The following assortment of questions are some of the most frequently asked of the Legal Hotline over the last few months.

Record retention

How long does a broker need to keep copies of closed real estate files and old trust account records?

For licensing purposes, Wis. Admin. Code § RL 15.04 provides that a broker must retain copies of documents and correspondence related to transactions and trust account records for three years, running from the date of the closing, or the date of the listing or buyer agency agreement (if there was no closed transaction). For tax audit and possible litigation purposes, tax advisors and attorneys generally recommend a longer holding period of at least six years.

Bump notice

An accepted primary offer had a bump clause. The sellers accepted a secondary offer to purchase and gave the primary buyer a bump notice. There is now a dispute over when delivery of the 72-hour bump notice actually occurred. The secondary buyer is upset about the amount of time it is taking to make him primary. When do the 72 hours begin? 

Although many timelines in the offer to purchase are triggered when a document or notice is delivered, the 72 hours for this bump notice begins upon actual receipt of the bump notice by the primary buyer. Regardless of when the notice was faxed or otherwise delivered, actual receipt does not occur until the primary buyer has actual physical possession of the written notice.

Requiring the buyer to have the notice in hand before starting the 72 hours does give a dishonest purchaser the opportunity to buy more time by evading receipt. However, the offer to purchase provides that the parties are obligated to act in good faith and with due diligence to meet the terms of the offer. Intentionally avoiding receipt would be a breach of contract.

The secondary buyer should be told that, although there is a bump clause on the primary offer, the seller determines when and if he or she will give the primary buyer the bump notice. A secondary buyer is not entitled to the details of the bump implementation process.

Disappearing buyer

A transaction was supposed to close several months ago, but the buyer disappeared and has not been heard from since. The seller's attorney advised that the seller could sell to another buyer, and a second transaction has closed, but the listing broker is still holding the earnest money from the first offer. Can the broker just give the money to the seller? 

No, even in the absence of the buyer, the real estate broker cannot simply disburse the earnest money to the seller. There must be proper authorization for the release of any and all earnest money held in a real estate trust account per the Chapter RL 18 trust account rules.

One option the listing broker has is to disburse the funds based on an impartial attorney's written opinion indicating who should receive the earnest money. § RL 18.09(2) requires the broker to give the parties 30-days advance, written notice - via certified mail to their last known addresses - of the broker's intent to disburse per the attorney's opinion. The broker may deduct up to $250 from the earnest money for any costs or fees incurred in carrying out this procedure.

Other options for the listing broker include starting a small claims court action or simply doing nothing - it is not the listing broker's responsibility to resolve the situation. The broker, however, must make reasonable attempts to locate the missing buyer and document these attempts in the transaction file. The money will be considered abandoned after five years per Wis. Stat. Chapter 177. If the funds are not claimed by the conclusion of the state's abandoned-property procedures, the funds are paid to the state treasurer and applied to the state school fund.

Seller termination of listings

A seller was dissatisfied with her listing broker and fired him, but the broker is asking for reimbursement of his advertising expenses. Can he do this? Can another broker list the property? 

Sellers have the power to revoke a listing contract at any time. An agency contract, such as a listing, is a personal service contract based upon a fiduciary relationship that requires that the seller have trust and confidence in the broker. If a seller wishes to end that relationship and directs the listing broker to terminate the listing and stop marketing the property, the broker must obey the seller's instructions. The seller can revoke the listing with verbal or written notice, but a written letter, or an amendment to the listing contract changing the contract termination date, provides the clearest documentation.

The power to revoke, however, is not a legal right. Terminating a listing contract may violate the broker's contract rights, and the broker may demand compensation for the damages sustained as a result of the early cancellation. The broker's damages, in general terms, might include reimbursement for advertising and other expenses incurred by the broker, a reasonable amount for the broker's time and services, and compensation for any resulting lost profits that can be proved with reasonable certainty. (This generally requires proof that a buyer had been procured.)

For further discussion of listing termination issues, visit the WRA Hottips Library, www.wra.org/hottips in the listing contracts category.

Anonymous buyer

If a buyer wants to remain anonymous, can the agent write the offer? If not, how should the offer to purchase be written? 

Under the general principles of agency law, an agent can act for an unidentified principal. Wis. Stat. §§ 706.02 and 706.03, however, cast substantial doubt on whether this practice would be valid in Wisconsin. § 706.03(1) states that, "A conveyance signed by one purporting to act as agent for another shall be ineffective as against the purported principal unless such agent was expressly authorized, and unless the authorizing principal is named as such in the conveyance or in the form of signature or acknowledgment." This requires a power of attorney or some other express authorization to act. Additionally, Wisconsin courts have interpreted this statute to require that the authorizing principal be identified in the text of the offer, deed or other conveyance, or in the signature block or acknowledgment section of the conveyance. § 706.02(1) also requires that all parties be identified in order for a conveyance such as an offer or deed to be valid.

Consequently, an agent who signs an offer as an "agent for unidentified principal" risks being held personally liable on the contract. The contract may also be found invalid for lack of mutuality, that is, there is no real buyer who is entering into an agreement with the seller.

One possible solution involves the buyer finding a person to enter into an offer as "straw man and/or assigns." At closing, the offer could be assigned to the real buyer who would then take title in his or her name. The straw man and the buyer may have an underlying agreement stating the straw man's promise to assign the offer to the buyer at closing.

A second alternative is for the straw man to enter into an offer to purchase in his or her own name and then enter into a second offer to purchase whereby he or she would deed the property to the real buyer immediately following the closing with the seller. In both of these alternatives, it is not advisable for the agent to be the straw man because the straw man may be forced to purchase the property if the real buyer backs out, or the straw man may incur other liability.

If the buyer is willing to reveal his or her identity after the seller accepts the offer, an offer may be written with the buyer to be named upon the seller's acceptance. The offer could provide that the buyer will be revealed and sign the contract within so many days after the seller's acceptance. This sort of an offer would not be valid and binding until executed by both parties.

Another idea is to draft an offer to sell with the seller signing first without knowing the buyer's identify. This would be done by modifying the offer to purchase to make the process run backwards - the seller offers to sell the property and signs the offer first instead of the buyer offering to purchase the property and signing first.

In these cases, the agent could draft these offers as a subagent if the buyer's identity is made confidential. A buyer agency would not be necessary. Before determining a course of action, the buyer's legal counsel may be consulted for the most appropriate approach for the buyer.