Florida “As Is” Real Estate Contracts

img_2205By: Daniel T. Pascale, Esq.

As the real estate market in South Florida continues to heat up, more homeowners will undoubtedly list their homes for sale in Miami-Dade and Broward County.   An important issue that all prospective homebuyers should investigate is what, if any, encumbrances are on the property being sold.  Encumbrances are loosely defined as any claims, liabilities, violations, or problems that lessen a property’s value or restrict its marketability.  For instance, perhaps the property is located in an uninsurable flood zone, violates height restrictions, or has an illegal mother in law suite that violates the city or county code. Unfortunately, the prospective purchaser may not notice any of these problems at the initial or even subsequent visits to the property, and so they may not be able to include those problems as desired repairs in the initial offer.

Fortunately, the standard Florida Realtors/Florida Bar approved contract provides the prospective purchaser with the right to inspect the property for a limited amount of time and back out if he or she finds too much to be wrong with the property. The default inspection period of time is 15 calendar days unless the parties agree otherwise.  The property inspection clause provides the purchaser with the opportunity to retain a real estate lawyer in order to perform the necessary due diligence on the property to evaluate the situation.  If the prospective purchaser finds problems, the property inspection clause gives the prospective buyer the right to terminate the contract without losing their deposit. Of course, the buyer also has the right to demand that the seller reduce the sales price to allow the prospective buyer to repair the property themselves.  If the seller refuses to amend the contract, the purchaser can then choose to exercise his or her right to back out of the contract.

To alleviate the hassle in negotiating property encumbrances, either the buyer, in an original offer, or a seller, in a counteroffer, can propose that the purchase of the property be “As Is” with no specified repairs. Seemingly, this can simplify matters, since having the seller make repairs to the property during the term of the real estate sales contract can lengthen the time until closing takes place. The problem that can arise with “As Is” contracts, however, is that the purchaser in most, if not all, cases has only the seller’s word on which to rely. This can be quite dangerous since the seller’s primary objective is to get the house sold for the highest price possible.

A common area of controversy surrounding the use of “As Is” contracts is what a broker’s or seller’s liability is for making material misrepresentations or omissions about property encumbrances that can be found in the public records. From a legal perspective, there is a conflict between Florida’s appellate courts as to whether a seller of residential property has a duty to disclose to the buyer information that is available in public records.  Nelson v. Wiggs, 699 So.2d 258 (Fla. 3d DCA 1997), with Newbern v. Mansbach, 777 So.2d 1044 (Fla. 1st DCA 2001). In Nelson, the Third District Court of Appeal held that, because local flood regulations were available in the public records, the flooding condition was “within the diligent attention of any buyer.”  In contrast, the First District Court of Appeal in Newbern, held that, although certain information about the property was part of the public records and could have been ascertained before purchase, its availability did not, as a matter of law, bar claims for fraud and negligent misrepresentation against the realtor/broker.

The use of “As Is” contracts and present state of legal confusion among the courts surrounding them highlights the importance of hiring an experienced real estate lawyer at the inception of a real estate transaction. An experienced real estate lawyer can perform the necessary due diligence and structure your offer to minimize the chances of paying too much, or worse yet, entering into a contract to purchase a property in Miami Dade or Broward County which requires costly repairs.

If you have questions and are looking for answers to legal issues in Miami-Dade or Broward County, contact Jordan + Pascale, P.L. for a free consultation at 305-501-2836 or visit us at JordanPascale.com.