|
|
Legal Matters
Inspection Contingency: Give a Notice or Amendment?
by Debbi Conrad
Pursuant to the terms of the home inspection contingency in the WB-11 Residential Offer To Purchase, a buyer gives a notice of defects by delivering to the seller and listing broker a written copy of the inspection report along with a list of the items to which the buyer objects. If the seller elects to cure, he or she then has the contractual obligation to cure the defects listed in that notice in a good and workmanlike manner. If the buyer wants to request certain repairs that are outside the scope of the seller's election to cure, this should be done by amendment and agreed upon in writing by all parties to the transaction. In these cases, there is often confusion whether a notice form or an amendment form should be used.
WB-41 Notice Relating to Offer to Purchase
The WB-41 Notice form is used if one party is giving a notice which does not require the other party's agreement. A notice should be used, for instance, to give a notice of defects, a seller's notice that he or she has elected to cure the items stated in the buyer's notice of defects, or a seller's notice to the buyer that the seller will not cure.
A notice of defects should be prepared on the WB-41 Notice. This is a unilateral notice from the buyer that does not require the agreement or signature of the seller. The inspection contingency specifically cautions that "A proposed amendment will not satisfy this notice requirement." Accordingly,
REALTORSŪ must be very clear when they are preparing a notice of defects for a buyer.
The WB-41 should specify, "This is a notice of defects. The buyer objects to the following defects which appear in the attached copy of the inspection report of XYZ." The defects to which the buyer objects are then listed in the notice. The notice of defects must be accompanied by a copy of the inspection report and must be delivered to the seller and the listing broker by the specified deadline.
If the buyer wants to have a credit or wants the seller to use a specific contractor when repairing the defects, those details do not go in a notice of defects. These are extras, or specific requests that go beyond the procedure in the inspection contingency. In order to have these details implemented, the buyer must determine if the seller will agree by proposing an amendment. The seller may or may not agree to the buyer's request.
WB-40 Amendment to Offer to Purchase
As is stated in the caution at the top of the form, licensees are to use a WB-40 Amendment if the parties want to modify the terms of an accepted offer. An amendment should be used, for instance, to document any new agreement made by both parties to have the seller repair only some of the items that appeared on the buyer's notice of defects-instead of following the "all or nothing" process in the inspection contingency. In this type of situation, the seller may agree to repair the electric wiring problem but decline the buyer's request for a new roof. Or the WB-40 may be used to specify the method or manner the seller will use to cure a particular defect, in lieu of the "good and workmanlike manner" standard stated in the inspection contingency. For example, the parties may agree upon a particular electrical contractor, or upon a particular type of window to be used in a window replacement situation.
Such an amendment may state "This is not a notice of defects. Seller agrees to [(cure the following defects in the specified manner) (give the following credit at closing) (establish the following repair escrow)-give details, time frames, etc.]. The Inspection Contingency at lines 298-315 of the offer is hereby deleted." The seller then has the option to accept or reject the buyer's proposed amendment or propose a different amendment back to the buyer.
The buyer's proposal must go on the amendment form because the buyer is trying to change the way that the defects are handled. This change has no affect unless the seller agrees and signs the amendment. If the seller declines to sign, this has no affect on the accepted offer. All that has happened is that a change was proposed and there was no mutual agreement so the offer remains as it was before.
Because this proposed amendment is not a notice of defects, it does not trigger the seller's right to cure provisions.
REALTORSŪ must be aware that if a proposed amendment is given instead of a notice of defects, the deadline for giving a notice of defects may pass. This means that if no notice of defects is given and the seller will not accept the proposed amendment, the buyer will have accepted the property as is.
Q. When a buyer is giving notice of defects, should that notice be on an amendment form or should it be on a notice relating to the offer to purchase?
A. If the buyer wants to give a notice of defects, it should be given on a WB-41 Notice Relating to Offer to Purchase. If, on the other hand, the buyer wants to renegotiate with the seller about some aspects of the property condition, a WB-40 Amendment may be used. The final determination of which form to use depends upon the buyer's intent. See
Legal Update 99.10, which discusses the use of a notice or an amendment in an inspection contingency situation.
Q. A buyer's agent wants to propose an amendment asking the seller to repair the roof. If the buyer proposes the amendment and seller does not accept it, will the offer still be valid? Can the buyers choose to withdraw the amendment if seller does not want to cure?
A. If the seller does not accept the amendment, the offer will still be valid-everything will remain as before. If the situation dictates, the buyer may withdraw the amendment at any time prior to acceptance of the amendment by the seller.
Q. Line 303 of the 1999 WB-11 residential offer to purchase states, "Caution: A proposed amendment will not satisfy this notice requirement." What does this mean?
A. To give a notice of defects, a buyer must use the WB-41 Notice Relating to Offer to Purchase. A proposed amendment on the WB-40 Amendment to Offer to Purchase is not considered to be a notice and it will lead to confusion and maybe even legal problems for the parties and the brokers.
