Home Purchase

Blog Series: Offers to Purchase

Whether you are working with a realtor or not (If you are, be sure to review our last post discussing listing agreements), in order to make your dream home your own you will have to submit an Offer to Purchase (commonly referred to as “Offer”).

Quite simply, an Offer is the contract that will guide and govern you through your real estate purchase.  By law, an Offer to purchase real estate must (1) be in writing; (2) describe with specificity the real estate you wish to purchase; (3) be signed by all parties – including both spouses if both will own the property.  Wis. Stat. § 706.02.  This rule is called the Statute of Frauds.

Most Offers drafted by attorneys and realtors will be on the standard form WB-11 approved by the Wisconsin Department of Regulation and Licensing.  This form contains several sections and deadlines, including those setting the purchase price (including earnest money), contingencies, title, closing and occupancy.

Purchase Price

Undoubtedly one of the first and most important discussions between a seller and a prospective buyer is the purchase price.  As discussed in this previous post, significant thought should go into the determination of the purchase price.

To demonstrate that the he or she is serious about the potential purchase, a buyer will commonly submit earnest money  within a few days of acceptance of the Offer.  Upon a successful closing, these funds are applied as part of the purchase price.  If for some reason the sale doesn’t close, the earnest money may either be returned to the buyer or retained by the seller (depending on the language in the Offer).

Contingencies

Offers routinely include several contingencies depending on the specifics of the transaction and the property.  More common contingencies include those for financing the transaction, inspection and appraisal of the property, and title.  Attorneys may draft additional, specific contingencies depending on your particular circumstance. Contingencies must include a completion deadline – calculated either from the acceptance of the Offer or backwards from the proposed closing date – as well as what actions must occur in order for it to be satisfied.  In the event a contingency is not satisfied or the deadline is missed, the parties may waive the contingency, extend the deadline for compliance, or, in some cases, terminate the transaction.  Multiple individual contingencies will be discussed in detail in future posts.

Closing and Occupancy

The Offer will set a deadline and place for the transaction to close and when the buyers will take occupancy.  Occupancy is usually provided immediately upon closing.

The above constitutes a simple overview of residential Offers to Purchase.  If you are looking to submit an Offer, or have already submitted an Offer but have questions or concerns, we strongly recommend that you meet with an experienced real estate attorney.  If you would like to meet with own of our experienced real estate attorneys, please contact our office at (608) 837-7386.

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Understanding Multiple Representation Relationships and Designated Agency

When you agree on a specific realtor, he/she will provide you with a broker agreement for services.  Within this agreement, you will be provided with the following choices regarding the relationship you establish with the real estate agent and the brokerage firm.

___ Consent to designated agency

___ Consent to multiple representation relationships, but I do not consent to designated agency.

___ Reject multiple representation relationships.

This post will decipher what each of those choices mean.  It is important to note that a real estate broker is the actual firm/company that employs real estate agents.  Although not common, it is entirely possible to have a one person real estate firm.  In the case of a one person firm, designated agency (as you will learn below) wouldn’t be an option because you need at least two agents to provide the separate and distinct representation.

If you consent to designated agency, it means that different sales agents of the same broker (First Weber, Keller Williams, Coldwell Banker, etc.) could represent the Buyer and Seller in the same transaction.   The buyer’s agent owes its loyalty to the buyer and acts solely in the buyer’s interest and the seller’s agent does the same for the seller.  Each party has their own agent working on their behalf (do not share the same agent).   In theory, designated agency is supposed to provide “full-service” negotiation on behalf of the agent’s client and create the effect that the buyer’s agent and the seller’s agent are independent, as if they were from completely different real estate firms.

If you consent to multiple representation relationships, but do not consent to designated agency this means that the broker can represent both the buyer and the seller in the transaction, cannot at any time put the interests of one party over that of the other and cannot give helpful advice to one that would be detrimental to the other.  With this representation, neither the buyer nor the seller really has anyone in their “corner” looking out for their best interests and is much more limiting than a designated agency relationship.

Rejecting multiple representation relationships (MMR) means that the broker (real estate firm) cannot represent both the buyer and seller in the same transaction.  A consequence of rejecting multiple representation relationships is that you narrow your pool of prospective buyers/sellers.  This is because a buyer who rejects MMRs is essentially saying that they don’t want to look at/consider any properties being marketed by their broker.  The same limitation applies to a seller who rejects MRRs; they would be precluding any potential buyers represented by the same broker.  In reality, if the buyer’s dream house is listed with buyer’s broker (by a different agent), the buyer may switch his/her representation designation and pursue the purchase of the house.

Consent to designated agency or MRR can be withdrawn by written notice at any time, which provides for flexibility if circumstances change.     Generally, the recommended choice is designated agency, but because each situation is different, the particular facts of a representation will dictate the ultimate choice.   If you have any questions about which representation relationship is best for you, please feel free to contact the author, Attorney Josh Kindkeppel, at (608) 255-8000 or j.kindkeppel@els-law.com..