Wisconsin REALTORS® Association - Legal Hotline Hottips
Legal Hottips - February 16, 2009 Conservation Reserve Program (CRP) A Conservation Reserve Program (CRP) contract is a contractual agreement with USDA that continues for a period of 10 to 15 years. It is the responsibility of the participant to ensure that the land continues in the CRP program for the length of the contract. If land is sold and the new owner does not succeed to the contract, the previous owner will be required to refund all annual rental payments with interest from the date of disbursement, cost-share payments with interest from the date of disbursement, and also will be charged liquidated damages which equal 25% of the annual rental payment on the acres involved. This can add up quickly and be very expensive!
Any questions concerning the Conservation Reserve Program can be directed to the local FSA offices, which are located in USDA Service Centers throughout the state. FSA contact information is also available at http://www.fsa.usda.gov/FSA/stateOffices?area=stoffice&subject=landing&topic=landing. 1.) Commissions - Miscellaneous Commission Issues QUESTION: What can a listing broker do to protect against the lender in a short sale transaction, or the court in certain circumstances, requiring a reduction of commission as a condition of approving a sale of a MLS listed property? Can the listing broker simply put "Call for details?" ANSWER: Pursuant to the policies and procedures of the National Association of REALTORS® multiple listing services cannot publish listings that do not include an offer of compensation expressed as a percentage of the gross selling price or as a definite dollar amount, nor can they include general invitations by listing brokers to other participants to discuss terms and conditions of possible cooperative relationships. However, under the 2009 NAR model MLS rules, a MLS, at its discretion, may adopt rules and procedures enabling listing brokers to communicate to potential cooperating brokers that gross commissions established in listing contracts are subject to court approval; and that compensation payable to cooperating brokers may be reduced if the gross commission established in the listing contract is reduced by a court. In such instances, the fact that the gross commission is subject to court approval and either the potential reduction in compensation payable to cooperating brokers or the method by which the potential reduction in compensation will be calculated must be clearly communicated to potential cooperating brokers prior to the time they produce an offer that ultimately results in a successful transaction. In addition, the 2009 NAR model MLS rules indicate that a MLS must give the listing broker the ability to disclose to potential cooperating brokers the possibility of a short sale. As used in MLS rules, short sales are defined as a transaction where title transfers, where the sale price is insufficient to pay the total of all liens and costs of sale and where the seller does not bring sufficient liquid assets to the closing to cure all deficiencies. An MLS may, as a matter of local discretion, require listing brokers to disclose potential short sales when they know a transaction is a potential short sale. In any instance where a listing broker discloses a potential short sale, they must also be permitted to communicate to other participants how any reduction in the gross commission established in the listing contract required by the lender as a condition of approving the sale will be apportioned between listing and cooperating brokers. All confidential disclosures and confidential information related to short sales must be communicated through dedicated fields or confidential "remarks" available only to participants and subscribers. 2.) Commissions - Miscellaneous Commission Issues QUESTION: In a recent WRA publication, the co-broke commission was discussed as it relates to a short sale. Many times the lender requires that the total commission to be discounted. For example, a listing is written for a 6% commission and the offered co-broke commission is 2%. If the lender approving the short sale lowers the listing broker's commission to 5%, the listing broker would like to not take the brunt of the entire 1% discount and feels that the co-broker should "share the pain." Would the following language be appropriate? "Co-Broke to be 2% or 1/3 of total commission allowed by lender, whichever is lower." The broker would like some guidance or better language suggestions for disclosing the broker's intent to "share the pain." ANSWER: The first step in a short sale situation is to obtain the seller's permission to disclose within the MLS confidential remarks section that this is or may be a short sale, subject to the lender's approval. Then, the listing broker may also disclose how any reduction in commission required by the lender as a condition of the lender's approval will be apportioned between the listing broker and the cooperating broker. One way is as described above. Another way might be to inform MLS participants that the cooperating broker's commission shall be reduced