The Contingency is the instruction for what to do if this or that happens

When concerns arise in a transaction the licensees have only to look to the contract to see what the Buyer and Seller have already agreed to do to move forward together or by parting ways.

Contingencies are the agreements between the Buyer and Seller of the steps to take as the parties satisfy their obligations under the contract.  Notices and amendments are the methods of communication between the Buyer and Seller when real estate licensees are involved.  Conversations between licensees on behalf of the buyer and seller are NOT acceptable alternative communications to amendments and notices signed by the Buyer and Seller.

The “Title Not Acceptable for Closing” contingency tells licensees exactly what to do on behalf of the buyer and seller.  Let’s walk through the contingency.

TITLE NOT ACCEPTABLE FOR CLOSING: If title is not acceptable for closing, Buyer shall notify Seller in writing of objection to title by the time set for closing. In such event, Seller shall have a reasonable time, but not exceeding 15 days, to remove the objections, and the time for closing shall be extended as necessary for this purpose. In the event that Seller is unable to remove said objections, Buyer shall have 5 days from receipt of notice thereof, to deliver written notice waiving the objections, and the time for closing shall be extended accordingly. If Buyer does not waive the objections, this Offer shall be null and void. Providing title evidence acceptable for closing does not extinguish Seller’s obligations to give merchantable title to Buyer.

Notice how simple the directions are. 1) Buyer sends a written Notice. (2) Seller either removes the problem condition of the title or sends a written Notice to Buyer. (3) When Buyer receives that Notice from Seller, buyer decides to waive the objection and of course does that with a NOTICE to Seller. (4) If Buyer does not waive the objection prior to the closing, the Offer is Null and void. Certainly in these days between Notices, the parties can negotiate by amendments.

Licensees are prudent to draft notices exactly as the contingencies specify.

An Offer. Just a conversation between two people…

It’s a cool fall evening. The street lights are on. A woman, carrying a tablet knocks on the front door of well cared for house. Her name is Betty, and she’s a Realtor. Betty is accompanied by a man.  A woman, let’s call her Nancy, opens the door.  Nancy is expecting the visitors. Nancy is the owner of the house. She opens the door and the conversation begins.

Betty does the introduction. “This is Roger Smith. Roger would like to buy your house. I’m Betty, and I represent Roger.”  Betty then goes silent.  She sits back and takes notes.

Roger, now sitting across from Nancy, speaks first. “I will pay Three hundred fifty thousand dollars to you for this house. To show I’m serious, I’ll give you Three thousand five hundred dollars.” Roger wants to acquire some of the personal property in the house.  He tells Nancy. “At the price I’m offering to you, I want that  stove and oven, the refrigerator, the dishwasher, your fancy wash machine and dryer, and that hot tub. And, I’d like that big screen TV on the wall in the family room downstairs.”

Nancy is listening to Roger. She doesn’t interrupt him. Betty, the Realtor takes notes and remains  silent.  Roger continues. “I’d like own the house on December 20th this year. Think about it for a couple of days. If you agree,  to get back to me contact Betty.  Here is her email address. And, oh by the way, I do need to borrow some money from Home Loan Bank before I can close. And one more thing, while I think this is a fair price for the house, to make sure  I’m not over paying, I want to have an appraisal. If that checks out we’re good to go. Oh yes, one last thing. I want to have someone inspect this place on my behalf. I’ll get that done after we agree on a price.”  Roger stands up. He says to Nancy, “That’s pretty much it. What do you think?”

Nancy thanks Roger, tells him she will think it over. After sleeping on it, Nancy decides she likes most of what Roger proposed. She would like to make a couple of changes. One is the price. Nancy will sell the house for Three hundred sixty thousand dollars. And, she’d like to own the house through the holidays.  She arranges to meet with Roger to explain her thoughts.

The Offer to purchase is between Roger and Nancy. Betty, the Realtor has a role. It’s an important role which can be done with care, competence, and precision. Betty’s role is to put the conversation in writing, offer some suggestions if necessary, and help assure the rules of real estate engagement are adhered to. The Offer to Purchase is written document of a conversation between a buyer and a seller. Because it’s a conversation between buyer and seller the items the parties discussed and recorded in writing are relevant. All of agreements are relevant…and if they aren’t in writing, they’re arguably not agreements between the buyer and seller.

Buyer Agency

Regardless of hopes, expectations, and myths, buyer agency places the licensee and the buyer on the same side with a shared perspective. Buyer agency is a privileged relationship where the most effective assets a Realtor legally has at her disposal are available for the buyer. Without buyer agency the licensee is unquestionably working as a sub agent for the listing broker with clear obligations to the interests of the seller. There is no gray area in Wisconsin real estate agency law.

In my opinion, there is one reason for working as a buyer agent and this is it: I intend to legally provide all of the services, share all of my insight, and work with the buyer to create appropriately safe terms. And this is important: Some of those terms may be to the advantage of the seller. I believe an informed person, given logical choices, is  comfortable taking on risk commensurate with the reward.

The assumption that buyers are best served by tipping the scales of every point in their favor is dangerous in the real estate market. Price is always important and to some extent it may be second to risk. Given a competitive price, prudent sellers weigh the risks of the contingencies before committing. An attractive number with high risk and low probability of closing might appeal to the gambler, but for the typical home seller who has other plans and commitments to meet, shifting risk to the buyer in exchange for a reasonable price is a more acceptable strategy.  The wise buyer agent knows the areas of a boiler plate contract ideal for softening.   We will find some of those easy to improve areas of offers in the coming weeks of Skill Share Thursday’s at Restaino & Associates. 9:30 to 11:00. Let me know if you want to attend.

