Warranties-2017 AAR PC

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The risks associated with the warranties section of the contract include:

  • Disputes arising from the seller’s failure to understand/comply with their obligations
  • Disputes due to the buyer failing to understand the buyer’s obligations
  • Delay of Close of Escrow for incomplete repairs

 Section 5.a Lines 191-199

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Condition of Premises: BUYER AND SELLER AGREE THE PREMISES ARE BEING SOLD IN ITS PRESENT PHYSICAL CONDITION AS OF THE DATE OF CONTRACT ACCEPTANCE. Seller makes no warranty to Buyer, either express or implied, as to the condition, zoning, or fitness for any particular use or purpose of the Premises. However, Seller shall maintain and repair the Premises so that at the earlier of possession or COE: (i) the Premises, including all personal property included in the sale, will be in substantially the same condition as on the date of Contract acceptance; and (ii) all personal property not included in the sale and debris will be removed from the Premises. Buyer is advised to conduct independent inspections and investigations regarding the Premises within the Inspection Period as specified in Section 6a. Buyer and Seller acknowledge and understand they may, but are not obligated to, engage in negotiations for repairs/improvements to the Premises. Any/all agreed upon repairs/improvements will be addressed pursuant to Section 6j.

Quick Quiz

Fill in the Blank:
Seller makes no to Buyer, either express or implied, as to the condition, zoning, or fitness for any particular use or purpose of the .

Pursuant to Section 5a, the Premises are now being sold in its “present physical condition as of the date of contract acceptance.” Does this mean that there is no longer a need for AAR’s As-Is Addendum?

Answer: The change to Section 5a has eliminated the need for AAR’s As-Is Addendum, which will be removed from AAR’s library of forms when the revised Purchase Contract takes effect. Since the As-Is Addendum will no longer exist, reference to the form was removed from Section 1f, Addenda Incorporated.

Even though the Premises are being sold in its “present physical condition as of the date of contract acceptance,” can Buyers request repairs?

Answer: Yes. As stated in Section 5a, Buyers and Sellers “may, but are not obligated to, engage in negotiations for repairs/improvements to the Premises.” AAR’s Buyer’s Inspection Notice and Seller’s Response form remains available for this purpose, as set forth in Section 6i.

Why were warranted items removed from the Purchase Contract?

Answer: A home consists of thousands of components, making it impossible to develop an all-encompassing list of warranted items. Without such a list, some Buyers and Sellers struggled to identify and agree on which components are warranted.

Furthermore, the term “working condition” was subject to different interpretations. Even when the parties agreed that an item is warranted, they may have still disagreed on whether the component was in working condition. To eliminate any perceived ambiguities, the Risk Management Committee elected to remove warranted items from the Purchase Contract, leaving all repairs subject to negotiation.

Section 5.b Lines 200-206

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Some warranties extend beyond close of escrow.  Including:

  • downloadThe seller has disclosed all material defects which materially and adversely affect consideration to be paid by the buyer.  This excludes opinions of value
  • Payment in full has been made for all labor, professional services, materials, machinery, fixtures or tools furnished within a 150 day window immediately preceding close of escrow for any construction, alteration or repair to the premises
  • Information regarding the presence of the sewer connection is correct to the best of the seller’s knowledge

Section 5.c Lines 207-212

section-5-c-lines-207-212

The Buyer promises and is obligated to:

  • Disclose any information that may materially and adversely affect the buyer’s ability to close escrow
  • Conduct all desired inspections and investigations and accepts the premises

The buyer also warrants that they are not relying on any verbal representations concerning the premises except those detailed on lines 202-203. Buyers Agents have a duty to advise buyers that the buyer should not submit any offer for purchase until   the validity of any verbal representations have been verified.

Quick Quiz

Fill in the Blank: The seller has all material defects which materially and adversely affect consideration to be paid by the .

warranties

 

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