by an amount equal to ____% of the reduction required by the lender. Using the example above, the listing broker would state that the "cooperating broker's commission shall be reduced by 33% of the reduction required by the lender." Note: the co-broke percentage of the lender-mandated commission reduction can be in any amount - it is not required to be in the same percentage as the division of the commission initially offered to cooperating brokers. There is no one way to make this disclosure. The key is to do so in advance of the cooperating broker producing an offer in a manner that allows the cooperating broker to determine in advance the potential compensation being offered by the listing broker. The MLS provides a mechanism for such communication but it is not within the MLS' authority to provide the exact wording for these communications. 3.) Offer to Purchase - Withdrawal QUESTION: The agent has a property listed and the seller received an offer that was in the counter-offer stage (counter-offer in the hands of the buyer). Another offer then came in and the agent notified the first buyer that another offer was coming in (at the time it sounded as if the first buyer was not going to accept the counter-offer). The seller in Louisiana elected to accept the second offer and faxed her acceptance to the agent's office Friday afternoon, which the agent did not realize had come in. The agent also received an accepted counter-offer from the first buyer. How to proceed? ANSWER: The issue for determination is whether there are two binding contracts of sale involving the seller. The seller needs to be advised immediately of this matter and directed to seek the advice of her attorney. It is not within the scope of the agent's real estate license to advise the seller regarding the legal status of either contract or her possible obligations thereunder. Before the agent speaks to either of the other agents who have been working with the buyers, the agent must first get the direction of the seller/client. For future reference, the seller should attempt to withdraw a counter-offer before accepting another offer. A party who has made an offer (or counter-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 in receipt of the offer that the offer is withdrawn. If the notice of withdrawal arrives before a binding acceptance (per the terms of the contract), the offer becomes null and void. Any attempt at acceptance of the offer thereafter (even if prior to the stated time limit for acceptance) will have no legal effect. Notice of withdrawal does not technically have to be in writing. However, the party attempting to withdraw the offer must make certain that proof is available that the offer has not already been accepted. If it can be verified (and hopefully documented) that the offer had not been accepted, then notice of withdrawal is less likely to be challenged. Of course, the licensee should not verbally withdraw offers or counter offers without specific direction from the client or customer. 4.) Offer to Purchase - Secondary Offers QUESTION: An agent has an accepted primary offer on a property that the agent owns. The agent received a secondary offer and served the bump notice to the primary buyer. The primary buyer is going to try to remove the home sale and financing contingency. The secondary offer is a better offer. Can the agent have the primary buyer meet the terms of the secondary offer? ANSWER: A seller may try to renegotiate the terms of an offer with a primary buyer, even if the offer includes a bump clause with specific terms stated. However, the primary buyer is not required to agree to the seller's proposal. If the primary buyer wishes to remain in primary position they only need meet the terms of the bump clause as it exists in their accepted offer. If the primary buyer agrees to the seller's proposed terms, then the parties should amend the offer. It may not uncommon for the buyer to then ask for language in the amendment that the bump clause is removed from the contract so that seller cannot attempt to bump them again in the future. 5.) Offer to Purchase - Presentation QUESTION: A seller would like the broker to list her property, but there is a neighbor to whom she refuses to sell. Can the broker legally list her house and specify that this neighbor cannot buy the home? ANSWER: As indicated in Wis. Admin. Code § 24.13(1) & (2), listing brokers must present all offers to purchase and permit access to listed property for showing purposes to all buyers unless the terms of the offer or buyer's access would be contrary to specific instructions by the seller. The broker may work with the seller to determine exactly what their intentions are. Assuming that there are no fair housing issues, a seller is not required to sell their property to a certain buyer. The listing may direct that no showings are to be allowed for the buyer and no offers from the buyer are to be presented by the broker. Instructions relating to buyer's access must be in writing, and it is recommended that seller instructions relating to offers that are not to be presented also be documented in writing. Debbi Conrad |