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If you are buying a home in Texas, you may see an “As Is” home sale. This declaration usually means that the seller is not interested in negotiating a sales contract based on needed repairs. Both the seller and buyer can benefit from this arrangement. However, there are pitfalls to watch out for. Let’s look at what an “as is” real estate contract is and how it affects both buyers and sellers in a transaction.
Myths About “As Is” Properties
It is common to think that accepting a property “As Is” means that the buyer may not get an inspection or negotiate the terms. However, this is not true. Buyers and sellers may still negotiate over the details of an inspection with an “as is” contract.
It is essential to understand your real estate contract. If the buyer accepts the property “as is” under Paragraph 7D (1 & 2), the buyer may still get an inspection and work with the seller to negotiate repairs during an option period.
However, if you neglect to negotiate an option period with the seller, you may find trouble. Without an option period, you may find yourself the not-so-proud owner of an “as is” property without any inspection or idea of what you have gotten into.
Why is the Option Period Important?
Most buyers choosing to buy a home “as is” are looking for a good deal. However, it is crucial to select an option period in the contract agreement to have time for due diligence.
Paragraph 23 of the contract allows for the option period. For the right to terminate during an option period, you must pay the seller an agreed-upon amount. The option period is a negotiated amount of time you can use to inspect the property and terminate the contract if needed.
Buying “as is” with an option period allows for inspections and a negotiation process with the seller for repairs. Without an option period, you have no room to terminate the contract in an as-is real estate contract.
Are Sellers Required to Provide Disclosures?
The Texas Property Code requires that most home sellers fill out a Seller’s Disclosure form. However, there are exemptions. For example, looking at your real estate contract, if the seller has checked off 7B3, they may be exempt from giving you disclosures. Lead paint, however, is always a required disclosure for a family home.
As a home buyer, disclosures are an essential part of the process. Disclosures give you the right to terminate the contract within seven days of receipt. You may terminate your contract during this time for any reason and receive back your earnest money. You may also terminate if you don’t receive the disclosures before closing.
What if the Lender Requires Repairs?
Perhaps the home has a rotting wood deck attached to the back. Maybe there is a faulty wiring system in one area of the house. Unfortunately, many lender’s loans are contingent on completed repairs before closing.
In this case, neither buyer nor seller must pay for lender-required repairs (unless they have agreed elsewhere in writing). If both opt-out due to lender-required repairs, the seller returns earnest money to the buyer.
If the seller wants to make repairs to satisfy the lender, but the cost of repairs is more than 5% of the home value, the buyer can terminate the contract anyway.
For example, if the home is worth $300,000, but an inspection during the option period shows termites, the seller may get an estimate for repair. Let’s say the estimate for repair is more than $15,000. As a buyer, you might be suspicious of a house that needs this much work. In this case, you can terminate the contract.
Buying & Selling As-Is Property in Texas
In sum, it is possible to buy a property “as is” in Texas and still have an inspection and negotiation for repairs or price. However, it is essential to negotiate an option period with the seller to have time for due diligence. Without an option period, you are buying in the dark. Always consult an attorney before signing a contract to purchase real estate.
It is possible to sell your home “as is,” but less likely to sell to someone who needs a loan unless it is in good condition. Many 3rd party buyers will buy your home for cash “as is.” Working with an attorney specializing in real estate can help you look at all of your options if you are in a hurry to sell your home.
We Can Help
At Jarrett Law, our real estate attorneys specialize in real estate contracts, deeds, titles, and everything related to buying or selling your home. Whether you are buying or selling, real estate agents are by law not allowed to give legal advice. Don’t end up facing a negligence lawsuit because of a poorly written contract. You need someone on your side to ensure your contract is airtight. An attorney protects your interests when you buy or sell a home. Contact us for a free initial consultation and find out how we can help.