Follow by Email

Wednesday, July 23, 2014

Purchase Contract With ‘As Is’ Clause Sounds Great, But It’s a Hollow Promise

[Published July 24, 2014, in the Jeffco editions of the Denver Post's YourHub section and in five Jefferson County weekly newspapers]
As buyers compete for listings, it is common to see contracts which promise that the buyer will take the house “as is” and not submit any inspection demands.

The Inspection Objection Deadline remains in the contract, but buyers assert that it would only be used to terminate the contract and not to demand any repairs.

I have been on both sides of this promise, both as listing agent and buyer’s agent.  Whether writing this additional provision for a buyer or explaining it to a seller, I point out that it’s nice sounding but rather meaningless.

While the clause does suggest that the buyer will not submit a laundry list of both petty and major problems for the seller to fix, it does not guarantee that no major problems will need to be addressed by the Seller.

Here’s what really happens.  A week into the contract period the buyer does the inspection and finds some “deal killers.”  Sure, he or she could simply terminate the contract, but why do it?  The seller is already invested in the transaction and may have gone under contract on his or her replacement home.  If the buyer says, “I’m going to terminate… unless you replace the furnace which is emitting carbon monoxide gas at dangerous levels,” the seller would likely agree to make the repair. 

After all, remember that under real estate law both the seller and the listing agent are obligated to disclose all material defects to prospective buyers.  If the seller refuses to replace the furnace, he and his listing agent will have to disclose the defective furnace to all prospective future buyers of the property.  He might as well replace it for this buyer as for the next one.

With or without an “as is” provision, the buyer’s agent is always wise to submit the full inspection report with his or her inspection objection notice, thereby putting the seller and his agent on notice as to multiple defects that may not have appeared on the Seller’s Property Disclosure.  If this contract falls because the seller won’t agree to make a reasonable number of repairs to issues raised in that report, he will be obligated to disclose all those newly reported defects to future buyers or else be in violation of real estate laws pertaining to full disclosure.

No comments:

Post a Comment