Single Buyer/Married Seller
The seller married since she bought the property and the couple lives in the home. She listed the home and does not want her husband’s signature on any of the documents for listing or selling the property. The cooperating broker working with the buyer wants the husband to sign the offer. Must the husband sign the offer?
The listing contract must be signed by someone agreeing to pay the commission. The law does not require that all owners sign a listing contract in order for the listing contract to be enforceable against the owner who does sign. Therefore, technically a wife signing a listing can be liable for a commission to a broker who successfully procures a buyer. Prior to accepting a listing signed by one spouse, counsel may be consulted regarding the myriad of potential problems, including disclosure duties owed to prospective purchasers, homestead law, marital property law, and agency disclosures to the seller client and the seller customer.
In Wisconsin, Wis. Stat. § 706.02 provides that both spouses must sign all documents conveying an interest in any homestead property, including the Offer to Purchase and the deed or land contract. Generally speaking, a “homestead” is the home or dwelling of a married person. The definition is intended to be broad and covers a property as long as one or both of the spouses lives there. The brokers may work together, and with the title company, to determine the status of the property and whether or not it is homestead requiring all signatures.
A broker is going to list a home that is owned by three siblings. They live all over the country. Must all three sign the listing contract? Must all three sign the same offer?
As previously discussed, the listing contract must be signed by someone agreeing to pay a commission. The law does not require that all the owners sign a listing contract in order for the listing contract to be enforceable against the owner who does sign. The broker may be cautious about proceeding without the signature of all owners because if all sellers are not in agreement to the listing, they may not agree to the sale.
For the offer, acceptance must be in writing to satisfy the Wis. Stat. § 706.02 requirements for a written contract conveying an interest in real estate. Wis. Stat. § 706.02 requires that a real estate conveyance document, such as an offer to purchase, must identify the parties and be signed by or on behalf of all the parties to create a binding contract.
Given the sellers are in different locations, the broker and parties may use counterparts to obtain a fully executed offer. As indicated on lines 23-24 of the WB-11, “Acceptance occurs when all Buyers and Sellers have signed one copy of the Offer, or separate but identical copies of the Offer.” This provision specifically allows for the use of counterparts, which is helpful, for example, when there are parties living in different states. Wisconsin case law recognizes that contracts may be signed in counterparts — that is, no one piece of paper has all the original signatures, but taken together, all parties have executed a copy of the same contract. It is the assent of the parties to the same terms and conditions that makes a contract. When counterparts are being used, it is prudent to include a statement in the offer explaining that the contract is being executed by the buyers and sellers in counterparts, which are multiple copies of the same offer.
If a buyer is trying to purchase a home, but her divorce is not final yet, can she purchase a home without the soon-to-be ex-husband’s approval and name on the contract?
Although, as a general rule, married persons may purchase property and take title in one of the spouse’s names alone, this buyer’s situation and divorce may impose limitations on the purchase of real property. Often preliminary orders in a divorce prohibit both spouses from entering into any significant economic obligations during the pending divorce. The broker should refer the buyer to consult with her divorce attorney to determine how best to proceed with any transaction in light of the pending divorce and her particular circumstances.
As the agent of the seller under a listing contract or the agent of the buyer pursuant to a Buyer Agency Agreement, can a licensee sign contracts and documents on behalf of the client? What is the proper form for signing on behalf of another?
Unless the broker or agent has actual authority, that is, a Power of Attorney (POA), he or she may not sign for the buyer. The standard listing contract and the buyer agreement forms approved by the Real Estate Examining Board for use by Wisconsin licensees do not provide such an authorization. A licensee signing transaction documents for a party without proper written authorization risks discipline and sanction by the Real Estate Examining Board.
Wis. Stat. § 706.03 states that an agent must be expressly authorized to sign on behalf of a principal — such as a POA. Further, the law provides that the burden of proving the authorization is on the agent. When actually executing real estate documents under a POA, the agent signing on behalf of the principal must comply with Wis. Stat. § 706.03(1m), and state the name of the authorizing principal. It is also recommended that the agent indicate his or her authority or capacity, as illustrated in the following examples: “Seller XYZ By: (agent signs name)(Print or type name), authorized attorney-in-fact” -OR- “(attorney-in-fact signs name)(Print or type name), as authorized agent on behalf of Buyer ABC.”