An amendment and notice can be used in combination by licensees who fully understand this concept and draft with extreme care. When a buyer wishes to propose an amendment, but does not want to risk missing the deadline for giving a notice of defects, this strategy may be employed. The notice may begin, "If seller has not signed and delivered the buyer's proposed amendment dated _____, by [insert amendment acceptance deadline], the following notice of defects is hereby given: [list items cited in the inspection report to which the buyer objects] This notice of defects is invalid if the seller timely accepts the buyer's proposed amendment."
H REALTORŪ Practice Tips: When selecting the inspection contingency deadline on line 301 of the residential offer, remember that this is not only the deadline for the home inspection, review of the inspection report, and giving a notice of defects, it should also include time to negotiate amendments before the buyer must decide about a notice of defects. Add 2 or 3 extras days for this.
Back to Inside This
Edition
Return to On-Line
Publications
Best of the Legal Hotline
by Debbi Conrad & Tracy
Rucka
Many areas of Wisconsin border along other states. What are the rules for transactions across these borders? The following questions were recently asked of the Legal Hotline concerning issues involving licensees and properties in other states.
| Q. An agent has a friend who lives in Florida and who owns several lots. He would like to sell the lots here in Wisconsin. He approached the agent to advertise the properties. Is there any way for the agent to receive compensation? |
| A. A Wisconsin real estate license permits a licensee to negotiate the sale, purchase, rental or exchange of an interest in real estate, with another, for a commission, money or other thing of value. What is regulated is where the act of negotiation takes place, not where the property is located. Under Wisconsin real estate license law, the act of negotiation must take place within the state, but the real estate may be located outside of Wisconsin.
Each state's laws control the real estate license activities that occur within that state. Most states limit real estate activities in their state to those who are licensed there. Thus, for example, while it may be possible for a Wisconsin licensee to list and sell a piece of real estate located in Florida, all of the Wisconsin licensee's work in negotiating the sale must be conducted in Wisconsin. Out-of-state work such as showings should be conducted by a licensee of that state if the Wisconsin licensee is not also licensed in that state.
Wis. Stat. § 452.135(1) states that no broker may provide brokerage services without an agency agreement that authorizes the broker to provide those brokerage services (i.e., authorizes the broker to advertise or otherwise market the real estate or business opportunity for sale or lease). Wis. Adm. Code § RL 24.04(3) requires permission from the owner before the owner's property can be advertised. All agreements regarding a real estate transaction shall be in writing (§ RL 24.08) using approved forms (§ RL 16.04).
|
Back to Top
| Q. Re: A Minnesota licensee acting as an agent in a Wisconsin sale. This person is advertising and soliciting listings in Wisconsin. Can he inspect and show a listed Wisconsin property? |
| A. Wisconsin real estate licensing law regulates the provision of brokerage services within the boundaries of in the State of Wisconsin. Wisconsin law limits real estate brokerage activities in the state to those who are licensed here. A real estate license is required under Wis. Stat. Chapt. 452 when a person is engaged in the business of selling real estate-to negotiate the sale, purchase, rental or exchange of an interest in real estate on behalf of another, for a commission, money or other thing of value. An unlicensed individual who provides brokerage services in Wisconsin may be subject to an administrative injunction by the Wisconsin Department of Regulation and Licensing (DRL) or legal action by the local district attorney.
Check the DRL credential holder inquiry page to determine whether the person in question holds a valid Wisconsin real estate license. The inquiry page may be found at
http://drlchq.state.wi.us/plsql/chq/cred_holder_query.
|
Back to Top
| Q. A Minnesota licensee has referred a client to a Wisconsin agent. Can a Wisconsin licensee pay a referral fee to a licensee from another state? |
| A. Wis. Stat. § 452.19 limits the payment of referral fees, finders fees and commission splits to persons licensed or registered in Wisconsin to practice real estate, or persons regularly and lawfully engaged in real estate brokerage in another state. It may be prudent practice to ask for a copy of the Minnesota agent's license and a written statement that the licensee is regularly and lawfully engaged in real estate brokerage in Minnesota before entering into an agreement to pay a referral. Referral agreements should be in writing to avoid subsequent confusion and disputes. See Legal Update 02.01, "Getting Paid Outside the MLS" for a discussion of referral fees.
|
Back to Top
| Q. A broker is on the Minnesota-Wisconsin border. Quite a few of the inspectors the broker works with do not need to be licensed in Minnesota and are not licensed in Wisconsin. Can a home inspector from Minnesota provide home inspections on Wisconsin properties? Does a broker have any special responsibility regarding the credentials of home inspectors used in Wisconsin transactions? |
| A. The Wisconsin WB-11 Residential Offer To Purchase requires that a registered Wisconsin home inspector perform the home inspection. Although there may be other professionals who could perform a competent inspection, buyers will not be able to submit a proper notice of defects in compliance with the inspection contingency if a Wisconsin-registered home inspector does not do the home inspection. The Wisconsin Statutes also provide, with limited exceptions, that no individual may act as a home inspector, use the title "home inspector," use any title or description that implies that he or she is a home inspector, or represent himself or herself to be a home inspector unless the individual is registered as a Wisconsin home inspector.
