New WB-11 Residential Offer to Purchase: Changes

More of the answers owners typically want to know are right where they should be–on the first page. Price, Binding Acceptance, and Closing date. The definition of a fixture is front and center on page 1, with some clarification tweaks.

An Offer to purchase is as simple as a written form of a conversation a Buyer may have with a Seller. It makes sense the the Offer document would flow from beginning to end the way the conversation would begin and end. Buyer: “I’ll buy your property for this amount, on this day.” Seller: “OK”.

The new WB-11 isn’t that simple, but it is formatted closer to the natural conversation. Highlights:

More of the answers owners typically want to know are right where they should be–on the first page. Price, Binding Acceptance, and Closing date. The definition of a fixture is front and center on page 1, with some clarification tweaks.

Page 2 has long been boiler plate with definitions and explanations. Now it’s a working page where Earnest Money and the rules of Earnest Money disbursement are together.

Page 3 Conditions Affecting the Property use the entire page. The list should be a closer match to the Condition Report items.

Page 4 now has only the Inspection Contingency and the definition of Inspections and Testing. By itemizing the 3 steps a buyer is authorized to take to inspect it’s expected the process of inspection will be better understood. Seller’s right to cure is unchanged.

Page 5 A radon testing contingency is part of the Offer for the first time ever. Good news for the testing and remediation business, not so good for buyers who will have that contingency included without understanding the three day test is unreliable for determining long term exposure, and the fix is almost the same price as the cure. Buyer agents may want to sharpen their Radon issue knowledge before they fall into the habit of checking the test contingency out of habit and costing their client an accepted offer.

Financing Commitment Contingency As long as we can remember, there has been no Contingency to Obtain Financing in any version of the WB-11. By labeling the contingency what it is, a contingency to be able to obtain a financing commitment, if a buyer wants the Offer to be contingent upon getting the money, they will know they have to create that contingency.

The satisfaction of the Commitment Contingency is modified to allow buyer signed commitment letters to be used to satisfy the contingency OR a Buyer’s written direction to deliver. However, a commitment sent by the lender does not satisfy this contingency. Essentially, this change reverts the practice back to pre 2011 and in line with the changes firms incorporated in the Addenda to allow deliverance to be done without a Notice from Buyer.

Default days and amounts have been added to fix the issues that come with leaving blank lines unfilled.

Page 6 Seller Financing: Wisconsin has a unique provision which made 100% of the Offers subject to a Seller’s right to provide financing if the financing as described was unavailable. This is now an optional condition of the Offer.

Non contingent on Financing Offers are not “cash offers”. The revised condition for the Buyer to provide evidence of funds available allows the buyer to provide verification that funds are available at the time of verification, or some other documentation. This change was driven by a need for buyers to bargain for the ability to make a non financing contingent offer when the funds are not available today, but will be available in the future when the sale of their real estate occurs.

Closing of Buyer’s Property Contingency: The forms committees worked to make this provision’s steps easier to understand and to tighten the Buyer’s ability to waive the contingency. A few options for proof of buyer’s ability to close are provided and the term “Bump Clause” is used to head the steps Buyer and Seller will follow once Seller accepts a secondary offer.

Page 7 There must have been a flood of confusion about who pays home owner association one time fees at time of closing. Why this condition was necessary is a mystery. Association fees have always been seller’s responsibility. I’m not sure why this one time fee is treated differently. Buyer’s who agree to pay this will want to know the fee in advance.

Page 8 Special Assessments/Other Expenses: Have you ever wondered what the term “Levied” meant? Wonder no more, it’s defined now.

What happens if an optional provision is completed but the box is not checked? Well, according to page 8, the provision is not part of the Offer unless the box is checked.

Page 9- 10 Foreign Investment in Real Property Tax Act (FIRPTA): Who knew a buyer is responsible for paying up to 15% of the purchase price to the IRS when purchasing a property from a “Foreign Person”. Page 9 not only includes a WARNING, the WARNING includes a provision to allow the Buyer to terminate the Offer, or withhold the 15% if Seller fails to deliver certification of Seller’s Non-foreign status NO LATER THAN 15 DAYS PRIOR TO CLOSING. Special care is needed to make sure this exit clause is closed on 100% of the transactions we are part of.

Page 10 Additional Provisions: We have a total of six lines to include additional provisions and those six lines are all on page 10.

Optional use date is November 1, 2019. Mandatory use date is January 1, 2020. I can’t think of any good reason to continue to use the old WB-11 after November 1.

Disclosure of Other Offers. Do I or Don’t I?

In the category of no-win situations licensees who answer yes or no to the question “Do you have other offers?” is going to look bad to someone who cares about the answer. The REALTOR Code of Ethics, and the State of Wisconsin laws regarding disclosure read separately have something for everybody to point to when they want to accuse a licensee of failing them or failing to meet their expectations. Fortunately, the response which keeps the licensee on the right side of the law can be determined if the people involved in the conversation are willing to follow a path of logical thinking.

The Code of Ethics sets standards and parameters for ethical fair-play. Ethics are inherently subjective to norms. Your standard of ethics may be higher than those in the Code, and you are welcome to practice your standard. Holding others to your superior standard will result in your expectations being unmet time and again. All REALTORS are subject to the Code of Ethics, but all REALTORS do no practice is every state. State law dictates legal practice standards. Legal standards when greater than an Association Ethical Standard take precedence.

When the question is disclosure of other offers or possible other offers the Rule and the Code are going to send you on a tail chasing circle. NAR Standard of Practice 1-15: IN response to inquiries…(REALTORS) shall, WITH THE SELLERS’ APPROVAL, disclose the existence of offers on the property. OK. When the seller approves disclosing the existence of offers a REALTOR MUST disclose. Question: “Do you have any offers on the property?” With the sellers’ approval you must answer YES if indeed you do have offers. Does the listing contract give you automatic approval to disclose you have other offers? No. How will you know if you do or do not have approval from seller? Do you assume you do or you don’t have permission? Murky.

What does the law say? REEB 24.12 speaks to confidentiality. “…a licensee may, but is not required to, disclose information known by the licensee regarding the existence of other offers on the property…”. Where are we now? Do we disclose or don’t we? Depends.

Do we have an ethical and or legal responsibility to give honest answers, provide accurate information, avoid misrepresentation? Yes, and yes. But…if the client gives us a lawful instruction to keep existence of offers or the fact that no offers are in or coming in confidential, we are to keep the facts confidential. Does that mean we can lie? No. When our answer the accurate representation of a fact related to presence of offers is YES or NO and the answer is contrary to the lawful direction of the client, the only answer is: “It’s confidential”. Does “it’s confidential” remove you from an accusation of ill intentions? Nope. Someone is not going to like the answer.

So what do we learn? The best defense against an accusation is, DON’T participate. The best defense against being found guilty is documentation. Amendments and Notices are proper forms for documenting lawful instructions. An email or a text will help. Your recollection of a phone call, or your opinion of what is standard practice, or best for your reputation are insufficient and possibly just wrong. Depend on the literal interpretation of the law, and the Code. And then make sure the client’s direction is in writing, and lawful.