As the market remains competitive, both listing agents and buyer agents are trying to navigate it in a way that is most beneficial to their respective parties. Some of the emerging agent practices are clever ways to advance a party’s interest and would be considered appropriate, while other trends are potential violations of license law to be avoided. 

Disclosing offer terms

An agent drafted an offer for a buyer on a property listed with a firm. There were several offers, and the seller rejected the buyer’s offer. The listing agent sent out a communication to the agents who submitted offers that were rejected. The listing agent provided a summary of the offers that the seller received. 

Summary of offers

• 18 offers were received
• 18 were over the list price of $285,000
• 4 were cash offers
• 15 waived the Inspection Contingency
• 6 had partial appraisal gap coverage
• 6 waived the Appraisal Contingency
• 3 had escalation clauses 

Further, the listing agent invited the buyers with rejected offers to counter their own offers as secondary. 

Listing agents are permitted but not required to disclose the existence of other offers. A seller, of course, can restrict an agent from disclosing the existence of other offers. If a seller has not restricted such disclosure, the listing agent can further disclose that the offers are subject to contingencies, or the existence of a bump clause. The listing agent should not have disclosed that offers were over list price, offers were cash, or the specific nature of contingencies either included or waived. Similarly, the listing agent should not have disclosed specific terms such as including appraisal gap coverage and escalation clauses. 

The Wisconsin Administrative Code and the REALTOR^® Code of Ethics regulate the sharing of information about pending offers on a property. Wis. Admin. Code § REEB 24.12(1) states, in relevant part, “A licensee may, but is not required to, disclose information known by the licensee regarding the existence of other offers on the property, the fact that a seller has accepted another offer, that the offer is subject to contingencies and that the offer is subject to a clause requiring removal of certain contingencies upon the occurrence of an event such as receipt, acceptance or conditional acceptance of another offer.” Therefore, unless the seller has required the agent to keep any information about offers on the property confidential, the agent may disclose the existence of other offers.

Standard of Practice 1-15 provides, “REALTORS^®, in response to inquiries from buyers or cooperating agents shall, with the sellers’ approval, divulge the existence of offers on the property. Where disclosure is authorized, REALTORS^® shall also disclose, if asked, whether offers were obtained by the listing licensee, another licensee in the listing firm, or by a cooperating broker. (Adopted 1/03, Amended 1/09)” Therefore, with the seller’s approval and prior to the acceptance of an offer to purchase, the agent shall disclose information about other offers. If, however, the seller directs the agent not to disclose, the agent may document this fact and follow the instructions of the seller. 

Standard of Practice 3-6 provides that REALTORS^® must disclose the existence of accepted offers to agents seeking cooperation. Therefore, unless the seller has indicated that this information is confidential per Wis. Stat. § 452.133(1)(d), the agent would disclose accepted offers. Any confidentiality directive should be in writing in the listing contract, or an addendum or amendment thereto, or on a copy of an agency disclosure form.

In summary, REALTORS^® must disclose the existence of other submitted offers if asked and if the seller has authorized the disclosure of this information. When a property is listed, REALTORS^® should discuss with sellers whether they want the existence of submitted offers disclosed to buyers. If they do, REALTORS^® should obtain the seller’s written authorization in the listing contract or an addendum or amendment thereto. The authorization may specify whether the disclosure is authorized only when the agent is asked, or whether the agent should volunteer the information. Absent a seller’s directive ordering or prohibiting the listing agent’s disclosure of the existence of submitted offers, REALTORS^® still have the discretion to choose whether to disclose the existence of submitted offers per Wis. Admin. Code § REEB 24.12.

Seller making offers contingent on finding a property

In this market, some sellers are reluctant to list a property for fear they will not be able to purchase another property due to competition and low inventory. As sellers are currently calling the shots in many transactions right now, a seller may have the luxury of convincing a buyer to agree to make the buyer’s offer contingent on the seller finding a property. If the seller has already identified a property, the following clause or something similar could be countered into a buyer’s offer and protect the seller from having to move forward if something happens with the seller’s purchase. 

Purchase of other property by seller
This Offer is contingent upon the closing of the purchase by Seller of the property located at ____________________________________________ on or before ___________________. If Seller’s purchase transaction does not close by the stated deadline, Seller may, at Seller’s option, terminate this Offer by delivery of written notice of termination.

If the seller has an accepted offer on a property but would still like the protection of not having to move forward after accepting an offer from a buyer, the following clause could be countered into a buyer’s offer. 

Purchase of other property by seller: seller obligated to close on other property (alternate)
Seller’s obligation to conclude this transaction is conditioned upon the closing of Seller’s purchase of property located at _______________________________ ________________________________ for which Seller is now under contract. If, through no fault of Seller, Seller is unable to close on such property no later than _______________________, Seller may deliver written notice of termination and all earnest money shall be returned to Buyer. Seller may, prior to the above date, deliver written notice to Buyer waiving this provision.

The clauses cited above are from Wisconsin Real Estate Clauses (2019 Edition) and may be used in an offer to make the offer contingent on the seller purchasing another property. For more information about Wisconsin Real Estate Clauses (2019 Edition) and all the helpful pre-drafted clauses available therein, visit www.wra.org/pub280. It is also available electronically at www.wra.org/Transactions. 

Buyers bringing inspectors through during a showing 

Agents have been reporting a recent trend of buyers bringing a home inspector to a showing of the property to offer comments about the property. A buyer bringing a home inspector, contractor or another adviser through a property during a showing is not prohibited unless the seller has provided written instruction otherwise. 

