The current edition of the TREC 1-4 Family Residential Contract (ReSale) modified Paragraph 7 (Acceptance of Property Condition) to provide alternative terms/conditions for the parties agreement regarding property condition.  Only one of the boxes should be checked.

Para. 7.D.(1)

            Para. 7.D.(1) is new and, if checked, means the Buyer is purchasing the property in its current, “AS IS” condition.  Checking 7.D.(1) makes the earnest money contract an AS IS contract, meaning the Seller has no obligation to make repairs to the property.  It also means the Buyer will not rely on any representation, statement or other assertion with respect to the property condition, but will rely on his/her own examination of the property.  But always remember, even with an AS IS contract, the Seller is obligated to disclose to the Buyer any known defects in the property. 

            The parties selection of Para. 7.D.(1) has no effect whatsoever on other provisions of the contract such as Buyer’s right to conduct inspections under Para. 7.A. or an agreed upon Para. 23 Termination Option.  That is to say, it is possible, even most likely, that when Para. 7.D.(1) is checked, the Buyer will also want the right to terminate under Para. 23.  Certainly the Buyer will want to conduct inspections and should not be discouraged from having inspections.

            The usual scenario sets up like this:  Para. 7.D.(1) is checked and there’s an agreed upon termination option for the Buyer.  Buyer conducts inspections that identify certain items in need of repair.  Next, Buyer MAY, within the time limits of the option period, attempt to renegotiate the contract by requesting concessions from the Seller for repairs or perhaps a reduction in the sales price – threatening to terminate the contract if Seller does not agree.  Should Seller agree to make the requested repairs under this scenario, then the parties would execute an Amendment to specify specific Seller repairs.  Now, the amended contract would no longer be an AS IS contract.  Why is this?  Because Seller is agreeing to make repairs. 

            If, on the other hand, the parties address Buyer’s inspection/repair requests by adjusting the sales price only, then the Amendment reflecting a new sales price would not affect the AS IS nature of the contract.  Why is this?  Because the Seller is not making repairs to the property. 

            In most cases, a Seller offers his/her property for sale on an AS IS basis – no Seller repairs.  Rarely is a property offered for sale with Seller repairs being part of the offering.  However, when that situation does exist or when a Buyer wants to include certain Seller repairs as part of the Buyer’s offer to purchase, then Para. 7.D.(2) should be checked.

Para. 7.D.(2)

            The new Para. 7.D.(2) is the old Para. 7.D.  It provides that Buyer accepts the property in its present condition but that Seller will make repairs and treatments as specified by the parties.  Thus, when Para. 7.D.(2) is utilized, the contract is not an AS IS contract. 

            For example Paragraph 7.D.(2) should be checked when, prior to submitting an offer, the Buyer already knows of specific repairs that the Buyer wants the Seller to perform.  An example would be a situation where the Buyer, upon reviewing the Seller’s Disclosure Notice, learns that the roof needs repairs.  The Buyer decides that she doesn’t want to enter into a contract to buy the property unless the Seller agrees, at the outset, to repair the roof.  The Buyer would choose box 7.D.(2) of the contract and fill in the blank to say something like “repair northwest corner of roof.”  The Buyer still has the right to submit an amendment after inspections requesting that the Seller perform other repairs in addition to the roof.   

            And, just as with Para. 7.D.(1), checking Para. 7.D.(2) and specifying Seller-required repairs has no effect whatsoever on Buyer’s right to conduct inspections nor on the parties agreeing to the termination option.  All of these provisions, if agreed upon, remain in play. 

Conclusion

            If it’s an AS IS contract (no Seller repairs), check Para. 7.D.(1). 

            If Seller is going to make specified repairs and treatments, (not an AS IS contract), check Para. 7.D.(2).