Christian and I have always had spirited discussions regarding the best contract forms to use. He prefers As-Is contracts almost exclusively, while I still prefer the standard contracts. However, my choice of contract has always depended upon whether the client is a member of my family, a personal friend, a typical client, and the property location.
Family and Friends: My first choice is the As Is Contract – NABOR in Collier County, and FR/BAR As-Is everywhere else. Why?
My focus with family and friends is our post- closing relationship. I will not risk a family bond over a real estate deal. All four of my children married wonderful people from different areas of the country. They all come from different backgrounds, are highly educated, and some have children with health issues. All have different pre-conceptions. I find it especially challenging to explain all the moving parts of a Florida real estate transaction, especially when the Buyer may be accustomed to a different procedure.
Using the As-Is Contract allows them to terminate the contract for any reason, regardless of any perceived problem. The best example is allergenic mold, which is not a defect under either contract. For several of my daughters in laws and grandchildren, allergenic mold is an important issue… potentially a deal-breaker.
I also use this approach with other clients with any health issues. Cancer patients, respiratory patients, and anyone with a compromised immune system should use the As-Is Contract. Quite simply, the standard definitions of Defective or General Repair Items are inadequate for these clients and I don’t want them being angry with me if they did not understand that entirely.
Do I prefer NABOR over FR/BAR? I do! That being said, if backed into a corner, I use whichever contract the Seller will accept. Both work. To me, the different contracts are Realtor tools, options available to us given a particular situation. Sometimes I need a hammer, sometimes a wrench. Neither is good or bad. Use either one with finesse and expertise, and achieve the goal.. a successful closing.
Why NABOR over FR/BAR?
- The list of tangible “Property” in NABOR is longer. Plus, the washer and dryer are included, unlike FR/BAR.
- NABOR makes time of the essence only for closing. FR/BAR makes time of the essence for everything in the contract. I like having a little wiggle room for my Buyer deadlines, just in case.
To illustrate, being one (1) day late on a deposit in a NABOR contract is not necessarily fatal. The Buyer can have extra time, depending on the facts and circumstances. However, FR/BAR makes every day count. Monday means Monday!
- Seller damages differ under NABOR and FR/BAR.
Under NABOR, the Seller can only claim deposits actually made. Under FR/BAR, deposits include deposits made or “agreed to be paid”. NABOR gives my family, friends, and our typical client the additional protection of only losing the initial deposit, if they have no other way to terminate the contract.
- The NABOR financing contingency is more lenient.
The NABOR financing contingency does not automatically turn into a cash contract after a certain time period. FR/BAR does, plus the Seller may terminate the contract within three (3) days of the expiration of the Loan Approval Period if the Buyer gives no notice to the Seller.
Why do Christian and I have such different opinions on our go-to contract then? I believe that the standard NABOR Contract has a higher closing rate. I cannot prove why, but my personal theory is that most Buyers do not fully appreciate that they can terminate the contract during the 5-day period after the Seller’s repair response. If the Seller says “no”, or nothing at all, to a legitimate repair or credit request, the Buyer may terminate the contract. This right resides in the middle of page 6 of the NABOR Contract. Easily overlooked.
In contrast, the ability to cancel with an As-Is Contract is much more obvious. Tough to miss. A jittery Buyer has an easy out.
Location Matters. Finally, I use NABOR in Collier County and FR/BAR in the rest of Florida. If the listing agent knows FR/BAR better than NABOR, I recommend using Fr/Bar. We want our offer accepted, and we can always protect our client with either form.
Both contracts are useful, and both contracts can be tweaked to protect any client. Layers of strategy, and years of experience make the process enjoyable. We routinely consult with Realtors and clients prior to making an offer. Reach out anytime!
This article is an overview of my preferences. But remember, every deal is different and there are always exceptions.
As always, we truly appreciate your closings. Reach out if you need help with an offer. We hope to become a member of your team!
We hope that you enjoyed these articles. If you should have any questions, please don’t hesitate to contact us directly!
Donald Ross, Attorney
Ross Law | Ross Title