Document presentation of offer
An agent noticed a pattern with a particular broker. The agent believes the listing broker does not present buyers’ offers in a timely fashion to the seller and holds off to see if other offers come in. How does the buyer go about holding the broker accountable to show he has presented the offers?
Many of the Wis. Admin. Code § REEB 24.13 rules address presentation of written proposals. Starting with the listing agent’s obligation to promptly present the offer, Wis. Admin. § Code REEB 24.13(2)(b) provides, “Licensees shall promptly present all written proposals received to the licensee’s client or customer. Licensees shall not withhold any written proposals from presentation pending the party’s action on a written proposal previously presented.”
Furthermore, Wis. Admin. Code § REEB 24.13(4) states, “Notification of action on written proposal. Licensees shall promptly inform their clients and customers whether the other party has accepted, rejected, or countered their written proposal. A licensee shall immediately provide a written statement to the other party’s firm that includes the date and time when the written proposal was presented when such a statement is requested by the other party or the other party’s firm. A licensee shall immediately provide a written statement to the other party’s firm that includes the date and time when the written proposal was rejected or had expired without acceptance when such a statement is requested by the other party or the other party’s firm.”
Therefore, as an agent working with a buyer, the agent can request a statement of when the offer was presented. The easiest way to provide such a statement is to return a copy of the offer to purchase that includes a presentation date and time. If the listing broker is not responsive to the agents request for such a statement, the agent may remind the listing agent about the requirements of Wis. Admin. Code REEB § 24.13(4).
Missing home warranty: who is at fault?
The MLS sheet stated that the seller offered a home warranty. The offer was negotiated with an addendum containing a section for the home warranty, however, none of the blanks were filled in. The transaction closed, and when the buyer had issues, the home warranty company stated there was no policy.
The responsibility to complete the offer to meet the intention of the parties is, in essence, up to everyone: the buyer, seller, listing agent, cooperating agent and the two supervising brokers. The first page of the offer specifically states that the offer determines the agreement between the parties — not what is in the MLS or marketing materials. Therefore, a buyer wishing to have a home warranty would include it in the offer. As for missing information, an offer should be reviewed by the buyer and drafting broker to assure all blanks are filled in or marked as not applicable (N/A). Likewise, when presenting the offer, the listing firm should identify any incomplete provisions in the offer or attached addenda and point them out to the seller. The seller would either counter the offer or accept it knowing of the blank lines and the potential risks of proceeding without a meeting of the minds.
The brokers are required to review the offer and identify provisions of the offer where blank lines are not completed. The standard of review for broker review is now contained in Wis. Stat. § 452.132(4)(b):
“The review under par. (a) shall be limited to confirming that a written disclosure statement to a customer or client has been provided by a licensee associated with the firm in accordance with s. 452.135, confirming that any applicable form approved by the board has been used and the forms have been completed by filling in the blanks in a manner consistent with the structure of the form, and communicating to the licensee any errors in how the forms were completed that are apparent on the face of the document and known to the person reviewing the document.”
Given this transaction has closed, it is up to the parties, the agents and the brokers to determine what responsibility they choose to take regarding the matter. A first step toward resolution would be to contact the home warranty company to determine what coverage is available and at what cost. Once known, the parties and brokers may negotiate to reach a mutually agreeable solution.
For discussion of home warranties, see page 11 of Legal Update 03.09, “Warranties in the Offer to Purchase,” at www.wra.org/LU0309; for a discussion of rules of contract interpretation, see the January 2005 Legal Update, “Contract Review,” at www.wra.org/LU0501.
Increase in short sales
The buyer has an accepted offer including an Addendum SSO. The listing broker said the seller’s lender has not accepted the buyer’s offer. How to proceed?
The offer to purchase is negotiated between the parties: the buyer and seller. Although the lender is not a party to the offer, the short sale is subject to lender approval. Because the lender is not a party to the offer, the lender technically does not “accept” the buyer’s offer. The lender is being asked to approve a short sale for the seller based on the buyer’s offer. Similarly, the lender may not unilaterally modify the terms of the buyer’s and seller’s offer. In the event the lender will not approve the short sale unless the offer is amended, the seller may propose an amendment to the buyer based on the lender’s request. If agreed upon, the transaction will proceed; if not, the lender would provide notice disapproving the short sale.
Additional information about short sales is available by searching “short sales” on the WRA website. Likewise, a search for “foreclosure” will give myriad links and resources.
Fill in the blanks — really
Nothing is listed for the number of hours for the notice under the bump clause for a sale of home contingency on an offer to purchase. Is there some implied number of hours in the event this is left blank?
The primary buyer and the seller could agree to the number of hours by amendment of the offer. If the parties, however, cannot reach an agreement, they may need to litigate the matter for the court to determine the amount of time to use. Generally the courts will apply a reasonable time. The court may look at the market and determine what amount of time is usual or customary, such as 72 hours or 48 hours, for example. There is not, however, an implied amount of time. In the event the seller elects to issue a bump notice before an agreement is reached, the seller may attach a Cancellation Agreement and Mutual Release (CAMR) to the bump notice. If the CAMR is signed and returned by the buyer, the transaction would be resolved by the CAMR. In the future, both the drafting agent and the listing agent will want to be careful to assure all blanks on the offer are completed or marked as not applicable (N/A), particularly with the bump clause.
