Closing Statements Match Terms of Offer Contracts

If the buyer and seller agree in their contract that the purchase price shall be $300,000 the closing statement must show a sales price of $300,000. We all agree on that. If the contract states the Seller will credit the Buyer $1,500 for closing costs the closing statement will show a credit of $1,500 from Seller to Buyer. What if the Seller’s agent and Buyer’s agent correspond (by phone, text, email, in person) and agree that the credit will be $1,000 instead of the $1,500 the buyer and seller agreed to in writing?  The closing statement must reflect the terms of the Offer and the terms of the Offer must be in writing  using approved forms as long as Wisconsin Real Estate Licensees are involved. $1,500 is the only agreement the buyer and seller have. That’s the amount that has to be on the closing statement.

What about the situation where the buyer’s broker and listing broker agree to contribute money to the transaction by lowering the broker’s commission? Assuming the Offer to Purchase includes a statement where buyer has directed buyer broker to reject listing broker’s offer of compensation, and have the Seller pay the buyer’s broker at closing (assume 3.0% of the purchase price), the Offer to purchase must be amended to change the 3.0% to an amount less than 3.0%. If the Offer is not accepted a counter offer is the proper form. If the Offer is accepted then the buyer and seller must amend the Offer. An appropriate statement for the counter offer or amendment where the buyer’s broker is accepting $1,000 less to improve the Seller’s bottom line could be:

Addendum A, page 1. Buyer Broker Commission: Change 3.0% to 3.0% minus $1,000.

Nothing else in the Buyer Broker compensation contingency of the Offer is changed. Buyer is still directing the buyer broker to reject the listing broker’s offer of compensation. The only change is that the seller is not paying buyer broker 3.0%, they are paying 3.0% less $1,000.

The listing broker, selling broker, title company, lender, closing agent want to be careful to make sure all of the agreements the parties have with respect to money are documented and signed by the buyer and seller.

Obviously, a listing broker who reduces the commission the seller is to pay at closing will use an amendment to the listing contract to document the commission change. The title company receives the listing contract and amendments to that contract as well.

 

 

Author: Tom Meyer Real Estate Broker, Madison, WI

I believe every every Offer to Purchase can present the unique ability of the person the contract is written for. The person who is most compelled to be cooperative, most qualified, most sincere, most committed, least risk adverse, can have an Offer drafted to show their true ability and commitment. Home sellers are likely to look favorably upon those offers which give them the most comfort. Licensees who know how to craft Offers as unique as the individual buyer are worth their weight in gold.

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