The WRA periodically surveys members to find out which problems, trends and practice issues are disrupting or influencing their transactions. Often the top complaints from respondents are transactional issues caused by untrained or undertrained agents. Frequently, these complaints are pinned on new or newer agents. While new agents may be undertrained in some cases, new agents are sometimes the most careful and conscientious in drafting contracts and cooperating with other agents. New agents make good use of their supervising brokers as well as the WRA Legal Hotline. Just as not all new agents are necessarily undertrained, not all seasoned agents are sufficiently trained. There are seasoned agents who make the same mistakes repeatedly because that is the way they have always done things. New or experienced, agents who seek additional training help raise the bar of professionalism.

The complaints about undertrained agents range from anti-trust to the unauthorized practice of law, but most of them cluster around drafting errors or procedural errors such as delivery of documents or observing deadlines. Many errors stem from agents treating contract provisions as suggestions rather than legally enforceable terms or from attempting to be casual when negotiating a contract for a complex financial transaction. Consider how a client would react to the client’s lawyer missing a deadline resulting in the client’s lawsuit being dismissed. Consider an accountant making an error on a person’s tax return resulting in an expensive audit plus back taxes and penalties. Similarly disastrous results happen to buyers and sellers in the real estate world when their agents make mistakes in their transactions. Real estate transactions can be complicated and expensive. Agents who are careful and professional know how to avoid these mistakes, yet some agents proceed with an air of casual disregard for the details of the transaction. If an agent’s mistake in drafting or procedure results in financial damages or other harm to the parties, they may seek recompense from the agent and the agent’s firm. 

Mistake of little consequence

A seller signed a listing contract but the listing agent did not. Is it a valid listing contract? 

Yes. It is a valid listing, but it may lead to confusion. According to Wis. Stat. § 240.10, a valid listing contract must be signed by the person who is agreeing to pay the commission. While it is definitely commonplace to have the agent sign the listing contract, the listing agent’s signature is not a legal requirement. The agent’s missing signature may lead a seller to believe the contract is unenforceable and no commission is due. The firm may have to sue the seller to enforce the commission.

Wis. Stat. § 240.10(1) 

Every contract to pay a commission to a real estate agent or broker or to any other person for selling or buying real estate shall be void unless such contract or note or memorandum thereof describes that real estate; expresses the price for which the same may be sold or purchased, the commission to be paid and the period during which the agent or broker shall procure a buyer or seller; is in writing; and is subscribed by the person agreeing to pay such commission, except that a contract to pay a commission to a person for locating a type of property need not describe the property.

Mistake by text

A buyer’s agent sent an amendment to the seller after the buyer’s home inspection. The seller rejected the amendment. On the last day of the buyer’s home inspection contingency, the listing agent texted the buyer’s agent indicating the seller was willing to agree to a price reduction. The buyer’s agent texted a response indicating the buyer’s agreement to the price reduction. The listing agent informed the buyer’s agent by text that it would be "okay" to wait until the following day, which was the day after the home inspection contingency expired, to draft the price reduction amendment.

The next day, the buyer’s agent drafted the amendment and sent it to the listing agent. The listing agent contacted the buyer’s agent indicating the seller would not be signing the amendment because the home inspection contingency deadline had passed, so now the buyer could not issue a notice of defects. The seller misled the buyer intentionally. The buyers contacted a real estate attorney who told them that the texts might constitute a legally binding contract. The listing agent is claiming there cannot be a contract because the negotiations were not on approved forms and nothing is signed. Are the text messages sufficient to demonstrate the seller’s intent to agree to these terms? 

Maybe. It is possible that the text exchange between the agents on behalf of their parties created a legally enforceable amendment to the contract. Whether it is enforceable is a decision for a court to make. Even though text message negotiations and the ultimate text message agreement to terms were not on approved forms, they may still be enforceable against the parties. 

Wis. Stat. § 706.02 Formal Requisites requires that the contract be signed by or on behalf of all parties if it is a lease or a contract to convey, such as an offer to purchase and its accompanying amendments. The buyer’s signature was on the amendment, but the amendment and the text messages were lacking the seller’s signature. 

Wis. Stat. § 706.04 Equitable Relief, however, gives a court the ability to declare a contract enforceable even if the contract is missing an essential element such as the seller’s signature on the amendment. Whether the buyer in this case could demonstrate the necessary elements to ask for enforcement of this contract is a conversation for the buyers and sellers to have with their respective attorneys. 

To avoid this uncertainty, the agents should not have casually been texting terms back and forth. While texting is a convenient way to communicate, when it comes to proposed terms in a real estate transaction, agents should use approved forms to negotiate those terms. An agent can text another agent to say that an amendment is on its way, a notice is being considered, or that a seller is evaluating offers. Actual terms should only appear on the correct forms, such as an amendment, and not in texts or emails where they can lead to the possible creation of a binding contract. The specificity of the terms in these text messages is what caused the problem here. 