The DRL credential search may be used to confirm a home inspector's registration:
http://drlchq.state.wi.us/plsql/chq/cred_holder_query.
|
Back to Top
| Q. A person must be licensed in Wisconsin to sell real estate and provide brokerage services in Wisconsin. A broker is involved in a disastrous transaction with an agent from Illinois who is providing brokerage services in Wisconsin. What can the broker do about this? |
| A. The broker may want to file a complaint against the Illinois broker for unlicensed practice in the State of Wisconsin. The DRL complaint form can be obtained at
www.drl.state.wi.us/Regulation/consumer_services/complaint_form.html.
|
Back to Top
| Q. An agent drafted an offer to purchase land located in Minnesota on a Wisconsin form. The seller countered to provide that any disputes affecting this transaction shall be decided based on laws of the state of Minnesota. |
| A. Although Wisconsin forms may be used in negotiations to acquire property in Minnesota, the parties are free to negotiate which laws will apply to the transaction. Because state laws vary relating to the sale of real estate, there will be choice of law issues when parties enter into contracts across state lines. The application of Minnesota law to the contract may modify the parties' positions in the transaction. Pursuant to § RL 16.05, real estate licensees are strictly prohibited from giving legal advice in real estate transactions. A licensee is expected to refer parties to legal counsel when inquires are made that require a response that would go beyond giving a general explanation of the provisions in an approved form. Therefore, the agent should refer the buyer to legal counsel, preferably one familiar with Minnesota real estate law, to advise about the impact of Minnesota law on the terms of the contract and the completion of the transaction.
|
Back to Top
| Q. Are there any problems with Wisconsin licensees advertising in Illinois newspapers? |
| A. Advertising the sale of real estate in a state where the agent does not hold a real estate license may be viewed as the unlicensed practice of real estate in that state. However, some states, like Illinois, Wisconsin and Minnesota, do not always enforce their respective license laws under certain circumstances. Illinois advises it will not pursue Wisconsin licensees placing advertisements for Wisconsin properties in the Illinois media as long as the Wisconsin licensees are not physically present in Illinois.
According to the Illinois Department of Professional Regulation, non-Illinois licensees can advertise non-Illinois real estate in Illinois newspapers, provided that the non-Illinois licensees do not engage in the practice of real estate while physically present in the state of Illinois, and provided that the real estate is not required to be registered under the Illinois Land Sales or Time Share Registration Acts. If the real estate to be advertised is a time-share unit, or a lot sold as part of a common promotional program involving the sale of 25 or more lots (for example, a subdivision of more than 25 lots), the advertising must first be approved by the Illinois Department. Wisconsin licensees advertising in Illinois should observe the standards applied to Illinois licensees and, accordingly, refrain from blind advertisements and advertisements which are fraudulent, deceptive, misleading or inaccurate.
Wisconsin generally will not enforce its license law against persons advertising in Wisconsin media without a Wisconsin license unless there is a complaint or risk of injury to the public, and is likely then to only write a warning letter.
|
Back to Top
| Q. An Illinois broker who wants to co-list a Wisconsin property has contacted a Wisconsin broker. The broker has already had the listing contract drafted on a Wisconsin form. How to proceed? |
| A. Unless licensed in Wisconsin, the Illinois broker will be prohibited from providing brokerage services in Wisconsin. Although co-listings are not illegal per se, the Wisconsin broker may wish to review the advantages and disadvantages of co-listings before entering into this type of arrangement. The following items should to be considered both under Wisconsin and Illinois regulatory frameworks: showings, advertising, disclosures, commissions, co-broke arrangements, MLS rules and regulations, procurement, listing contracts, liability, etc. MLS rules and regulations may limit or prohibit co-listings with brokers who are not participants in that MLS.
|
Back to Inside This
Edition
Return to On-Line
Publications
Update from the DOC on Sex Offender Web Site
by Rick Staff
Jon Litscher, Secretary of the Department of Corrections (DOC), has contacted the Wisconsin
REALTORSŪ Association with an update on the status of the search functions which are to be installed as part of the DOC's sex offender Web site. Secretary Litscher wrote:
"On March 27 we installed an enhanced version of the Wisconsin Sex Offender Registry Web site. The general public Web site address is
http://offender.doc.state.wi.us/public. The most recent enhancement allows searches of the registry to obtain information about sex offenders who are required to register with the State of Wisconsin. Information available includes registrant name and identifying information, recent photograph, offense requiring registration, correctional status, registration start and end dates, and contact information. The public Web site includes information that the Department is required to provide to the public pursuant to Wisconsin State Statute §301.46.
The Wisconsin Sex Offender Registry Web site does not include the location of registered sex offenders. The Department's policy is that we will not make addresses available to the general public due to potential inaccuracy of the information and liability associated with disclosing incorrect residence information. Location information is at best a snapshot at a specific point in time. The Department is only able to ensure the accuracy of this information for those offenders who are located in our correctional institutions. We do plan to add a feature that will allow the user to search for registered sex offenders based on zip code. We plan to make this function available by May 20."
Look for additional information in a future Legal Update which will be written after DOC has completed implementation of the sex offender search function.
Back to Inside This
Edition
Return to On-Line
Publications
Back to Top
|
