The revised WB-11 Residential Offer to Purchase will be coming within the next several months. Although the existing offer form has generally served REALTORS^® well over the past 10 years, the time has come for an update.

The Department of Regulation Licensing prepares and approves contractual forms for use by real estate licensees. The bulk of the discussion and debate regarding forms revisions takes place at meetings of the DRL Real Estate Contractual Forms Advisory Committee. The Advisory Committee, which is comprised of real estate licensees and attorneys, including REALTOR^® members, reviews proposed changes to DRL-approved forms and reports to the DRL Real Estate Board and to DRL Secretary Celia Jackson.

In addition, the WRA Forms Committee, chaired by Dwight Kruse, reviews the DRL’s drafts of the forms and provides valuable recommendations to the Advisory Committee, many of which have been adopted. The changes proposed by the WRA Forms Committee and by the Advisory Committee are intended to make the forms the best that they can be by clarifying language, creating better definitions and fixing provisions that do not work well in day-to-day practice – in other words, improving the forms for the benefit of consumers and licensees alike.

As the discussion of the revised WB-11 nears the home stretch, we wanted to give you a snapshot of a few sections of the offer that are expected to change and give you an opportunity to offer your comments and suggestions to the WRA Forms Committee.

Closing the title insurance gap

Several changes have been proposed for the Title Evidence section to clarify the parties’ responsibilities for ordering and paying for title insurance. The Gap Endorsement was promoted from a caution at the end of the Provision of Merchantable title subsection to its own subsection:

TITLE EVIDENCE: Seller shall give evidence of title in the form of an owner’s policy of title insurance in the amount of the purchase price on a current ALTA form issued by an insurer licensed to write title insurance in Wisconsin. Seller shall pay all costs of providing title evidence to Buyer. Buyer shall pay all costs of providing title evidence required by Buyer’s lender.

GAP ENDORSEMENT: Seller shall also provide a “gap” endorsement at (Seller’s)(Buyer’s) [STRIKE ONE 1 “Sellers” if neither struck] cost to provide coverage for any liens or encumbrances first filed or recorded after the effective date of the title insurance commitment and before the deed is recorded, provided the title company will issue the endorsement. If a gap endorsement is not available, buyer may give written notice that title is not acceptable for closing (see lines xx-xxx).

This new language recognizes that gap endorsements may not always be available from the title companies, for example, for estates or foreclosures/short sales. If this provision has been checked and the gap endorsement is not available, the buyer can follow the procedures in the Title Acceptable for Closing subsection and/or amend the offer to provide for some other mutually agreed upon resolution.

When the buyer has a property to sell

Over the years there has been some confusion over how to handle the Sale of Buyer’s Property Contingency. At times licensees wish to remove the sale portion of the contingency, leaving the offer contingent upon closing. Others struggle with determining the beginning and the end of the bump period. Several changes have been recommended to address these and other concerns:

CLOSING OF BUYER’S PROPERTY CONTINGENCY: This Offer is contingent upon the closing of the sale of Buyer’s property located at ___________________________________________, no later than ______________. If Seller accepts a bona fide secondary offer, Seller may give written notice to Buyer of acceptance. If Buyer does not deliver to Seller a written waiver of the Closing of Buyer’s Property Contingency and _______________________________________________________ [INSERT OTHER REQUIREMENTS, IF ANY (e.g., PAYMENT OF ADDITIONAL EARNEST MONEY, WAIVER OF ALL CONTINGENCIES, OR PROVIDING EVIDENCE OF SALE OR BRIDGE LOAN, etc.)] within ____ hours of Buyer’s actual receipt of said notice or within ____ hours of delivery of said notice to the Buyer or Buyer’s recipient for delivery named at lines xx or xx (whichever comes first), this Offer shall be null and void.

This draft provision assumes that although an accepted offer on the buyer’s property is beneficial, at the end of the day the closing is what really counts. Accordingly, the sale component was removed, leaving the offer contingent upon the closing of the sale of the buyer’s property. The great majority of REALTORS® using the WB-11 Sale of Buyer’s Property Contingency always use the Continued Marketing option (bump clause), so the draft combines the two. Alternate starting points for the bump period are included to cover the “hiding buyer” making himself or herself scarce to buy extra time. A statement concerning the seller’s rights to continue marketing the property and accept secondary offers has been placed on the first page of the offer.

