Legal FAQs for REALTORS®
— Contracts and Forms
“As Is” and Inspections
My client won't accept the property “as is.” He wants to wait until after the inspection to list specific repairs that he wants the seller to fix. Can I leave both boxes in Paragraph 7D of the One to Four Family Residential Contract (Resale) blank, or can I check Paragraph 7D(2) and write in “repairs to be listed following inspections”? (Updated Aug. 25, 2014)
Neither. Leaving both boxes blank in Paragraph 7D or altering the contract terms by adding language in Paragraph 7D(2) that does not list specific repairs could be considered to be acting negligently or incompetently if a complaint were to be filed in connection with the transaction.
The buyer should only choose Paragraph 7D(2) if he knows of specific repairs that he wants the seller to complete at the seller’s expense. Otherwise, the buyer should check Paragraph 7D(1).
Most buyers in this situation will also choose to pay a termination-option fee pursuant to Paragraph 23 in exchange for the right to terminate the contract for any reason within a negotiated number of days. During this termination-option period, an inspection can be performed, and if specific repairs are identified, the parties can negotiate to amend the contract to address these items, or the buyer can terminate the contract.
Commercial: The seller of a commercial property has rejected my client's offer to purchase that property. We used TAR form 1801, Commercial Contract—Improved Property. The seller's agent said the seller rejected the offer because he was selling the property "as is" and was not going to do any repairs. Therefore, the buyer's request for a feasibility period and his right to inspect the property were not necessary for the contract. The listing agent suggests that we submit another offer without the feasibility paragraph checked on the form. Do we have to choose between the property condition "as is" paragraph and the feasibility paragraph in the contract? (updated April 7, 2005)
Unless a buyer is requesting in his offer that the seller agrees to do certain repairs, all buyers purchase property in its present condition (or "as is") at the time of contract execution. Paragraph 7A of the TAR contract allows for the buyer to purchase the property "as is" or to require certain seller repairs as part of the contract provisions. Regardless which choice is made in paragraph 7A, there is nothing inconsistent with either of those choices and a buyer's right to inspect the property and possibly terminate the contract under the terms of paragraph 7B, the feasibility paragraph. While a seller could refuse to permit a buyer to have inspections or a right to terminate under a feasibility period, it is generally not a good idea to try to prevent a buyer from having a right to freely inspect the property. Such a restriction might increase the seller's risk of a subsequent claim of withholding information about the condition of the property. Furthermore, most buyers are going to be reluctant to buy a property without a right to inspect the property and often would not buy commercial property without a feasibility study and a companion right to terminate if not satisfied about the viability of the proposed project. You might discuss these points with the seller's agent and see if a thoughtful reconsideration of these matters by the seller might create an opening for you to resubmit your client's offer. It should be stressed that the granting of the buyer's feasibility study period and his inspection rights do not obligate the seller to do any repairs.
A seller told me she won’t make repairs to her property and she wants the MLS listing to state she will only consider offers that say the property will be sold "as is" in the blank in Paragraph 7D(2) of the TREC One to Four Family Residential Contract (Resale). The seller also refuses to let a buyer have the property inspected under Paragraph 7A or a termination option under Paragraph 23. Can the seller make these demands? (updated June 3, 2014)
While a seller can make conditions on accepting an offer or in permitting an offer to be submitted, these requirements would seem to be inadvisable.
Paragraph 7D(1) states that the "buyer accepts the property as is” at the time of the execution of the contract. Additional language in Paragraph 7D is unnecessary, but a seller could request you indicate on the MLS that the property is being sold as is.
Although a seller could refuse to permit a buyer to have inspections or a right to terminate under the termination option, it is generally not a good idea to try to prevent a buyer from having a right to freely inspect the home. Preventing a buyer from an inspection increases the seller's risk of a subsequent claim that she withheld information about the condition of the property. Furthermore, most homebuyers are going to be reluctant to buy a home without a right to inspect the home and without an option to terminate the contract if they are not satisfied about the condition of the property. Permitting the buyer to inspect a property doesn’t obligate a seller to agree to repairs.
Discuss these points with your client. Explain you aren’t an attorney and you are prohibited from practicing law, and that she is asking you to make significant changes to the standard contract form that go well beyond a factual statement or business detail, which could venture into the practice of law. Therefore, she needs to hire an attorney to draft the provisions in the contract that she will want at that time.
Before the seller refuses to permit any inspections, suggest she discuss this with an attorney. It’s likely that her attorney will counsel her to permit inspections.
You could also consider refusing to accept this listing, so you don't waste your time and resources listing a property that will be difficult to sell.
Legal Disclaimer: The material provided here is for informational purposes only and is not intended and should not be considered as legal advice for your particular matter. You should contact your attorney to obtain advice with respect to any particular issue or problem. Applicability of the legal principles discussed in this material may differ substantially in individual situations.
While the Texas Association of REALTORS® has used reasonable efforts in collecting and preparing materials included here, due to the rapidly changing nature of the real estate marketplace and the law, and our reliance on information provided by outside sources, the Texas Association of REALTORS® makes no representation, warranty, or guarantee of the accuracy or reliability of any information provided here or elsewhere on TexasRealEstate.com. Any legal or other information found here, on TexasRealEstate.com, or at other sites to which we link, should be verified before it is relied upon.