Offers to sell

The seller of a commercial listing is quite anxious and asked the broker to write an offer to purchase on the property and submit it to a potential buyer. Is this okay to do? How to proceed? 

Although this situation is somewhat unusual because the seller typically doesn’t know which provisions, contingencies and time frames the buyer would want, this situation is feasible by modifying an offer to purchase form, in this case, the WB-15 Commercial Offer to Purchase. 

First, the broker would change the title to “Offer to Sell.” The language on the lines at the beginning of the form should then appropriately be changed to read, “The Seller, ______, offers to sell the Property ...” It also may be helpful in the offer or in an addendum to make clear that this is an “Offer to Sell” from the seller to the buyer. The signature lines may be reversed because the seller instead of the buyer will be signing first. Also it is best to modify the acceptance lines at the end of the form since the buyer is the one who hopefully accepts the offer. The broker should review the document in its entirety and make additional changes as necessary. Even if the offer to sell is countered by the buyer, at least the seller has triggered some active negotiation.

When the seller initiates an offer to sell, the question of how to complete the financing contingency often arises. According to the financing contingency, the seller may elect to self-finance if the buyer is unable to obtain the financing described in the financing contingency or other financing acceptable to the buyer. Therefore, when completing an offer to sell, the seller may state the financing terms that the seller would provide if the seller were to self-finance. If the terms are not acceptable to the buyer, the buyer may counter. 

More information about creating an offer to sell is available in the March 2005 Legal Update, “Customizing the Offer to Purchase,” online at www.wra.org/LU0503. 

Independent practice

Can a licensee be employed by more than one company? For example, can a broker be licensed under a residential company for selling homes and, at the same time, be licensed under a commercial real estate company for leasing commercial property? Would written permission from both broker-employers be needed?

A licensee may not be employed by more than one broker at a time per Wis. Admin. Code § REEB 17.03(3). The independent practice rule in Wis. Admin. Code § REEB 17.03(1) allows an individual who is employed by another broker to conduct some independent practice. To qualify for independent practice, the individual must have a broker’s license, not a salesperson’s license, and the licensed individual must have the written consent of the employing broker and must avoid conflicts of interest. In addition, the licensed individual may not employ other licensees in this independent practice. For further information about independent practice, see the March 2008 Legal Update, “Running a Real Estate Office,” at www.wra.org/LU0803. 

RECR or VLDR?

On commercial or business vacant land parcels, is a condition report required?

Effective July 1, 2012, sellers of vacant land are required to complete a Vacant Land Disclosure Report (VLDR). All sellers who are subject to Wis. Stat. § 709.033 must complete a disclosure report with the necessary provisions or risk buyer rescission of the purchase contract. The Wis. Stat. § 709.033 disclosure provisions generally must be completed by all persons who transfer Wisconsin real estate that does not include any buildings.

Pursuant to the Wis. Admin. Code § REEB 24.07(1)(b), real estate licensees who are listing any property are required to inspect the property, ask the seller about the condition of the property and ask the seller to provide his or her answers in writing. This obligation to inspect and request a written statement applies to all transactions, even vacant land. Read the May 2012 Legal Update, “Vacant Land Disclosure Report” at www.wra.org/LU1205 for FAQs and practice tips. 

Verbal offers and letters of intent 

The broker has a commercial listing priced at $1.5 million, and the seller wants offers only from legitimate buyers. The cooperating broker is demanding the listing broker present a verbal offer of less than a million dollars to the seller. Alternately, the cooperating broker says that the listing broker should draft a letter of intent for the buyer. How to proceed? 

In Wisconsin, verbal offers regarding real property are not enforceable. Although the broker is not prohibited from verbally telling the seller there is an interested buyer, without a written offer, there can be no valid, binding contract. It is the seller’s prerogative to refuse verbal offers or offers below a certain price. Wis. Admin. Code § REEB 24.13(1) indicates that licensees should draft and submit all offers to the seller unless “contrary to the specific instructions of the owner.” Although the rule does not require the instructions to be in writing, the broker may document the seller’s instructions in a WB- 42 Amendment to Listing. The buyer may be a legitimate buyer, only offering a low purchase price to initiate negotiations. 

The listing broker may refer the cooperating broker to Wis. Admin. Code § REEB 24.08, and the Code of Ethics if he is a REALTOR^®, which require licensees to put all offers to purchase in writing unless the writing is completed by the parties themselves, their legal counsel or is outside the licensee’s authority. The cooperating broker may use a commercial offer or possibly a letter of intent. Although letters of intent are often used in commercial transactions, there are risks for brokers who elect to draft them. A broker may decline to draft a letter of intent to avoid unintended unlicensed practice of law concerns or violation of the Wis. Admin. Code chapter REEB 16 rules. 

See the November 2012 Wisconsin Real Estate Magazine article, “The Purpose and Power of Letters of Intent” at www.wra.org/WREM/Nov12/LOI. And for more information about getting it in writing, see the July 2013 Wisconsin Real Estate Magazine article “Believe it When You See it” at www.wra.org/WREM/July13/Writing.

Tracy Rucka is Director of Professional Standards and Practices for the WRA.