The Wacky world of inspections and testing

The current Inspections and Testing provisions in the WB-11 have been combined and emphasize that testing is different than inspection and that the authorization for testing needs to be established in separate contingencies designed to measure the particular substances in question.

INSPECTIONS AND TESTING: Buyer may only conduct inspections or tests if specific contingencies are included as a part of this offer. An “inspection” is defined as an observation of the Property which does not include testing of the Property, other than testing for leaking carbon monoxide, or testing for leaking LP gas or natural gas used as a fuel source, which are hereby authorized. A “test” is defined as the taking of samples of materials such as soils, water, air or building materials from the Property and the laboratory or other analysis of these materials. Seller agrees to allow Buyer’s inspectors, testers and appraisers reasonable access to the Property upon advance notice, if necessary to satisfy the contingencies in this Offer. Buyer and licensees may be present at all inspections and testing. Except as otherwise provided, the Seller’s authorization for inspections does not authorize the Buyer to conduct testing of the Property. Note: Any contingency authorizing testing should specify the areas of the Property to be tested, the purpose of the test, (e.g., to determine if environmental contamination is present), any limitations on Buyer’s testing and any other material terms of the contingency. Buyer agrees to promptly restore the Property to its original condition after Buyer’s inspections and testing are completed unless otherwise agreed to with Seller. Seller acknowledges that certain inspections or tests may detect environmental pollution which may be required to be reported to the Wisconsin Department of Natural Resources.

There is no doubt that the Inspection Contingency causes more confusion and is the source of more Hotline calls than any other contractual provision in use, so a great deal of effort went into clarifying the workings of this important provision.

INSPECTION CONTINGENCY: This contingency only authorizes inspections, not testing. This Offer is contingent upon a Wisconsin registered home inspector performing a home inspection of the Property which discloses no Defects. This Offer is further contingent upon a qualified independent inspector or independent qualified third party performing an inspection of: ____________ (list any Property component(s) to be separately inspected, e.g., swimming pool, roof, foundation, chimney, etc.) which discloses no Defects. Buyer shall order the inspection(s) and be responsible for all costs of inspection(s). Buyer may have follow-up inspections recommended in a written report resulting from an authorized inspection performed provided they occur prior to the deadline specified at line xx. CAUTION: Buyer should provide sufficient time for the home inspection and/or any specialized inspection(s), as well as any follow-up inspection(s). This contingency shall be deemed satisfied unless Buyer, within ______ days of acceptance, delivers to Seller, and to listing broker if Property is listed, a copy of the written inspection report(s) and a written notice listing the Defect(s) identified in those report(s) to which Buyer objects (Notice of Defects). CAUTION: A proposed amendment is not a Notice of Defects and will not satisfy this notice requirement. For the purposes of this contingency, Defects do not include structural, mechanical or other conditions the nature and extent of which Buyer had actual knowledge or written notice before signing this Offer.

RIGHT TO CURE: Seller (shall)(shall not) [STRIKE ONE] have a right to cure the defects. (Seller shall have a right to cure if no choice is indicated.) If Seller has right to cure, Seller may satisfy this contingency by: (1) delivering written notice to Buyer within 10 days of Buyer’s delivery of the Notice of Defects stating Seller’s election to cure defects, (2) curing the defects in a good and workmanlike manner and (3) delivering to Buyer a written report detailing the work done within 3 days of closing. This Offer shall be null and void if Buyer makes timely delivery of the Notice of Defects and written inspection report(s) and: (1) Seller does not have a right to cure or (2) Seller has a right to cure but: a) Seller delivers written notice that Seller will not cure or b) Seller does not timely deliver the written notice of election to cure. SEE LINES xx – xx FOR DEFINITION OF “DEFECT.”

These revisions separate the home inspection provision from the authorization for component inspections by qualified experts. This draft reminds the buyer that the home inspection, any specialized component inspections and any follow-up inspections recommended in a written inspection report must all be completed by the stated deadline. This reorganized provision defines a “Notice of Defects” and specifies that a proposed amendment is not a Notice of Defects.

In the Right to Cure subsection, the seller’s 10-day response period is measured from the buyer’s delivery rather than the seller’s receipt of the Notice of Defects. The definition of “Defects” was moved to a separate definitions section but is referenced at the end of the contingency.

These are only a few of the expected changes. We are interested in your thoughts and suggestions. Please forward your recommendations to Debbi Conrad at dconrad@wra.org or Kevin King at kking@wra.org.

Debbi Conrad is Director of Legal Affairs and Kevin King is General Counsel for the WRA.