Among the many advantages of Florida’s real estate industry is the availability of standardized forms that could be used in a variety of transactions to save time and money for both parties. Created jointly by the Florida Bar and Florida Realtors, contracts such as the FAR/BAR “AS IS” Contract and the FAR/BAR Standard Contract are as streamlined as they are comprehensive, which is why they have become ubiquitous in transactions of all shapes and sizes across the state. However, not all standard forms are created equal, and there are crucial differences between them. Here are the top five difference you should know about between the FAR/BAR “AS IS” Contract and the FAR/BAR Standard Contract:
The “AS IS” Heading
This may seem obvious, but it is not uncommon for buyers to initially skim through an otherwise similarly-titled contract and assume it is the standard version, only to be put off upon discovering the extra “As Is” language. There is a common but mistaken tendency to assume that these two short words denote that a property is in poor condition and that the seller just wants to get off their hands.
However, do not let the heading spook you: as you will learn, the FAR/BAR “AS IS” Contract, while indeed different from the FAR/BAR Standard Contract, is not categorically an “inferior” or suspect document. It is in fact one of the most common standard contracts used in Florida. The “AS IS” Contract simply places no repair obligations on the seller, while the Standard Contract has default terms requiring that the seller make certain types of repairs up to a certain dollar amount.
The second substantive difference relates to the “Inspection Clause” under Paragraph 12 of the “As Is” Contract. In the FAR/BAR Standard Contract, the buyer has 15 days, unless specified, after the effective date of the contract, or five days before closing, to complete inspections of the property and notify the seller. Once the notice has been received, the seller has ten days from notification to either obtain repair estimates for the buyer, or to order a second inspection if there is disagreement with the buyer’s inspection report. If there is a discrepancy between the two inspections and the parties cannot come to an agreement, then the contract will have both parties share the cost of a third inspection, the results of which will be binding on both parties.
In contrast, the “As Is” Contract allows the buyer to get a “free look” during the inspection period, which by default lasts for 15 days following the effective date of the Contract. If the buyer decides they no longer want the property, they can notify the seller prior to the 15-day inspection deadline and cancel the contract without penalty. In short, the “As Is” Contract gives buyers greater discretion in deciding whether to proceed with the purchase.
Under Paragraph 10 of both contracts, there is a very important disclosure which states, “Seller knows of no facts materially affecting the value of the Real Property which are not readily observable and which have not been disclosed to Buyer.” In Florida, this is called the Johnson v. Davis duty to disclose, after the Florida Supreme Court case which imposed the duty on all sellers of Florida real estate. But in the “As Is” Contract, there is additional language stating that other than this duty to disclose, the seller “extends and intends no warranty and makes no representation of any type, either express or implied, as to the physical condition or history of the Property.” That is why a thorough property inspection is even more vital with the “AS IS” Contract.
Under Paragraph 12 of the FAR/BAR Standard Contract, if the buyer gives notice of permit issues, the seller is obligated to resolve any open or expired permits as well as obtain permits for any unpermitted improvements up to a certain dollar amount. By contrast, under Paragraph 12 of the “As Is” Contract, the seller must only assist the buyer with the closing out of the permit and is not obligated to spend any money to do the same.
Paragraph 18 of the “As Is” Contract stipulates that the buyer waives any claims against the seller and any Realtor involved in the transaction for any defect or damage that existed at closing but is discovered later by the buyer. No such waiver exists in the FAR/BAR Standard Contract.
Which Contract is Better?
Neither contract is objectively better than the other: it all depends on the nature of the transaction and the type of property involved. For example, the “As Is” Contract may be preferred over the Standard Contract in short sale transactions or closings involving bank-owned properties. The real estate attorneys at Jurado & Farshchian, P.L. have experience reviewing and negotiating all types of real estate contracts, including the FAR/BAR “AS IS” Contract and the FAR/BAR Standard Contract. We will determine whether your interests are adequately protected before you sign.
See original at: https://jflawfirm.com/five-big-differences-between-the-far-bar-as-is-contract-and-the-far-bar-standard-contract/