As-Is Clause in Divorce Listings
Divorce Listings: As-Is Clause in Orders
I am picturing heated negotiations, a dozen things to sort out - custody, support, napkin rings, and candlesticks. And then there’s the house. Money is tight, everyone feels like they’re getting the shaft, and you've agreed to sell the house but both parties are adamant “I am not putting a DIME into that place. It needs to be sold AS-IS.”
So your attorney assures you that they will put it in the order, along with everything else you’ve successfully negotiated, you sign it, and off it goes…..
A confirmed copy of the order for the Divorce Listing eventually lands in the real estate agents inbox along with a message that states they have been selected or appointed to the case. The agent goes out to the property and find problems with the house that can either prevent a buyer from getting financing, are statutory requirements, or some things that, if taken care of, will produce a significant “ROI” for the parties.
But…….the order says “as-is,” and the parties won’t budge. We have a problem.
This recently happened in a case with a pool containing 6” of standing water, and a lawn that had not been mowed in two months. It was otherwise a great house, but the pool issue would not pass appraisal inspection and the unkept yard made the curb appeal look like a foreclosure, which would probably attract lower offers. Another case with an as-is clause had a condo with an inoperable furnace - this is another finance killer.
More often than not, divorcing property sellers have limited financial resources and they do not want to get stuck having to make repairs to the property that have been deferred for years. I get it. And yet, there are things to keep in mind:
Statutory repairs: State and local ordinances must be adhered to before the property can be sold. This can vary by municipality and needs to be addressed.
Lender-required repairs: Mainstream loans have underwriting guidelines that not only require a buyer to qualify, but the house must qualify too. Things like an operable heat source, working stove, filled swimming pool with running pump, and many other health and safety items must be present, or the loan - and escrow - is stopped dead in its tracks until the repairs are made.
Cosmetic repairs: Deep cleaning, carpet cleaning, and a manicured lawn are some of the best investments a seller can make. This is an example of how $1,000 can bring a $5,000 - $10,000 higher offer in a shorter amount of time than if left undone.
Buyer-requested repairs: If a buyer submits a great offer, possibly above list price or with very favorable terms, it wouldn’t be prudent to torpedo a deal because they are requesting minor things to be done. Most items can be negotiated through escrow with a monetary credit to a buyer, in lieu of repairs, which alleviates the client from having to front money that they don’t necessarily have.
Bottomline: A good substitute for an “as-is” clause in a Divorce Listings order is something along the lines of: “The property shall be sold with minimum, or no, repairs, unless required by law, an underwriting guideline, or suggested by the listing agent for the purposes of obtaining a higher offer upon mutual agreement by the parties.”
Should you have any specific questions regarding "as-is" orders in Divorce Listings, feel free to give me a call, I’m happy to talk through some scenarios.