The Monster on your Front Porch - Cautions About the As-Is Contract
For many years, the standard real estate contract included a provision that required the Seller to make repairs to certain defects discovered in the Buyer’s inspections. A maximum cost for these repairs was established in the contract, and as long as the cost did not exceed this number, the Seller would make the repairs, and the Buyer remained bound by the contract.
In about 2006, the real estate market— as well as the condition of many homes being sold— suffered a major downturn, and the “As-Is with Right to Inspect” contract became popular. It is still used today in the majority of real estate sales.
The As-Is contract was meant to work as a “take it or leave it” arrangement. The selling price would be negotiated, then the Buyer would have a period of time, usually two weeks, to conduct all the desired inspections, and during that time the Buyer could make the decision to go ahead with the purchase or withdraw from the contract and receive a complete refund of all monies deposited into escrow.
Over time, however, the As-Is contract has become a way for buyers to renegotiate the price of the property after the inspections are completed. Many buyers now conduct their inspections and then try to renegotiate the sales price to cover repairs. When sellers find themselves in this position, it feels as if the Money Monster is at the front door, and when the Money Monster knocks, sellers had better be prepared to deal with him in order to protect their equity— and their contract.
It’s important to remember that the Seller has no obligation to either make repairs or renegotiate the price. In fact, the Seller does not even need to respond to any request the buyer may make. The responsibility is entirely incumbent upon the Buyer to notify the Seller in writing if the Buyer wishes to cancel the contract. There may be other contingencies in the contract, but at the expiration of the inspection period, the time for the Buyer to cancel by choice simply disappears. As the contract states clearly, “Time is of the essence.”
If the Buyer does threaten to cancel the contract at this point, the Seller’s decision needs to be based in a solid understanding of the contact, as well as both financial and market factors that might not be immediately apparent. This is one of the many places where having an experienced agent by your side can make all the difference.
We’ve been selling luxury residential property in St. Petersburg for 23 years, and we’d love to put our experience to work for you. Call us at 727-456-8093, or just click here.