Later this year, the new WB-11 Residential Offer to Purchase is expected to be available for optional use by Wisconsin real estate licensees. The mandatory-use date for the new form is projected to be January 1, 2010.
The current WB-11 form was last revised in the late 1990s and became mandatory for use on November 1, 1999. Just last year, residential, vacant land, condominium and commercial listing contracts along with the WB-36 Exclusive Buyer Agency Agreement were updated. Although the existing offer form has generally served REALTORS® well, the time has come for an update.
How are new forms developed? Pursuant to state statute, the Department of Regulation Licensing prepares and approves these forms for use by real estate licensees. Like form revisions in the past, the bulk of the discussion and debate on revisions to the new forms takes place at meetings of the DRL Real Estate Contractural Forms Advisory Committee. Established under Wis. Stat. Ch. 452, the Advisory Committee reviews any changes made to DRL-approved forms and reports to the DRL Real Estate Board and to DRL Secretary Celia Jackson. The Advisory Committee is appointed for one-year terms by Secretary Jackson and is comprised of real estate licensees and attorneys, including REALTOR® members.
In addition, the Wisconsin REALTORS® Association Forms Committee, chaired by Dwight Kruse, has reviewed drafts of the forms and provided valuable recommendations to the Advisory Committee — many of which have been adopted into the forms. 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 continues, we wanted to give you a preview of several sections of the contract that are expected to change and allow you an opportunity to offer your comments and suggestions to the WRA Forms Committee.
Who is drafting the offer?
One of the very first items of discussion was line 1, which currently reads “BROKER DRAFTING THIS OFFER ON ___ [DATE] IS (AGENT OF SELLER) (AGENT OF BUYER) (DUAL AGENT) STRIKE TWO.” Ever since July 1, 2006, when the changes to Wis. Stat. Ch. 452 under the Agency Modernization Law became effective, this line has been problematic: How do I fill it out if the property is listed with another broker and I am the subagent of the listing broker? How do I fill it out if I am acting as a designated agent? How do I fill it out if I am a salesperson and not a broker?
After considering a number of different options, the DRL Forms Advisory Committee has currently adopted the following:
“LICENSEE DRAFTING THIS OFFER ON __________ [DATE] IS (AGENT OF BUYER) (AGENT OF SELLER/LISTING BROKER) (AGENT OF BUYER AND SELLER) [STRIKE AS APPLICABLE].”
This new language recognizes that the agent drafting the offer may not be licensed as a broker and thus the change to “Licensee.” It also provides enough options to address all possible representation capacities of the licensee-drafter. Remember, however, if the licensee is the buyer under the offer to purchase, and thereby not acting in an agency capacity, the licensee would cross out all of line 1.
Delivery of documents and written notices
As we know, delivery of documents and written notices is extremely important in an offer to purchase. It determines when binding acceptance takes place; it can determine if a withdrawal of an offer or counter-offer has been timely made; and it can be important with respect to satisfaction/removal of contingencies. Several changes have been recommended for the new form:
“Unless otherwise stated in this Offer, delivery of documents and written notices to a Party shall be effective only when accomplished by one of the methods specified at lines xx — xx. NOTE: Lines xx-xx are optional. THE PROVISIONS ON LINES xxx THROUGH xxx ARE A PART OF THIS OFFER IF MARKED, SUCH AS WITH AN “X.” THEY ARE NOT PART OF THIS OFFER IF MARKED N/A OR ARE LEFT BLANK
(1) Personal Delivery: giving the document or written notice personally to the Party, or the Party’s recipient for delivery.
(2) Commercial Delivery: depositing the document or written notice fees prepaid or charged to an account with a commercial delivery service, addressed either to the Party, or to the Party’s recipient for delivery if named at lines xx or xx, for delivery to the Party’s delivery address at lines xx or xx.
(3) Fax. fax transmission of the document or written notice to the following telephone number:
Buyer: (____) __________________ Seller: (____) ______________
(4) US Mail: depositing the document or written notice postage prepaid in the U.S. Mail, addressed either to the Party, or to the Party’s recipient for delivery if named at lines xx or xx, for delivery to the Party’s delivery address at lines xx or xx.
