Buying a home, which option should you check off on the contract?

The 2007 Sales agreement form used within the real estate industry has had some important changes and most buyers are not congnicent of those changes.   There are three options in the agreement and you get to select one when filling in the contract.   These are:  Property Sold with Right to Request Repairs, Subject to Due Diligence Period or “As-Is”.

❏ A. Property Sold with Right to Request Repairs.

1. Buyer shall have the right to request that Seller repair and/or replace Defects, if any, in Property identified by Buyer’s Inspector(s) in a written report(s). Within __________ days from Binding Agreement Date, Buyer shall provide Seller with: (a) a signed written amendment to this Agreement requesting Defects to be repaired and/or replaced and (b) a copy of all reports of Inspectors describing those Defects. If Buyer does not timely present the written amendment and inspection report(s), Buyer shall be deemed to have accepted Property “as is.”

In essence the buyer can have inspections performed, present an amendment for repairs or correction and the buyer can either agree or not agree and the sale could terminate becasue of disagreement.  There is some very specific language as to what this means and you should take the time to read thorugh the agreement to fully understand your rights. 

❏B. Property Sold Subject to Due Diligence Period.

For and in consideration of the additional payment of $10.00 by the Buyer to the Seller, the receipt and sufficiency of which is hereby acknowledged, Seller does hereby grant Buyer the option of terminating this Agreement, for any reason, for a _____ day period from the Binding Agreement Date (“Due Diligence Period”). During the Due Diligence Period, Buyer may conduct at Buyer’s sole expense whatever evaluations, inspections, examinations, surveys, and testing, if any, Buyer deems appropriate to determine whether Buyer’s option to terminate this Agreement should be exercised. This shall include but not be limited to testing for lead-based paint and/or lead-based paint hazards, inspecting for active infestation of and/or damage from termites and other wood destroying organisms and determining if the Property or the improvements thereon are in a flood plain. During the Due Diligence Period, Buyer may also propose an amendment(s) to this Agreement to address any concerns of Buyer with the Property. If Buyer decides to exercise Buyer’s option to terminate this Agreement, Buyer must give notice of the same to Seller prior to the end of the Due Diligence Period. If Buyer fails to give such notice in a timely manner, the Due Diligence Period shall expire and terminate and Buyer shall be deemed to have accepted the Property “as-is”. The expiration of the Due Diligence Period shall not terminate any other contingencies to which this Agreement may be subject. Buyer is ❏ or is not ❏ currently under contract (including option contracts) to purchase other real property. Buyer shall ❏ or shall not ❏ have the right to enter into other such contracts during the Due Diligence Period. This Agreement shall be an option contract until the Due Diligence Period has ended without the Buyer terminating the same.

I personally  like this option the best for the buyer since it gives the buyer all of the options of protection.  It also means there is no deal until this contingency is removed so the seller may not like it very much.  The agents will like it even less, since there is no deal on the table.  It is a completely buyer friendly option and ties up the property to some degree.  

❏C. Property Sold “As Is”. All parties agree that Property is being sold “as is,” with all faults including but not limited to damage from termites and other wood destroying organisms and lead-based paint and lead-based paint hazards. Seller shall have no obligation to make any repairs or replacements to Property.

This is fairly straight forward.  No contingencies and no protection for the buyer.   Usually we see this on investment type purchases or ones where the buyer is aware up front that there may be issues but does not care.