|Legal Hottips - October 3, 2011
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In this Issue:
Reduced FHA Loan Limits
Congress failed to extend the FHA and GSE loan limits. As a result, those limits declined in 669 counties in 42 states effective October 1, 2011, including FHA loan limits in some Wisconsin counties. The new limits are equal to 115% of median home price (down from 125%), and the high cost gap fell from $729,750 to $625,500. NAR continues to work with Congress to get the higher limits restored.
NAR has a guide available to determine the new loan limits available on REALTOR.org @ http://bit.ly/rdMC6x
REALTOR Safety Tip #5 — Open house: it ain’t over till it’s over
Don’t assume that everyone has left the premises at the end of an open house. Check all of the rooms and the backyard prior to locking the doors. Be prepared to defend yourself, if necessary.
Review the REALTOR Safety Resources Kit @ www.REALTOR.org/Safety for additional safety pointers and resources.
Hottips for October 3, 2011
Legal Hottips – October 3, 2011 – Contract Issues and Forms
Question: A buyer wrote an offer on REO property. The buyer received a counter-offer proposing new terms, but the counter-offer was not signed by the seller. The buyer accepted the counter-offer within the stated timeframe and delivered it back per the terms of the contract. The buyer has now been told submit his highest and best offer. Wasn’t a contract created when the buyer accepted the seller’s counter-offer?
No. There is never a legal binding contract under Wisconsin law until there is a written agreement signed by both parties. Wisconsin law is clear about binding acceptance: a seller’s acceptance must be in writing and delivered to meet the requirements for conveyances of real property pursuant to Wis. Stat. § 706.02.
Acceptance is defined in the WB offers as when all the parties have signed an identical copy of the offer. Timelines running from the time of acceptance require evidence that the seller has signed the offer. If the binding acceptance date passes without the signed offer returned to the buyer, the buyer may continue the negotiations by initiating a counter-offer for the seller’s signature and delivery.
A licensee may indicate to the buyer that the REO asset manager or seller is giving favorable consideration to the buyer’s offer, but that the offer cannot be valid until it is signed and delivered. If a buyer has any questions regarding the buyer’s legal rights or the status of the buyer’s offer, the buyer should be referred to legal counsel for appropriate advice.
READ MORE ABOUT IT:
Date Created: 10/3/2011
Legal Hottips – October 3, 2011 – Offer to Purchase
Question: The seller received an offer on a bank-owned (REO) property he had listed. The buyer’s agent included a home warranty in the WB-11 Offer to Purchase. However, the REO addendum supersedes the offer, and the bank did not acknowledge the home warranty in their paperwork. The transaction went to closing. Two months after closing the listing broker received an email from the buyer’s agent requesting that the listing broker pay for the home warranty. Is the seller still responsible for the home warranty if it was not referenced in the bank addenda and paperwork? If so, the buyer’s agent was responsible for ordering the warranty per the WB-11. Would it be the buyer’s agent’s responsibility to make sure it was on the HUD-1? Does this come back completely on the seller or the listing agent as an expense if there was no home warranty addressed in the bank’s paperwork?
The offer to purchase, including all incorporated addenda, controls the transaction between the parties. It may be necessary to have legal counsel review the specific terms and conditions of the REO addenda to determine if, in fact, the request for the seller-provided home warranty was superseded or eliminated. Generally speaking, the terms and conditions of an addendum will predominate and control over all the standard provisions of the offer. It is more difficult to determine what controls when a provision addressing one issue such as a home warranty is written into the offer or appears in an offer addendum, and is also addressed in a second addendum such as a REO addendum.
There are multiple parties who could have addressed the home warranty issue at the time of closing including the buyer, the seller, the listing and buyer’s agents, as well as the broker/employers who are, per Wis. Admin. Code § RL 17.08(2), responsible for the preparation and correctness of all entries on closing statements.
The parties and brokers may try to negotiate a solution regarding the home warranty or the parties may be referred to their attorneys for legal advice.
