Here are some phrases you may find on a listing or purchase contract that should raise a red flag in your mind:
"As is, where is"
This is a phrase you’ll find commonly on listings that are in foreclosure, an estate sale, in disrepair, not lived in by the seller and many other instances. What this phrase basically means is that the seller does not want to not make any warranties or representations about the property and it’s contents. The seller may state this because they have no way of knowing what condition the property is in, or they may be unwilling to identify or take responsibility for known problems. All in all, as is where is means what you see is what you get, and if you don’t like it, too bad.
Normal
This is a favourite of mine… in the purchase contract it will usually state something similar to "normal working order" "normal wear and tear" etc. For example, the seller may warrant that the appliances are in normal working order. We had a client who called us about a week after taking possession of her condo and said that the washing machine bounced half way across the room during the spin cycle. When we contacted the seller she said "that’s normal! it always did that!"
Title Insurance
The purchase contract that Realtors in Alberta use states that the property must be in compliance. To prove this the home owner needs to have a real property report with compliance from the city, which can be expensive and time consuming to obtain, especially if the owner has done work on the property without obtaining the necessary permits. The buyer’s lender will require a copy of the RPR with compliance. One way to avoid getting the RPR with compliance is to offer the buyer title insurance as it can generally be obtained faster and with less expense – especially if the property doesn’t comply. The buyer may not care about the RPR and may accept title insurance instead, but what many buyers don’t realize is that most title insurance (like all insurance) has exclusions. For example, lets say part of the garage is on city property, and the city demands that it is corrected. Your title insurance may cover the costs of demolishing the garage, but most likely will not cover the costs of building a new one. (Sheldon has serious concerns about title insurance that we’ve discussed on the blog numerous times).
I am curious about the Title Insurance.
I believe I heard a real estate lawyer say that it was also used when the title could not be transferred in time for closing, for example because of a quick possession date, even though a Real Property Report with compliance was available.
MDM,
In that case they should only temporarily use it as a stop gap until the RPR with compliance comes through.
There are circumstances when title insurance could be useful in smaller communities but that’s a tale for another yarn.
Ah, while they are simple terms, I never thought much about the “normal working order” clause… good insight!
these last two articles were really good.