Mistake by paper

A buyer sent an amendment to the seller requesting some repairs in response to the buyer’s home inspection. The seller ignored the amendment. The buyer then sent over a Notice of Defects that said, “The buyer objects to the defects listed in the home inspection report.” The agent did not reference the home inspection report on line 27 of the Notice. The home inspection report did not contain a section or page titled Defects but rather was a typical inspection report with comments on the condition of various components. The deadline under the home inspection contingency expired, and the seller’s attorney sent the buyer a letter indicating that the home inspection contingency was satisfied because the buyer did not properly object to the defects according to the process in the offer to purchase. Was the buyer’s notice sufficient?

Maybe not. The language in the offer specifically instructs the buyer to deliver a “written notice listing the Defect(s) identified in” the inspection reports to which the buyer is objecting. The buyer in this case just referenced the inspection report but did not specifically list the defects to which the buyer objected.

Lines 421-423 of the WB-11 Offer to Purchase: This contingency shall be deemed satisfied unless Buyer, within days of acceptance, delivers to Seller a copy of the written inspection report(s) and a written notice listing the Defect(s) identified in those report(s) to which the Buyer objects (Notice of Defects).

At line 27, the WB-41 Notice Relating to Offer to Purchase gives the party initiating the notice, which in this case is the buyer, the opportunity to incorporate another document, such as the home inspection report. If the buyer had incorporated the home inspection report by reference at line 27, the buyer would have had a better argument that the buyer’s notice identified the defects to which the buyer objects. Contrary to the instructions in the offer, the buyer’s Notice of Defects did not list the defects to which the buyer objected.

Line 27 of the WB-41 Notice Relating to Offer to Purchase: The attached is/are made part of this Notice.

The buyer claims the notice is sufficient. If the parties cannot negotiate a resolution, they may have to go to court and ask a judge to rule on the notice. To avoid any dispute about whether the buyer correctly provided a Notice of Defects, the best practice is to list the defects to which the buyer objects in the Notice of Defects. 

Mistakes were fixed

There are a number of considerations an agent has to make when addressing a mistake. The first consideration is whether the mistake is fixable by the agent. If so, the agent or agents can take the necessary steps as directed by their parties to correct the issue. Consider the bump clause with the hours deadline left blank. Despite numerous magazine articles, frequent WRA Legal Hottips and biennial reminders in the required continuing education, some agents still draft the Closing of Buyer’s Property Contingency without any hours in the bump clause.

Closing of Buyer’s Property Contingency from WB-11 Residential Offer to Purchase

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 note 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, this Offer shall be null and void.

In a perfect world, the agent or the agent’s supervising broker discovers the error and alerts the agent who made the error, who alerts the other agent. Those agents discuss the situation with their parties and decide whether it is fixable. If so, one of the agents drafts an amendment to add the agreed upon deadline for waiving the contingency upon the buyer’s actual receipt of the bump notice. If the buyers and the seller sign the amendment, this ia fixable mistake. 

Mistakes were not fixed

Some mistakes are not easily fixed with an amendment. An agent’s error may be irreversible. Either it cannot be undone because the other party will not agree to the necessary paperwork, or the parties are at the point in the transaction where it is too late to fix the agent’s error. Consider a mishandled short sale. An agent wrote an offer for a buyer on a short sale. The agent did not use the Addendum SSO, which includes a provision for making the buyer’s offer deadlines run from the lender’s acceptance of the short sale agreement.

Addendum SSO to The Offer to Purchase — Short Sale

Deadlines Run From Time of Lender Approval: All deadlines (excluding the deadline(s) for payment of earnest money), such as for the financing contingency and the inspection contingency, shall run from the time the Offer is considered approved (see lines 16-18 above) rather than from acceptance of the Offer.

The agent told the buyer to order an appraisal and a home inspection prior to receiving the lender’s approval. The buyer gave notice to the buyer’s landlord that the buyer would be terminating the buyer’s lease. Ultimately, the lender did not approve the short sale, and the property was slated to go to a foreclosure auction. The buyer ended up with a useless appraisal and inspection paid for by the buyer and without a place to live. No amendment or documentation of any kind can fix this because the ultimate decision maker in this transaction was the bank. This is the type of mistake that should trigger a call to the firm’s errors and omissions insurance carrier and the firm’s attorney.

Make no mistake

While acknowledging that everyone makes an error here and there, avoiding mistakes is the simplest path. The WRA is here to help agents avoid mistakes that can lead to headaches, frustration and unhappy parties. Whenever an agent is uncertain of how to complete a process or how to fill out a form, the agent should follow company policy to obtain the answer. Whether the firm tells the agent to call the WRA Legal Hotline directly or the firm wants the agents to run questions through the supervising broker first, asking for clarification is the important part. 

If the agent contacts the WRA Legal Hotline, the hotline attorney will not tell the agent exactly how to fill out the form but rather will discuss different options for completing the form. The agent will then discuss those options with his or her party and complete the form according to the instruction of the party. 

To help address specific drafting issues, the WRA recently created a new forms training video series, Line by Line. This training series will detail a line-by-line explanation of the WB forms. The first video of the series, available now, includes the WB-1 Residential Listing Contract and the WB-42 Amendment to Listing Contract. Additional forms will be added to the training series throughout 2018. Stay tuned for more information about new Line by Line videos. Learn more and view the videos at www.wra.org/linebyline.

Jennifer Lindsley is Director of Training for the WRA.