(5) Email: electronically transmitting the document or written notice to the party’s email address, if given below at lines xx or xx. If this is a consumer transaction where the property being purchased is used primarily for personal, family or household purposes, each consumer providing an email address below has first consented electronically to the use of electronic documents, email delivery and electronic signatures in the transaction, as required by federal law.
Seller’s recipient for delivery (optional): ______________________
Delivery address for Seller: _________________________________
Email address for Seller (optional): __________________________
Buyer’s recipient for delivery (optional): _____________________
Delivery address for Buyer: ________________________________
Email address for Buyer (optional): _________________________
The new language makes it clear that personal delivery is always a permissible means of delivery. Thereafter, the parties have the option as to which other means of delivery are acceptable (they can choose as many as they like). Commercial delivery and the U.S. Mail have been separated — a number of REALTORS® told the WRA Forms Committee that they counsel their customers and clients away from the U.S. Mail method due to its frequent uncertainty. And the new offer is expected to give the buyer and/or seller the option to use email as a means of delivery, provided the party has first consented electronically as required by federal law. See the February 2008 Legal Update “Electronic Commerce and Email Delivery,” online at www.wra.org/LU0802, for the forms and procedure for this electronic consent.
Closing prorations
Often questions to the WRA Legal Hotline ask “When a proration is calculated, what value is used — the value at the time of the offer to purchase, the value at the time of closing, some other value?” Under the new form, prorations at closing (i.e., real estate taxes, rents, property owner’s association assessments, fuels, etc.) will be based on the values as of the date of closing. Of course, if the parties wish to agree on a different value, they are free to draft their offer to reflect their agreement.
A new provision used in addenda in many areas of the state with reported success helps address the parties’ concerns over what happens if the real estate taxes change substantially in the year of closing and the proration at the time of closing ends up favoring one party over the other. The following option will most likely be available for the parties to chose in addition to their agreed upon closing tax proration:
“Buyer and Seller agree to re-prorate the real estate taxes, within 30 days after the actual tax bill is received for the year of closing, with Buyer and Seller each owing his or her pro-rata share. Buyer and Seller agree this is a post-closing obligation and is the responsibility of the Parties to complete, not the responsibility of the real estate brokers in this transaction.”
Appraisal contingency
A new optional contingency is anticipated that will provide the buyer with the ability to condition his or her offer on the property appraising for at least as much as the agreed upon purchase price:
“This Offer is contingent upon the Buyer or Buyer’s lender having the Property appraised by a Wisconsin licensed or certified independent appraiser that indicates a market value for the property equal to or greater than the purchase price. If the appraisal report does not indicate a market value equal to or greater than the purchase price, Buyer may terminate this Offer by delivering to Seller, within _____ days of acceptance, a copy of the appraisal report and a notice of termination of the Offer. Otherwise this contingency shall be deemed satisfied.”
A recent suggestion is to include an optional “right to cure” for the seller — in other words, give the seller the option to reduce the purchase price to the appraised value should the appraised value be lower.
Distribution of information
As we know, Fannie Mae, Freddie Mac and the Federal Housing Administration find it necessary to require additional information in appraisals, especially relative to properties located in declining markets. In some cases, seller concessions may inflate sale prices when compared to other sales in the neighborhood. As a result, licensees may be asked to disclose information regarding the sale. How do we assure that licensees have the proper authorization to disclose? New language is expected to address this issue (new language is underlined):
"Buyer and Seller authorize the agents of Buyer and Seller to distribute copies of the Offer to Buyer’s lender, appraisers, title insurance companies and any other settlement service providers for the transaction as defined by the Real Estate Settlement Procedures Act (RESPA). Buyer and Seller authorize the agents of Buyer and Seller to report sales and financing concession data to multiple listing service sold databases and to provide this and related information regarding seller contributions, incentives or assistance, and third party gifts to appraisers researching comparable sales, upon inquiry.”
Kevin King is General Counsel and Debbi Conrad is Director of Legal Affairs for the WRA.
Editor’s note: The DRL became the DSPS in 2011. Information above may not be current.