Common Pitfalls Realtors Face When Using the FAR-BAR “As Is” Contract
Developed by a joint committee of the Florida Bar and Florida Realtors, the FAR-BAR “As Is” Contract is a standard agreement form that is widely used by Realtors all over the State of Florida. Here are just three examples of common issues that real estate agents face when using the FAR-BAR “As Is”.
Overlooking the "As Is" ComponentThe FAR-BAR "As Is" Contract is so named because it requires the buyer to accept the property in the condition it is in at the time the contract is executed, without requiring the seller to make any repairs or improvements. The default provision in the contract states that buyer has fifteen days from the signing of the contract to do an inspection of the property, and if any major issues are discovered that require repairs, the buyer can then negotiate for a lower sale price, or request a credit, to cover the cost. The buyer can also request that the seller perform some or all of the repairs, though seller does not have any obligation to do so unless expressly stated in the contract. If the parties cannot come to an agreement, then the buyer can back out within the allotted time period without any penalty.
As straightforward as this arrangement may seem, it is not uncommon for either party to misunderstand the due diligence requirements or the "AS IS" status of the property. Often times, a buyer will underestimate the condition of the property, only to discover during the inspection that it is worse than they bargained for. For their part, some sellers will try to sell the property for more than its state would warrant. If the parties do not have a meeting of the minds, your transaction will quickly come apart. That is why it is very important to conduct the inspection within a few days of the execution of the contract so that there is sufficient time to negotiate any credits or repairs. It is also important for the seller to know that the buyer can cancel for any reason stated on the inspection report, and that they may want to be a bit flexible on any credit or repair requests if they really want to transaction to close.
The real estate attorneys have ample experience helping buyers and sellers come together to hash out an agreement that will allow the transaction to continue. Our legal experience makes us well equipped to handle negotiations on behalf of Realtors who already have enough to worry about. If need be, we can also explain the legal implications of the FAR-BAR "As Is" Contract to your clients in a plainspoken manner that ensures all parties are on the same page.
The Limited Seller Disclosures of the FAR-BAR "As Is" ContractUnder the standard provisions of the contract, the seller is required to make several disclosures about the property, such as whether there is lead-based paint (if the property is built prior to 1978); if they know of any changes made to the property without a proper permit; and whether there are any unresolved violations of building, environmental, or safety codes. The seller also must disclose any material facts that impact the value of the property and that are not readily observable (e.g., a roof that only leaks when there is heavy rain but the buyer did not visit the property on a day that it rained). Additional disclosures may be required for properties that are part of condo or homeowners' associations. There are no other seller disclosures provided for in the "AS IS" contract, and the contract expressly states that the seller does not make any representations or warranties as to the condition of the property. This is another reason why your buyer clients must do their own due diligence investigation.
Also, these seller disclosures are not as straightforward as they seem. For example, Florida courts disagree about the seller's obligation to disclose information that is in the public records, with some ruling that it is incumbent on the buyer to find publicly-available information. Our experience in conducting title searches and title examinations means we can quickly uncover any potential problems with the property that are in the public record. Rather than leave things to chance with the FAR-BAR "As Is" Contract, we can take the initiative to protect your client from a potentially fraught deal.
Is the FAR-BAR "As Is" Contract Sufficient?While the standard form is generally effective in most transactions, it may not necessarily be the best choice for your particular transaction. With the Florida real estate market being as big and diverse as it is, no two transactions are exactly alike. You may face unique circumstances and challenges that are not adequately addressed by the standard FAR-BAR "AS IS" contract. Although there are a variety of addendum forms specifically designed for use with the FAR-BAR "AS IS" Contract, as well as space to add tailored clauses or conditions, you should consult with an attorney before making any changes that are specific to a particular deal and may have a material impact on your client's transaction.
There are numerous legal implications in every real estate transaction, and any ambiguous phrasing or unwitting loophole can leave you and your client open to a dispute or even litigation. We have helped Realtors close on a wide variety of transactions requiring different terms, conditions, and addenda. No matter what type of contract you use or what issues may emerge, we will do what it takes to keep things running smoothly through closing.