Escalation clauses and implementation
How would a seller handle increasing the price based on an offer with an escalation clause? If the seller decided to increase the price on the first offer, what form would be used, and how would this be worded? Would the seller send a notice or an amendment to the buyer with the final price?
It is a legitimate negotiation strategy to negotiate price at an amount above another’s offered price. The offer to purchase must state the price the buyer is willing to pay to purchase the property. The price may be determined by referencing the price of another offer to purchase. If the buyer wants to use such a strategy, the equation used to determine the offered price must be clear and unambiguous.
With regard to changing the purchase price, if the price escalation clause is triggered, there is no definite roadmap. When the buyer drafts the price escalation clause, the buyer could indicate how any price change would be documented and thus set the mechanism by agreement of the parties. Under many escalation clauses, there is no choice to the seller; the higher price in a subsequent offer automatically triggers the price increase.
An amendment has the advantage of confirming that both parties are in agreement. A notice could be used if the escalation clause language stated that such a notice would be effective to modify the terms of the offer to purchase. Lenders and others looking at the offer would clearly understand an amended price but may be puzzled and unwilling to rely on a notice unless that protocol was established in the contract language. A buyer may not be willing to give a seller the unilateral power to change the price. Basic contract law says that to change the price in an accepted offer, the licensee would use an amendment.
See “The Best of the Legal Hotline: The Market Is Heating Up for Summer,” in the July 2013 Wisconsin Real Estate Magazine at www.wra.org/WREM/July13/Hotline and “The Best of the Legal Hotline: Duty Confidentiality,” in the January 2012 Wisconsin Real Estate Magazine at www.wra.org/WREM/Jan10/DutyConfidentiality. Furthermore, also see the January 2017 Legal Update, “Price Escalation Clauses and Multiple Counter-Proposals,” at www.wra.org/LU1701.
Cybercriminals getting smarter
What steps can real estate licensees take to ensure that cybercrime doesn’t seep into their real estate transaction?
The risks are real. Wire transfer fraud hackers are getting more sophisticated, more patient and more successful. Taking affirmative steps to educate agents and parties alike will minimize the likelihood of your firm being named in the next scam headline. As an industry, brokers, lenders and title companies need to work together for vigilance in the transaction. Watch out for last-minute changes for closing instructions, email requests with different routing numbers and emails from misspelled senders — all are red flags to possible fraud. Be sure to employ adequate cybersecurity measures to avoid the risk. Establish and strictly follow a policy with regard to the communication of wire transfer instructions. Educate consumers at the outset of the transaction and again prior to closing. Parties should receive a pre-closing reminder regarding the risk of wire fraud and that details the communication procedures that will be followed. If any change or modification is requested, verify by an independent method.
For more information about cybercrime, see the February 2017 Legal Update, “Combating Cybercrime Concerns,” at www.wra.org/LU1702 as well as “The Risks of Sending Wire Transfer Instructions,” in the October 2017 Wisconsin Real Estate Magazine at www.wra.org/WREM/Oct17/WireTransferFraud.
Protected buyers
Is the listing agent required to mail the seller a list of protected buyers within three days of the expiration of the listing? If the listing agent sent the seller a written showing notice at the time of showing, does this constitute a notice of protected buyers? Does the listing broker have to send a list at the end of the listing if the listing broker already sent the buyers' names earlier?
For buyers who are not automatically protected, the three-day time frame is the latest a buyer’s name may be delivered. The broker may, at any time during the listing, deliver names for protected buyer purposes. Generally speaking, a written showing notice, contemporaneous with the showing, may be proper notice of protected buyers if it includes the buyer’s name and explains that the notice establishes a protected buyer, and was delivered by an authorized delivery method. It is prudent practice, and may be company policy, to send a full list including all protected buyers at the end of the listing.
Who are protected buyers? They are buyers, who, during the term of the listing: (1) submitted a written offer to purchase the protected property; (2) viewed the property with or communicated directly about potential acquisition terms with the seller; (3) attended an individual showing; or (4) communicated with a broker regarding potential terms upon which a buyer might acquire an interest in the property.
Buyers who fall under categories (1) and (2) are automatically protected, and the listing firm would not be required to perform any additional steps to protect those buyers. Buyers who fall under categories (3) and (4) will be protected only if the listing broker delivered their names to the seller no later than three days after the expiration or termination of the listing contract.
For additional information regarding listing protection, see the August 2014 Legal Update, “Limiting Listing Broker Liability,” at www.wra.org/LU1408, pages 5-6 and 8-9 of the October 2007 Legal Update, “WB-1 Listing Contract — 2008 Revisions,” at www.wra.org/LU0710, pages 8-10 of the February 2004 Legal Update, “Listing Procedures for the Prudent Broker,” at www.wra.org/LU0402 and the WRA LegalTalks series on listing protection at www.wra.org/LegalTalks/ListingProtection.
Tracy Rucka is Director of Professional Standards and Practices for the WRA.