In addition to the standard “FAR/BAR” contract, there are several disclosures, addenda, and types of contracts you may see in different situations along the way. Here’s an explanation of a few of the more common ones you may come across.
Buying a Home “As-Is”
Sometimes in your search for a home you will come across a home being sold “as-is”. This means that you are allowed to have your inspections done, just like a normal sales scenario but the owner will not be responsible for fixing anything you may find wrong with the place. Many people errantly believe that any home being sold “as-is” is a “handyman’s special” that will require lots of work to be made habitable. This is simply not always the case.
It’s true that is sometimes the owner's reason for selling a place “as-is,” but in my experience the reason the seller chooses this route is more often just a matter of convenience. Another reason might be as a point of negotiation. For instance, you may make an offer for twenty thousand less than what the seller is asking for a home, and the seller could agree but add the caveat that you must buy it “as-is.” You the buyer, of course, will have to do your own research to see which of these scenarios are true for the house you are considering.
The seller is still required to disclose all known facts that affect the value of the property. However, the seller makes no representation as to the physical condition of the property.
As the buyer in this scenario, you are given the right to inspect the property as you would under normal circumstances, but you are also given the right to cancel the contract, should you not be satisfied with the findings of the inspection or do not wish to pay for the repairs that need to be made. You will be given a certain number of days to conduct your inspections and you must let the seller know of your intention to cancel in writing during that allotted time, should you decide you do not want to proceed with the purchase.
Homeowners’ Association Disclosure
The Homeowners’ Association Disclosure, required by Florida Statute 720.401 is one of the more plainly written documents you will come across during your real estate transactions here in Florida. There are nine statements on the current Homeowners’ Association Disclosure.
a. Simply lets you know that you will be obligated to be a member of a Homeowners’ Association.
b. States that there are or will be restrictive covenants that govern the property.
c. If there is a fee (assessment) to be a member of the homeowners’ association, the fee is noted here. Also, if there are any special assessments owed it will be noted here.
d. Lets you know that you may be required to pay special assessments to the municipality, county, or special district and that these can change from time to time
e. Gives you warning that if you do not pay the above-mentioned assessments, a lien can be placed on your property.
f. If there is a mandatory fee to use certain facilities in a community, it will be noted here. For instance, some associations have pools or clubhouses that you are required to pay to use.
g. Lets you know whether or not the covenants or rules of the association can be changed without the approval of the association membership. It is preferable that they cannot be changed without the approval of the association membership.
h. Tells you that the statements in the disclosure are only summary in nature and that you should read the covenants and restrictions of the association before purchasing property there.
i. This lets you know that a homeowners’ association's covenants and restrictions are a matter of public record and can be obtained from the record office of the county where the property is located.
Also included in BOLD CAPS is the following statement:
“IF THE DISCLOSURE SUMMARY REQUIRED BY SECTION 720.401, FLORIDA STATUTES, HAS NOT BEEN PROVIDED TO THE PROSPECTIVE PURCHASER BEFORE EXECUTING THIS CONTRACT FOR SALE, THIS CONTRACT IS VOIDABLE BY BUYER BY DELIVERING TO SELLER OR SELLER’S AGENT OR REPRESENTATIVE WRITTEN NOTICE OF THE BUYER’S INTENTION TO CANCEL WITHIN 3 DAYS AFTER RECEIPT OF THE DISCLOSURE SUMMARY OR PRIOR TO CLOSING, WHICHEVER OCCURS FIRST. ANY. PURPORTED WAIVER OF THIS VOIDABILITY RIGHT HAS NO EFFECT. BUYER’S RIGHT TO VOID THIS CONTRACT SHALL TERMINATE AT CLOSING. BUYER SHOULD NOT EXECUTE THIS CONTRACT UNTIL BUYER HAS RECEIVED AND READ THIS DISCLOSURE.“
This simply means that if you completed a contract before receiving this notice, you may be able to void your contract if you so desire, within three days after having finally received this disclosure.
Florida Building Energy Efficiency Rating Disclosure
As the purchaser of a home in Florida you have the right to have the energy efficiency of the home tested. This can be helpful in determining what the annual energy use of the home might be, and how it compares to other homes used as “yardsticks” for means of comparison. You should be notified of this right either before doing a contract or at the time of contract. Most contracts will have verbiage in them alerting you to this fact.
There is a brochure available explaining all that you should know about the Florida Building Energy Efficiency Rating System as well as giving you suggestions to increase your home's energy efficiency at: http://www.dca.state.fl.us/fbc/committees/energy/EnergyBrochure-110602.pdf
Florida Homeowner’s Construction Recovery Fund
This is a disclosure you will see when buying a newly built home. The Florida Homeowner's Construction Recovery Fund, previously known as the Construction Industries Recovery Fund, is a fund paid into by all licensed contractors who build, renovate, or remodel homes. The fund, first created in 1993 in the aftermath of Hurricane Andrew, was set up to provide relief to those who suffer monetary damages as a direct result of the actions of a Florida licensed contractor performing one of those functions.
Money for the fund is basically collected as part of a half-cent per square foot surcharge that contractors pay when getting their permits. (I qualify this with “basically” because the half-cent actually goes first to the Professional Regulation Trust Fund, and the Building Code Administrators and Inspectors Fund, with any excess going to fund the Florida Homeowner's Construction Recovery Fund). Payouts per violation are capped at $50,000 per homeowner, and the cap against each contractor is $500,000.
Only specific events are covered, such as the builder abandoning a job for more than 90 days; causing financial harm to a customer by misconduct or mismanagement; or, signing false statements saying that work is bonded, that all payments to subcontractors have been made, or falsely claiming to have provided proper worker's compensation and insurance.
For more information or to request a claim form, call the Construction Industry Licensing Board at 850-487-1395
Important Note: As of this writing in September 2011, due to a shortfall in funding there are still insufficient funds available to pay all claims at this time. The Department will monitor revenues for the construction recovery fund and make payments as funds become available.
From the Fund’s website:
Q: Why is there a shortfall with the Florida Homeowners’ Construction
A. Previously, revenue for the recovery fund came from a half-cent surcharge per square foot assessed on building permits. Under s.468.631, Florida Statutes, the surcharges are first used to fund the Florida Building Code Administrators and Inspectors Board licensing and regulation programs, with the remaining money funding the recovery fund. The total money generated by the previous surcharge has dropped by more than $4 million in the past three years, due to a decline in construction projects and permits. This decrease resulted in insufficient revenues to fund both the Florida Building Code Administrators and Inspectors Board and the Florida Homeowners’ Construction Recovery Fund.
Insulation Disclosure for New Construction Homes
If you are buying a new construction home in Florida, you must be given an Insulation Disclosure, either in the contract or as a separate rider attached to the contract. The type, thickness, and R-value of the insulation in the interior walls, exterior walls, and the ceilings in all areas should be disclosed to you.