast, contact us!
This blog was cowritten by Crystal Brady with Homeward Real Estate.
Check out our other Waypoint Real Talk Podcasts.
Have a question? Comment below and we will respond as quickly as possible!