THE HONEST BROKER: SELLING “AS-IS”
There are different contracts that can be written for the sale of a home, one of them is termed
“As-Is.” An As-Is contract can benefit the seller by releasing him from performing any mandatory repairs to the home that may arise upon the inspection, especially if the home is in fair condition. Under a different type of contract, the seller is required or obligated to make repairs to a maximum dollar amount, usually no more than 1.5% of the purchase price.
This type of contract can be costly to the seller. However, in the majority of the sales done nationwide, the “As-Is” contract has become the most prevalent. The obvious reason is that the seller may not want to spend the time or money on repairs, maintenance items or improving the property.
When the home is marketed, it is disclosed that the house is to be sold in the condition it is in. Also, that there will be no expectation for repairs to be made.
Although the obligation to perform repairs is gone, some negotiating may have to take place to satisfy the buyer enough to keep the sale moving forward. This negotiation may take the form of the seller performing some minor repairs or offering a “credit” to the buyer. The credit is written in the contract to be used towards the needed repairs. In giving a credit, the seller, in essence, reduces his expected total he was going to receive at closing.
The home is under contract for $250,000
Upon inspection, repairs may potentially cost $2500
The contract price remains the same with a “credit” of $2500 towards repairs which will
reduce the balance that the buyer needs at closing and reduce the expected amount to the
seller at closing.
The buyer, in making an “As-Is” offer, is still protected because there is a “right to cancel” clause in the contract. If the inspection reveals enough significant flaws or issues that far surpass what the buyer will be willing to accept, then he/she will be able to “walk away” from the contract without a problem and get his/her full deposit back. Also, the final price for an “imperfect” home can initially be negotiated to benefit the buyer because the seller is more than aware that his/her home has flaws.
Stay well and stay healthy……
Diane Lott, Broker
Paradise Found Realty, Inc. of Palm City
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