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Date Created: 10/3/2011
Category: Offer to Purchase – Addendum
Legal Hottip – October 3, 2011 – Listing Contract
A letter was sent to an expired seller/client in a timely manner describing the protected buyers; the listing company had showed them the property and negotiated with them for the seller during the listing contract term. One of the showing agent’s buyer’s names was not disclosed in time to meet the 3-day deadline. The listing agent has been taught to put the name of the showing agent who worked with the buyer on the letter under those circumstances.
The listing is now active with another company, that buyer has written an offer, and the present listing company’s broker is claiming that she should present the offer to the sellers because the name of agent is not sufficient to protect the former listing company. The showing agent has not shown the property to the buyer during the term of the new company’s contract. Is that buyer protected?
The Extension of Listing section (lines 61-65 of the WB-1 Residential Listing Contract) coupled with the definition of a Protected Buyer (lines 220-229 of the WB-1) describes the listing protection process. Buyers may be protected for listing protection in one of four ways. If (1) the buyer submitted a written offer to purchase or (2) negotiated directly with the seller, the listing protection is automatic and the first listing broker would not have been required to perform any additional steps to protect the buyer for the override period. If, during the term of the listing (3) the buyer attended an individual showing or (4) “negotiated” with a broker, the buyer will be protected only if the listing broker delivered the buyer’s name to the seller no later than three days after the expiration of the first listing contract. “Negotiated,” for these purposes, means that the buyer discussed the potential terms upon which the buyer might acquire an interest in the property.
A selling agent could not legally provide the name of the buyer if the buyer has indicated his name is confidential information on the agency disclosure form or in some other manner, preferably in writing. According to the terms of the listing contract, if a buyer has requested that his or her identity remain confidential, delivery of a notice identifying the broker with whom the buyer negotiated and the date(s) of any showings or other negotiations can fulfill the “delivery of the buyer’s name” requirement.
If the listing agent provided the cooperating agent’s or broker’s name and other identifying information with regard to the showing or other negotiations, then listing protection may have been established if this was done because that buyer had requested confidentiality. If this information was provided for some other reason, then the establishment of listing protection would be unlikely.
Read More About It:
See pages 5-6 and 8-9 of the October 2007 Legal Update, “WB-1 Listing Contract – 2008 Revisions” @ www.wra.org/LU0710. For additional information regarding listing protection see pages 8-10 of the February 2004 Legal Update, “Listing Procedures for the Prudent Broker,” @ www.wra.org/LU0402.
Date Created: 10/3/2011
Category: Listing Contracts – Listing Protection
Legal Hottip – October 3, 2011 – Listing Contracts
Question: The broker exclusively sells businesses, many without real estate. The broker uses the WB-6 Business Listing Contract and is having difficulty collecting commissions. The broker understands this is a personal services agreement where the individual that executes the listing contract is responsible. In investigating the collection of this money, a seller/attorney is claiming that he is not personally liable. How can this be resolved?
The listing contract must be signed by someone agreeing to pay a commission. The law does not require that all the owners sign a listing contract in order for the listing contract to be enforceable against the owner who does sign. For example, a husband signing a listing can be liable for a commission to a broker who successfully procures a buyer even if the wife is also on title. In the real world though, a listing contract without the signature of all owners is a disaster waiting to happen. Prior to accepting a listing signed by fewer than all sellers, counsel should be obtained regarding the myriad of potential problems including disclosure duties owed prospective purchasers, homestead law, marital property law, etc.
Whether a business owner is personally liable for commission will depend, in part, on how the listing contract was entered into. If, for example, the individual signed only as a representative of the entity, there may be no personal liability for the commission. For example, the seller could enter into a listing where the individual signs twice, once as a representative of the entity and again in an individual capacity. If the seller only signed once and the seller’s signature was as a representative of the entity only, then it may be that only the entity, and its assets and resources, is bound and liable.
READ MORE ABOUT IT:
See pages 5-9 of the May 2004 Legal Update, “Avoiding Liability When Signing and Making Referrals,” @ www.wra.org/LU0405 for additional pointers.