You are remarkable.

Dare to go where perspectives are not what they used to be. Seth Godin and Simon Sinek inspire a new generation to go beyond “sales training” and become remarkable people connecting with remarkable people. You are a remarkable person. What the remarks are is up to you.

As proof that the torch has been passed, take a look at Ted  Ideas Worth Spreading.  You will not find one Ted Talk encouraging you to embrace the tired old sales ideas of manipulation by fear of loss, or “handling objections”. Ted is a Milky Way of bright ideas for being authentic, human, considerate, patient, and sincere. Given the choice, and we do have choices, what do you prefer to be remarkable for?

 

Broker Liability for Misrepresentation

Cases and Lessons from Wisconsin Courts provided by the WRA in the October 2016 issue of The Wisconsin Real Estate Magazine could keep you out of harms way.  Intentional fraud is one way to be found liable but deception is not required to be liable.  Being negligent  or failing the expectation of strict responsibility (A licensee is expected to know better or the law was specific in my obligation and I failed to be responsible) will put us on the wrong side of liability just as well.

If it hasn’t happened yet, it will happen where an owner balks at disclosing and asks you for your advice on disclosure.  Case Study #1 in the feature article makes it clear and simple—Disclosure is the way to go.  Case Study #2 we see too much of. As-is is no protection for seller or brokers. There  is no way to wash hands of liability for saying take it as is when an adverse fact is known.

The WRA legal division has a finger on the pulse of Wisconsin real estate law issues. Take time to read their Cases and adopt their advice. Maybe share the Case Studies with your clients.  You will never regret disclosure.

Earnest Hemingway on Writing Counter Offers and Contingencies

My aim is to put down on paper what I see and what I feel in the best and simplest way. Earnest Hemingway on writing

Real estate Counter Offers are ideal forms for saying a lot without writing much. In fact, if we have a well drafted Offer to Purchase, the less we write on a Counter Offer, the better the chance of being understood and steering clear of creating a contradiction or a whole new issue.

Here’s a simple method of saying the most while writing the least.

You have an Offer where the drafter used  Additional Provisions on page 3 of the Offer to insert this condition:  “This Offer is contingent upon Seller crediting buyer $3,000.00 at closing to be applied toward buyer’s mortgage loan costs and prepaid expenses.” You presented the Offer and the seller’s only objection is this $3,000 credit. Seller is willing to agree to the rest of the terms, provided the buyer will accept a $1,000 credit instead of $3,000.    Pick up a WB 44 Counter Offer. Notice on line 6 the first condition is already written in. It reads All terms and conditions remain the same as stated in the Offer to Purchase except the following:_________________________________.  

Rather than rewriting the entire contingency and possibly altering the intention, change only what needs to be changed.  In this case $3,000 needs to be changed to $1,000.0.

Line 7 of the Counter offer will look like this:

7 (1) Page 3 of 9. Lines 165 to 172. Additional Provisions. Line 167 change  “$3,000.00” to “$1,000.00”.

I like this method as a recipient of the Counter Offer because the wording tells me where to look. Done right, it’s like having an instructor saying: “OK Meyer, See the Offer in your hands? Good. Now first go to Page 3 of 9. Then go to Lines 165 to 172. This is the Additional Provisions section. Here’s all you gotta do,  change $3,000.00  to $1,000.00.

We are licensed  to write terms that make sense, can be understood, and properly reflect the intentions of the parties. If everything else is acceptable, leave it alone and walk the reader through the form to the changes your client prefers. That should work for anyone who wants to be precise and isn’t paid by the word.

It’s none of their business that you have to learn (how to write). Let them think you were born that way. E. Hemmingway

 

 

When is the best time to sell in Madison?

WRA Home Sales Graph Without looking at the graphics, in what month do you think home sale closing activity bottoms out in Wisconsin? What month is peak? Are you surprised? What do you think are the reasons for the rise and slide of home sales in Wisconsin? What do you think Florida sales closing data looks like?   This is California’s data.  Imagine that, the three areas of the country have similar peaks and valleys.

People buy and sell homes when they’re ready. Obviously more people are ready to put their homes on the market in the spring even in states where four seasons is only a hotel chain. In Madison we have to agree, looking for a home is more enjoyable weather wise when we’re not slipping and sliding over ice and up to our knees in snow. Of course with high demand and relatively low inventories early spring to July packs a competitive punch to the spirit of home buyers.

So we know the best time to be on the market is April and May…2016. What now? It’s October 2016 and turning back the clock is still a future fantasy. We live in a real estate reality world. The best time to put a home on the market is always, when you are ready. And there is much more to consider to determine your readiness than how the flowers have grown. An orderly real estate process is more likely when the parties are prepared financially and emotionally. Regardless of the weather, there are market conditions that make fall and winter a fine time to put a home up for sale. Consider how battered and bruised buyers were in the spring, those who came in second, third,…sixth on homes in your neighborhood are educated and reluctant to come in any less than first on the next great home in your neighborhood. Fewer buyers have fewer homes to choose from in October through January. Sure the competition is down, but remember who the buyers are—many of them are more inspired today than they were in the spring. The new buyers in the market are looking at sales price data from June 2016…their spring counterparts were looking at sales price data from June 2015. Guess what happened from June to June? Prices went up. You may not need competition to push price up because the evidence is there to support your asking price….that wasn’t the case 5 months ago.

Put your home on the market when you are ready and be prepared to negotiate with people who know what it’s like to miss out on a great home in their preferred neighborhood.