Wisconsin REALTORS® Association - Legal Hotline Hottips
Legal Hottips - July 20, 2009 Lifting Listings for Craigslist Consumers are urged to double check with whom they are dealing in online real estate transactions - especially if the other party is making requests such as wiring money out of the country. The Wisconsin Department of Agriculture, Trade and Consumer Protection advises consumers to be cautious about how and where they send money when replying to online ads. REALTORS® may wish to check Craigslist to see if their properties are being advertised without authority. Anyone who has been a victim of an online scam should contact the Consumer Protection Division of DATCP at 1-800-422-7128.
Wisconsin Foreclosure Assistance Resource Center
Wisconsin Neighborhood Advantage Program Apparently the NSP funded programs are a moving target and congressional and HUD changes come in often. Late in June it was announced that the required purchase price reduction to 90% of appraised value for transactions using NSP funds to purchase REO homes would be changed to only require a 1% reduction to 99% of appraised value. The Wisconsin Neighborhood Advantage Program requires a 20% down payment, but only $1,000 need be from the borrower's own funds. Although originally included, duplexes are no longer eligible. Forms are available at
1.) Offer to Purchase - Earnest Money Both agents should have been on top of the earnest money issue. The buyer's agent had an obligation to remind the client of the deadline for earnest money payment. The listing agent had a duty to inform the seller that the earnest money had not been timely received. As for the buyer's demand to have the items left behind removed, this may be an obligation that the seller agreed to - even if the seller did not know that the items were there. Lines 35-36 of the WB-11 Residential Offer to Purchase state, "At time of Buyer's occupancy, Property shall be free of all debris and personal property except for personal property belonging to tenants, or that sold to Buyer or left with Buyer's consent." 2.) Offer to Purchase - Financing Contingency QUESTION: The buyer's lender delivered a "conventional commitment letter" directly to the listing agent and did not go through the buyer or the buyer's agent. Even though they say it is a "preliminary" commitment with conditions, is this proper procedure? Can it be considered a loan commitment letter? ANSWER: The lender should not deliver a commitment letter to anyone without the buyer's prior approval - see lines 168-170 of the WB-11 Residential Offer to Purchase. The buyer should contact the lender and make certain that the lender understands the importance of this. In this case, if the listing agent was designated in the offer to purchase as a recipient for the seller for the delivery of documents and notices, it is entirely possible that this could have been considered a satisfaction of the buyer's loan commitment because it was not accompanied by a notice of unacceptability. The same is true had the listing agent delivered a copy of the commitment letter to the seller before the buyer's agent contacted him and directed not to do so. The term "loan commitment" is not defined in the offer. As such, it may be difficult to assert that any document that says it is a loan commitment, and that is issued by a lender which agrees to provide the loan described in the commitment to the buyer, is not in fact a loan commitment. All loan commitments have conditions or contingencies of some sort. Nowhere in the offer does it say that a written loan commitment cannot contain any conditions or contingencies or that the commitment cannot contain certain kinds of conditions and contingencies. 3.) Offer to Purchase - Miscellaneous QUESTION: The broker has a listing and the seller has an accepted offer. The buyer has a loan commitment, but it is subject to clear title and the buyer will not give the loan commitment until the seller provides the title commitment. So the selling agent asked the listing broker to order title for the property. The date for the loan commitment has passed. The seller does not want to order title until the buyer provides the loan commitment because the seller does not want to pay if the buyer won't close. The closing was scheduled for yesterday and the parties have amended the offer to extend the closing for a week. How to proceed? ANSWER: The obligations of each party are determined by the terms and conditions of the offer as written. Each provision or contingency is independent and breach of contract can occur if either party fails to perform. Per the financing contingency if the buyer does not issue the loan commitment in a timely manner the seller may terminate the offer to purchase by written notice. See lines 171-172 of the WB-11 Residential Offer to Purchase. If the seller does not give notice, the buyer may provide the commitment after the deadline and complete the transaction. Alternately, a buyer can complete the transaction without ever providing the loan commitment. While the loan commitment contains the terms and conditions applicable to the lender's agreement to fund the buyer's transaction, it does not create contract conditions or contingencies between the buyer and the seller. The seller's obligation to provide clear title is contained in the title evidence provisions of the offer at lines 197-212. Under these provisions the seller is required to provide title evidence not less than three business days before closing. The title evidence must show title to the property is merchantable, subject to liens which will be paid out of proceeds and standard title insurance requirements and exceptions. The parties may be referred to private legal counsel for legal advice regarding their rights and obligations per the contract. 4.) Commissions - Procuring Cause QUESTION: Two companies have a commission dispute. In August 2008 there was negotiation on an MLS-listed property and an offer was submitted to the listing company/seller by a cooperating broker. That offer was rejected. The next month the listing agent wrote an offer on the property for the same buyers. The offer was accepted and the transaction has closed. Now the first cooperating broker is claiming to be the procuring cause of the sale. According to the listing agent, the buyers alleged that the cooperating broker refused to write a counter-offer and they didn't have a good relationship. That relationship broke down in two weeks. The broker of the listing company believes that the cooperating broker may be due compensation. However, in the meantime, the listing agent has left the listing company and the cooperating company is pursuing compensation. What about arbitration or mediation? ANSWER: The underlying issue in this question is procuring cause: who caused the buyer to make the offer that resulted in the sale of the property? There is no one act which determines procuring cause - it can only be answered by a full, knowledgeable consideration of all the facts of the case. Arbitration panels will consider whether, under the circumstances and in accord with local custom and practice, the broker made reasonable efforts to develop and maintain an ongoing relationship with the purchaser. Did the first cooperating broker actively maintain ongoing contact with the purchaser or, did the broker's inactivity, or perceived inactivity, cause the purchaser to reasonably conclude that the broker had lost interest or disengaged from the transaction (abandonment). In other instances, a purchaser, despite reasonable efforts by the broker to maintain ongoing contact, may seek assistance from another broker. The panel will want to consider why the purchaser "abandoned" the first broker and whether the broker engaged in conduct which caused the purchaser to terminate the relationship (estrangement). This can be caused, among other things, by words or actions. Panels will want to consider whether such conduct caused a break in the series of events leading to the transaction and whether the successful transaction was actually brought about through the initiation of a separate, subsequent series of events by the second broker. If the brokers cannot negotiate an acceptable settlement, the dispute should be submitted to the local REALTOR® association for resolution by mediation or arbitration. The cooperating broker's claim may be submitted naming the listing firm because the MLS offer of compensation is broker to broker. The filing of an arbitration request must be made within 180 days of the closing or within 180 days after the facts constituting the arbitrable matter could have been known in the exercise of reasonable diligence. If the cooperating broker were successful in the arbitration, the listing broker may need to seek reimbursement from the former agent. Because the listing agent has left the listing company, this situation may best be resolved by requesting local association mediation services. Mediation is a voluntary process whereby parties who have a dispute can work with a neutral mediator to resolve the issue. The mediator's role is to help guide the parties to reach a mutually agreeable solution. The mediator cannot require or force resolution by the parties. Mediation may be conducted by the local association upon request of the parties and may be initiated at any time if the parties agree. Mediation could be held with both brokers and the former agent if all parties agree. Debbi Conrad |