Date Created: 10/3/2011
Category: Listing Contracts – Signatures
Legal Hottip – October 3, 2011 – Offer to Purchase
Question: If an offer is submitted and the seller signs or initials the offer accepting or countering it, can the seller return only the signature page or does the offer need to be emailed or faxed back in its entirety? The licensee’s understanding is that the entire offer has to be returned when it is accepted or countered; is this correct?
For proper legal delivery of the accepted offer, the entire offer with all pages, initials and signatures should be returned. The DSPS considers it incompetent practice for a licensee to return less than all of the pages of an offer when delivering the offer. Even when there has been no modification to the “boilerplate” pages, minimum standards of competent practice require returning all pages, including all addenda.
The same is true if the offer is countered or rejected. One good rule of thumb is that every contractual document should make a round trip from one party to the other and back again. Wis. Admin. Code § RL 15.02 requires that the parties receive exact and complete copies of all transaction documents.
READ MORE ABOUT IT:
Wis. Admin. Code § RL 15.02 states: “(1) A broker or salesperson shall promptly provide an exact and complete copy of any document utilized in real estate practice to any person who has signed the document. (2) A broker or salesperson shall promptly distribute to the following persons exact and complete copies of offers to purchase, amendments to contracts of sale, counter-offers, exchange agreements, or grants of option which have been accepted and signed by all parties: (a) the seller, (b) the buyer, (c ) the listing broker, (d) the selling broker.”
Date Created: 10/3/2011
Category: Offer to Purchase – Miscellaneous
BPOs: The Agent’s Role in the Valuation Process – Class scheduled October 25, 2011 – Wisconsin REALTORS Association, Madison, WI
With the increased use of Broker Price Opinions (BPOs) by market participants, the National Association of REALTORS® has launched a new certification, Broker Price Opinion Resource (BPOR). Whether you are experienced at preparing BPOs or are new to the business, this course will provide you with the know-how to prepare professional and accurate BPOs.
With this training, you will be able to:
To earn the certification, you need to complete the core course and a free one-hour webinar.
For additional information and to register, visit www.wra.org/bpor_overview
CRS201 – Listing Strategies for the Residential Specialist - recently revised!
This course will help you identify the motivations and concerns of today’s sellers and help them close the deal. You will learn real-world solutions from leading professional, Gee Dunsten, and meet other top agents for prime networking opportunities.
With CRS 201, you will:
If you have already completed the CRS201, you can audit this updated course at a reduced fee.
This class will be held October 26-27, 2011 at the WRA, Madison, Wisconsin. Register by October 12, for early pricing ($235). Wisconsin CRS Chapter Members receive a $20 discount.
This course is co-sponsored with the Wisconsin CRS Chapter.
For additional information and to register, visit www.wra.org/crscourses or call 800-279-1972.
Publication of the Week: New to the WRA library! Endless Referrals
Ready to turn casual contacts into solid sales opportunities? Endless Referrals provides a system for putting together the marketing aspect of your business in a way that eliminates wondering who to contact next for lead-prospecting. Maximize daily contacts, utilize online and off-line tools, leverage your relationships and generate ongoing sales opportunities to develop a large and diverse group of people who gladly and continually refer a lot of business to you. Customize Endless Referrals’ innovative definitions on posture, inventory and commodities to cultivate your most effective business model.
To learn more and order, please visit www.wra.org/PUB119.
|This Wisconsin REALTORS Association Best of the Legal Hotline service is provided for you by the WRA’s Legal Affairs Department. The service should be considered a general statement of applicable legal principles. Given this format, it is impossible to fully address all potential legal issues which might apply in any particular situation. A determination of any individual’s legal rights in a transaction can only be obtained after complete analysis of the law and its applicability to the particular fact situation. Please contact the WRA Legal Hotline if additional information is needed, or private counsel, if legal advice is needed. Thank you for using the Wisconsin REALTORS Association Designated REALTOR Best of the Legal Hotline service.Debbi Conrad
Senior Attorney and Director of Legal Affairs
Wisconsin REALTORS Association
4801 Forest Run Road Suite 201
Madison, WI 53704
Phone: 608-241-2047; 800-279-1972
WRA Legal and Public Affairs Department
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