Acceptance
The listing broker contacted the buyer and stated the seller is planning on accepting the offer. When will timelines run for inspections and contingencies?
Wis. Stat. § 706.02 requires that the offer to purchase must be in writing and identify the parties and the property, must contain the material terms of the conveyance and must be signed and delivered. The offer is not a binding contract unless the written acceptance is delivered prior to the binding acceptance date in the offer. Regardless of the statement that there is or may be an accepted offer, if the offer has not been signed by the buyer and the seller and subsequently delivered by an authorized delivery method by the deadline, it would not be a contract. As provided at lines 23-24 of the WB-11 Residential Offer to Purchase, acceptance occurs when all buyers and sellers have signed one copy of the offer, or separate but identical copies of the offer.
Training pointer: Do not claim an offer has been accepted until it is in writing and delivered.
Missed acceptance deadline
The cooperating broker just received a copy of the buyer’s offer from the listing agent. The buyer gave the seller three days for binding acceptance, but when the cooperating agent reviewed it, the offer was signed and dated by the seller on the fifth day and delivered back by the listing broker on the sixth day. Do the parties have a contract?
No. The offer was neither accepted nor delivered by the dates in the offer. Once the acceptance deadline has passed, the seller cannot accept and deliver the offer back to the buyer to create a binding contract. Likewise, binding acceptance occurs when an accepted offer is delivered back to the other party and must also occur on or before the stated deadline for binding acceptance at lines 27-29 of the Offer to Purchase. However, all may not be lost; if the parties wish to proceed, either the buyer or the seller may initiate a counter-offer to the other party that incorporates the original offer without any changes other than the date for binding acceptance. This use of the WB-44 Counter-Offer form will create new acceptance and binding deadlines for the parties to meet to do the deal.
Training pointer: Once binding acceptance date has lapsed, use a counter-offer to continue negotiations.
Withdrawal risk
The buyer submitted an offer, and the seller accepted it in writing on Monday night. The binding acceptance date was Wednesday, so the listing broker waited and did not deliver the accepted offer on Monday. On Tuesday morning, the cooperating broker contacted the listing broker. The cooperating broker stated that the buyer wanted to withdraw the offer. Can the buyer withdraw the accepted offer?
Yes, a party who has made an offer is, in all but a relatively few situations, able to withdraw the offer any time prior to its binding acceptance. The law requires the party withdrawing the offer to notify the person who has the offer that the offer is withdrawn. If the notice of withdrawal arrives before a binding acceptance, the offer becomes null and void. Any attempt at acceptance or delivery of the offer thereafter, even if prior to the stated time limit for acceptance will have no legal effect. Notice of withdrawal does not have to be in writing. However, the party attempting to withdraw the offer must try to make certain that proof is available that the offer has not been accepted and delivered.
Training pointer: Agents should timely deliver accepted offers to assure binding acceptance before withdrawal.
Counting days
When counting days for the additional earnest money deadline, is the day the offer is signed by the seller counted as the first day?
The state-approved forms provide that earnest money will either accompany the offer or will be mailed, or commercially or personally delivered within “X” days of acceptance. See lines 10-11 of the WB-11. The definitions of “days” and “business days” are included in the deadlines section of each WB form. See lines 174-181 of the WB-11. Therefore the use of the word “days” in the earnest money section or any other section in the form means that the time frame runs daily, including Saturdays and Sundays as well as any legal public holiday under Wisconsin or federal law.
Per lines 173-181 of the Offer to Purchase, deadlines expressed as a number of days from an event, such as acceptance, are calculated by excluding the day the event occurred. Day one — the day in which the buyer will mail, commercially deliver or personally deliver the additional earnest money — therefore starts the day after acceptance.
If the earnest money is due within five days of acceptance, and acceptance occurred on Tuesday, day one is Wednesday, day two is Thursday, day three is Friday, day four is Saturday and day five is Sunday. Unless otherwise agreed, the deadline expires on midnight of the last day. Thus the deadline to mail, commercially deliver or personally deliver the earnest money in this example would be midnight on Sunday.
Training pointer: To calculate deadlines, review lines 174-181 of the WB-11.
Can't go back
The buyers’ agent wrote an offer for the buyers. The seller countered the offer (counter-offer 1), and the buyers countered back (counter-offer 2). Counter-offer 2 was delivered to the seller. The listing agent told the buyers’ agent that a multiple counter would be forthcoming as another offer had come in on the same property.
The buyers changed their minds and decided they would meet the seller’s price, terms and conditions. Can the buyers sign and accept counter-offer 1 by the sellers, even after the buyers delivered counter-offer 2?
No. By submitting a counter-offer, a party has rejected the other party’s previous offer or counter-offer. In this case, the buyers can no longer back up and accept the seller’s previous counter-offer. A counter-offer can be understood as a new offer that is being issued by a party who previously received an unacceptable offer. The legal effect of writing and delivering a counter-offer is the same as the rejection of the previous offer and the presentation of a new offer to the party who had submitted the previous offer. A rejected offer is null and void and cannot be accepted. To continue in negotiations, the buyers may either initiate counter-offer 3 or await the sellers’ multiple counter proposal.
Training pointer: Be sure parties understand the implications of issuing a counter-offer.
Serious consequences when deadlines are missed
The counter-offer stipulates that the buyer shall provide an updated pre-approval letter within three days of acceptance. Three days passed, and the buyer did not deliver the new pre-approval letter. At what point can the seller call the offer null and void due to non-performance on the buyer's end?
Per the offer, time is of the essence as it relates to dates and deadlines. When time is of the essence, the buyer must perform by the stated date or deadline or risk breach of contract. If time is not of the essence, the buyer has a reasonable amount of time from the stated date or deadline to perform; “reasonable” is determined by the particular circumstances and local practice.
If time is of the essence, the time frame has passed and the buyer has not performed, this will be a breach of the buyer’s duties under the contract. Immediately thereafter, the seller can give notice that the contract has been terminated due to the breach of contract.
When a buyer has not met a condition or contingency and time is of the essence, then the seller should decide whether or not to terminate the contract based on the breach or perhaps propose an amendment extending the deadline, consulting with an attorney as needed. There is no specific deadline under the law for the seller’s decision, but it is strongly advised that the seller act sooner rather than later. If the seller takes no action and later attempts to terminate the contract, a court may determine if the seller waived his or her right to cancel the contract. Typically, if the parties close, a court would find that the seller waived the right to end the contract.
Training pointer: Keep on top of the parties’ time frames because a missed deadline can cause the transaction to come to an abrupt end.
Resources
Tracy Rucka is Director of Professional Standards and Practices for the WRA.