An agent in Wisconsin who signs an offer as “agent for unidentified principal” or otherwise does not disclose the principal in the contract risks being held personally liable on the contract. In other words, if the principal/buyer skips to Rio, the agent becomes the new owner of the property.
The selling agent allowed the girlfriend to sign the counter-offer on behalf of herself and her boyfriend, who are both named as buyers in the Offer to Purchase. It is unclear whether or not there was an appropriate expressed authorization, as required under Wis. Stat. § 706.03(1m), from the boyfriend to the girlfriend; it appears that there was at least verbal consent. Now the boyfriend no longer wants to buy the property and he is asserting that he never signed the counter-offer. The agent did not disclose to the listing agent that there may not have been proper authorization for the girlfriend to sign on behalf of the boyfriend. The sellers are currently considering their potential options against the buyers. What is the agent’s potential exposure? Would it matter if they were married?
It may be prudent for the agent to consult with his or her broker and legal counsel. Authority to sign for another should be given in writing, preferably notarized, with the fullest, most detailed as possible instructions from the party authorizing it. In executing documents, the signing party should comply with § 706.03(1m), which provides that the party’s name — in this case, the boyfriend’s name — appear with an indication of the authority of the signing party — here, the girlfriend — such as “(name of boyfriend) by (name of girlfriend), as authorized agent” or “(name of girlfriend) as agent on behalf of name of boyfriend.” Whenever someone signs on behalf of another, care must be taken to establish the authority of the person who is signing to do so. The fact that the parties were married rather than single would not change the outcome. Spouses do not have automatic authority to sign for each other.
Limited Liability Companies
Does an LLC member have the right to sell a property owned by the LLC?
With an LLC, the authority to transfer its property depends on whether the LLC is member-managed or centrally managed.
In a member-managed LLC, Wis. Stat. § 183.0301 provides that each member is an agent of the LLC. A member may sign documents and bind the LLC if the member is apparently carrying on the ordinary course of business for the LLC, unless the member has no authority to act and the person he is dealing with is aware of his lack of authority. Under § 183.0702, the property of the LLC that is held in the name of the LLC may be transferred by a conveyance executed by any member in the name of the LLC.
If one or more managers centrally manage the LLC, a member is not an agent of the LLC and cannot bind the LLC. Rather, each manager is an agent of the LLC and can execute documents and bind the LLC per § 183.0301. If there are one or more managers, property that is held in the name of the LLC may be transferred only by a conveyance executed by a manager in the name of the LLC; LLC members will have no authority to transfer title.
When dealing with an LLC, it may be wise to ask for the LLC’s operating agreement and/or other affirmative representations confirming a member’s or a manager’s authority to bind the LLC and to sell the real estate on behalf of the LLC.
Life Estate Sales
The accepted offer is signed by seller Jane Smith who is living in the house. The broker did not do a search and hold on title when listing the property. After the offer was accepted by Jane, the title commitment came back with the following: “Jane Smith, life estate and Power of Appointment and remainder interest to, Ronald Smith, Ted Smith and Cary Smith, as tenants in common.” Is the offer valid just with the signature of Jane Smith, or must all parties sign the offer to purchase?
It appears that Ronald, Ted and Cary Smith together hold the remainder interest in the property with Jane Smith having a life estate. Someone who has a life estate interest is not a legal owner of the property; however, she has the right to live in the property until her death. All owners of the property, both the person with the life estate and the remaindermen must sign the Offer to Purchase in order to create a valid real estate conveyance to sell the property in fee simple absolute per Wis. Stat. § 706.02. If, however, all that is being sold is Jane Smith’s life estate, then Jane may sell that interest independent of the consent of the remaindermen. In such a situation, the buyer would have the right to occupy the property only until Jane’s death.
For further discussion concerning signatures and power of attorney, see Legal Update 04.05, “Avoiding Liability When Signing and Making Referrals,” at www.wra.org/LU0405, and Legal Update 06.09, “Contract Law Basics” at www.wra.org/LU0609.
For further information regarding life estates, see page 8 of the June 2007 Legal Update, “Ownership and Title Pointers for Brokers” at www.wra.org/LU0706.
Tracy Rucka is Director of Professional Standards and Practices for the WRA.