Wis. Admin. Code § REEB 24.13(2) provides that, “Listing firms shall permit access to listed property for showing purposes, to all buyers and persons assisting or advising buyers, without unreasonable delay, unless the buyer’s or other person’s access is contrary to specific written instructions of the seller.” Arguably a home inspector, contractor or another adviser would be “persons assisting or advising buyers,” and therefore their presence is authorized unless the seller has provided written instructions to the contrary. 

If a home inspector produced a document for the buyer reflecting the inspector’s impressions gathered during a showing, that would not need to be shared with the seller unless it was an “official” home inspection report produced as a result of a contingency in an offer that was accepted or another bilateral agreement between the parties. The terms of the offer to purchase specify at lines 190-191 of the WB-11 Residential Offer to Purchase that the buyer “agrees to promptly provide copies of all inspection and testing reports to Seller.” 

There are some factors that a buyer should consider, though, if choosing to bring an inspector along for a showing. If the buyer later makes an offer that includes an inspection contingency, the buyer does not get to object to defects that the buyer already knew about regardless of how the buyer gained that knowledge. The terms of the offer to purchase specify at lines 210-211 that for purposes of the Inspection Contingency, defects “do not include structural, mechanical, or other conditions the nature and extent of which Buyer had actual knowledge or written notice before signing this Offer.” A seller with surveillance equipment on the property could easily record discussions between the buyer and a home inspector during a showing and use those recordings to establish that a buyer did have actual knowledge of some or all the defects the buyer is objecting to after completing a home inspection as a step in the Inspection Contingency.

Now would be a good time to reiterate how important it is for a buyer to consider the benefits of including a home inspection in their offer to purchase and the risks associated with not having an inspection. Agents, of course, must draft contracts according to the instruction of the party; so, if a buyer is instructing an agent not to include an inspection contingency, the agent must draft accordingly. However, it is highly recommended that the agent take the opportunity to educate the buyer about the benefits of having an inspection and the risks of forgoing it. Understandably, buyers are getting creative to compete with other buyers, so one alternative to consider is for a buyer to draft an offer that gives the buyer an opportunity to have an inspection but does not make the offer contingent upon it. That way, the seller is assured that the buyer will not try to get out of the transaction based on the condition of the property, but the buyer will know what they need to know about the property and can begin planning to address any defects after closing. 

Another alternative to forgoing an inspection entirely is to consider making the offer contingent on the inspection but setting some dollar limit under which a buyer will not object, or a category of defects to which the buyer will not object. For example, a buyer will only issue a notice of defects if the sum of needed repairs exceeds $X, and the buyer decides what $X is, based on the buyer’s financial ability to absorb the cost to repair defects. Alternatively, the buyer could structure the offer where the buyer will only issue a notice of defects if defects are found in the electrical system or perhaps the heating, ventilation and air conditioning systems, but will address any other defects after the transaction closes. Presenting options such as these to the buyer will offer the buyer an alternative to the “all or nothing” treatment of the Inspection Contingency. 

An agent working with a buyer who does not want to include an inspection contingency may also advise the buyer that some sellers may counter the buyer’s offer to include an inspection contingency on the advice of the seller’s attorney. The attorney may be advising the seller to do this to limit seller liability for conditions discovered after the transaction has closed. If the buyer had a home inspection and the home inspector did not discover a condition issue during the inspection that is discovered after the transaction has closed and the buyer sues the seller, the seller may be able to argue that the buyer ought to be able to rely on the inspector’s report and not the seller’s assessment of the property as represented in a Real Estate Condition Report. 

If the agent’s efforts to educate the buyer about the value of a home inspection do not persuade the buyer to have one, the agent is encouraged to have the buyer complete the WRA-BAR form, Buyer Acknowledgment of Risk When Not Having a Home Inspection, which is available in Transactions (zipForm Edition) as well as in the WRA PDF Forms Library for library subscribers. The form asks the buyer to affirmatively acknowledge that the buyer is making the decision not to have a home inspection against the advice of their agent. Additionally, the form includes a “hold harmless” provision so that if the buyer later regrets their decision not to have an inspection, the buyer may be less likely to try to sue the agent and the agent’s firm for this decision. 

“Dear Seller” letter in showing feedback

The discussion around the “Dear Seller” letters has been ongoing for some time now. In these letters, buyers often include information about the buyer or the buyer’s family, career, hobbies and other bits of information to induce the seller to pick that buyer’s offer over other buyers’ offers. The big concern with these letters is the great potential for fair housing violations by the seller — and potentially the listing agent, depending on how the letters are used — if a seller chooses an offer on some bit of information related to the buyer’s membership in a protected class such as religion, familial status, race or sexual orientation, for example. 

Recently, agents have been noticing that instead of buyers including these “Dear Seller” letters with an offer or as an addendum to the offer, which has generally been discouraged by most listing firms and often the sellers themselves, buyers have been including comments in the showing feedback that offers up information about the buyer’s membership in the protected classes, such as, “Loved the property. Can’t wait to see my family in there,” or “The lovely dining room is perfect for my family and me to celebrate our traditional Easter brunch.” If a buyer is requesting to offer feedback such as the aforementioned, it should generally be discouraged as the risk for potential fair housing violations is high. 

For more information about “Dear Seller” letters, visit www.wra.org/DearSeller. 

What new trend will this competitive market reveal next? Who knows, but whatever it is, all of us at the WRA will do our best to let you know about it and whether it is a practice to be embraced or avoided.