The Best of the Legal Hotline: The New WB-11 Offer to Purchase


 Tracy Rucka  |    January 13, 2020
Legal Hotline

The January 1, 2020, mandatory use date for the 2020 version of the WB-11 Residential Offer to Purchase is now in effect. All licensees are required to use the new WB-11. The WRA Legal Hotline discussions in this article are based on questions posed to the hotline during the WB-11 optional use time frame, which began on November 1, 2019. This article also includes several practical questions about the use of old offers.  

Why is the reference in the Inspection Contingency to registered or licensed home inspectors?

As of January 2020, home inspectors are registered in Wisconsin, but there is a possibility that a licensing process may be created for home inspectors in the future. To account for that possibility, both references were included in the offer lest it need to be revised again should home inspectors become a licensed profession rather than a registered profession. 

Why was the Financing Contingency renamed the Financing Commitment Contingency?

The Financing Contingency was renamed the Financing Commitment Contingency because the buyer is obtaining a loan commitment to satisfy the contingency. The modification to the title of the contingency will hopefully be more transparent so the parties understand the contingency is about the buyer obtaining a loan commitment and not a guarantee that the buyer will actually receive financing at closing if the contingency is satisfied.

In the caution lines 279-281 of the offer, the buyer is also reminded that the loan commitment is not a guarantee of financing: 

The delivered loan commitment may contain conditions Buyer must yet satisfy to obligate the lender to provide the loan. Buyer understands delivery of a loan commitment removes the Financing Commitment Contingency from the Offer and shifts the risk to Buyer if the loan is not funded.

This information emphasizes to the parties that a loan commitment may contain conditions and requirements that must be met before the lender becomes obligated to provide the purchase money. A commitment does not guarantee the lender will lend. The buyer is required to satisfy the conditions of the loan commitment to obtain the financing for closing.

Why has the earnest money section been modified for earnest money to third parties? Isn’t a listing firm required to have a trust account?

A firm is only required to open a trust account if it receives trust funds. Therefore, a listing firm, for a variety of reasons, may choose not to have a trust account. Although a listing firm may elect not to have a trust account, the listing agent must inform the seller that the listing firm has no trust account and educate the seller about the necessity to negotiate the offer to purchase 
to specify who the earnest money will be paid to and held by. 

On lines 61-63 of the 2020 offer, the parties choose where the earnest money will be paid and where it will be held. The default remains the listing firm. The offer also clearly notifies the parties of the need for an escrow agreement if the earnest money is not held by a firm; see lines 68-70. For more information about choosing not to have a trust account, see the article ‚ÄúSo You Don‚Äôt Want to Have a Trust Account?‚ÄĚ in the February 2016 Wisconsin Real Estate Magazine at www.wra.org/WREM/Feb16/TrustAccount. ¬†

A cooperating broker, using the 2011 form, submitted an offer to a listing broker. How can the listing broker proceed in this scenario?

Licensees must promptly present all offers, according to license law in Wis. Admin. Code ¬ß REEB 24.13(2)(b). Presentation of the old offer by the listing broker is not a rule violation. The cooperating agent could face possible disciplinary action from the Real Estate Examining Board for failure to use the required offer form ‚ÄĒ all licensees must use the latest approved versions of approved forms like the WB-11 beginning on the mandatory use date, per Wis. Admin. Code ¬ß REEB 16.06(7).

The broker is to discuss the advantages and disadvantages of the offer with the seller as required by Wis. Admin. Code § REEB 24.13(3). During the presentation, it may be helpful to compare the terms of the old offer with the current offer for the seller. The 2011 document could, if agreed upon, create an offer between the parties; but given the outdated content, the use of the old document could possibly put the parties at risk. It is up to the seller to decide to reject the offer, counter the offer, or issue an offer to sell on a current form to continue the negotiations.

What happens if the seller accepts an older version of the offer?

The contract is binding. While licensees are required to use current forms, the buyer and the seller can agree to whatever version of whichever form they so choose. If the listing firm also failed to realize the form was outdated, at this point, the listing firm must consider whether the use of the old form is a material fact that must be disclosed to the seller client. A licensee has a duty to disclose to the client all information known by the licensee and material to the transaction and that is not known by the client or discoverable by the client through reasonably vigilant observation. If a licensee decides the use of the wrong form is material to the transaction, this fact would be disclosed to the client. The licensee can share the current WB-11 Offer to Purchase with the client and discuss possible modifications. If directed by the client, an amendment may be proposed to incorporate any provision from the current WB-11. 

A broker is representing a seller in a sale set to close on March 15, 2020, a date requested by the buyer’s agent. However, March 15 is a Sunday, so the seller wishes to close on the next business day while the buyer wants to close on the Friday prior. What is the date for closing in a situation like this?

If the parties used the new 2020 WB-11 Residential Offer to Purchase, the closing will be moved to the next business day, which will be Monday, March 16. See lines 48-51 of the 2020 form. 

CLOSING This transaction is to be closed on ____________________ at the place selected by Seller, unless otherwise agreed by the Parties in writing. If the date for closing falls on a weekend, or a federal or a state holiday, the closing date shall be the next Business Day.

Based on the changes to the Distribution of Information section of the offer, the broker was told he can now give copies of one buyer’s offer to another buyer for purposes of an escalation clause. Is that correct?

No! It is still illegal for a licensee to provide copies of an offer with the intent the copies be provided to another buyer. The changes to the Distribution of Information provision provides written authorization from the parties to the licensees to provide a copy of the offer to the seller or seller’s agent for the seller to provide it to their seller.  

The buyer and the seller authorize their agents to: ‚Ķ ‚Äú(iv) distribute copies of this Offer to the seller, or seller‚Äôs agent, of another property which Seller intends on purchasing.‚ÄĚ

This language will enable the seller, if the seller is purchasing a new property for herself, to provide a copy of the offer whereby she is selling her property to the sellers of the property she is buying should that be required in the offer.

Tracy Rucka is Director of Professional Standards and Practices for the WRA. 

Resources

Forms update resource page

See a consolidated list of all WRA resources regarding the WB-11 update on the forms update resource page online at www.wra.org/formsupdate.

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