I Need TLC
As is, in real estate contracts, usually means that the seller will not make any repairs. It does not necessarily mean you cannot terminate the contract if a home inspection uncovers repair issues that you are unwilling to accept. It all depends on how the contract is written.
In North Carolina real estate contracts, the best way for a home buyer to cover themselves when a property is advertised for sale as is, is to have their agent specify Alternative 2 in the offer to purchase. This option is a good one and addresses the concerns of both parties.
Alternative 2 allows the buyer to give option money to buy a period of time to have the home inspected. The buyer can terminate the contract for any reason at all during the option period. In fact, the buyer does not even have to give a reason. If you were the buyer in this situation, you could simply terminate the contract by having your agent fill out a form and submit it to the listing agent prior to the end of the option period.
Can a buyer loose money with Alternative 2?
If the buyer terminates the contract, the option money is forfeited. Any earnest money is returned to the buyer, as long as the termination occurs before the end of the option period. Option money and earnest money are two different things. Option money is paid directly to the seller and is either forfeited upon termination, or applied to the purchase price at closing.
The purpose of the option money is to compensate the seller for taking the property off the market while the buyer makes inspections, etc. This is necessary because otherwise a seller is not very likely to take the property off the market just on a hope that the buyer will decide to move forward with the purchase.
How long can the option period be and how much option money?
The buyer will always want this period to be as long as possible and the seller will want it to be as short as possible. Typically, the longer the amount of time requested, the larger the option money must be. It ends up being a negotiation about time versus money.
A smart buyer and their agent will have an inspector on standby and ask for only a week, or so. This will minimize the time required, and therefore dollar amount that it will take to get the seller comfortable with taking the home off the market.
Is Alternative 2 the best choice?
Right now in North Carolina there are two alternatives for home inspections. The one we have been discussing here, and the more traditional Alternative 1 where inspections are completed by a certain date and the seller has to make any necessary repairs or risk breaching the contract. Alternative 1 by it’s very nature is not conducive to an as is sale.
And there aren’t too many buyers who are willing to buy a home as is without some way to discover its condition. Think how low the price would have to be to generate a decent pool of buyers who would be willing to do this.
Alternative 2 is as close to perfect as we can get when a seller wants to sell a home as is. It allows the seller to get the best possible price while giving the buyer some protection in case there are defects far beyond what can be seen just by viewing the home.
Related Articles
