Real Estate

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.

Disclaimer:  Please note that reading and/or commenting on this blog post does not create an attorney-client relationship with Eustice, Laffey, Sebranek & Auby, S.C. absent an express agreement between the firm and the client.  Contacting Eustice, Laffey, Sebranek & Auby, S.C. or any of its attorneys or employees via this website or via email does not create an attorney-client relationship.

We would be pleased to communicate with you by email. However, please note that if you communicate with us-through this website, via email, or otherwise-in connection with a matter for which we do not already represent you, your communication may not be treated as privileged or confidential and may be disclosed to other persons.

Blog Series: Do I Really Need a Real Estate Attorney?

 

All too often we are asked “I have a realtor, why do I need an attorney too?”[1]

According to realtor.com, the answer is “yes” if any of the following questions apply to your transaction:

Buyers

  • Are you an out of town buyer?
  • Are you buying a property that is a short sale or bank owned?
  • Are you buying a property that is part of an estate sale?
  • Are you buying a commercial property?
  • Are you buying a property that could potentially have some structural issues?
  • Are you buying a property in a problematic area such as a flood zone or areas with adverse conditions (tornado prone, radon, toxicity levels, etc.)?

Sellers

  • Are you selling a property that is in some state of distress?
  • Are you the heir or executor of a property whose owner is now deceased?
  • Are you selling a house with a non-cooperative partner?
  • Do you have that gut feeling that something could possibly go wrong based on knowledge you have about the property?
  • Do you have judgments or liens in your background?[2]

Even if none of the above applies, there are many other reasons why an experienced real estate attorney will prove to be a valuable asset to your buying or selling experience.

  1. Your real estate attorney only represents your rights and interests. A realtor may not step in to settle a dispute for fear of upsetting a party and losing the transaction.
  2. Your real estate attorney is trained to spot issues and solve problems that may not be readily apparent to others involved.
  3. Your real estate attorney is able to modify the “standard” contracts often used in residential transactions to avoid issues, problems, and disputes. Similarly, they can use your knowledge of the property to make the contracts most favorable to you.
  4. Your real estate attorney will walk you through your options throughout the transaction, including, for instance, if an issue arises upon inspection, or in the title work. They will be able to let you know whether you can walk away from the deal, and what will happen to the earnest money.
  5. Your real estate attorney will review and clearly explain to you the complex documents you will receive, including loan documents, title work, encumbrances, and closing documents.
  6. Your real estate attorney will attend the closing to ensure that no last minute issues arise, and that it progresses smoothly.
  7. And finally, your real estate attorney will give you the peace of mind of knowing you are in good hands!

As you can see, even if your transaction is “simple,” an attorney can provide you with valuable assistance and peace of mind so all you have to worry about is moving in!

Disclaimer:  Please note that reading and/or commenting on this blog post does not create an attorney-client relationship with Eustice, Laffey, Sebranek & Auby, S.C. absent an express agreement between the firm and the client.  Contacting Eustice, Laffey, Sebranek & Auby, S.C. or any of its attorneys or employees via this website or via email does not create an attorney-client relationship.

We would be pleased to communicate with you by email. However, please note that if you communicate with us-through this website, via email, or otherwise-in connection with a matter for which we do not already represent you, your communication may not be treated as privileged or confidential and may be disclosed to other persons.

 


 

[1] To be clear, we love our realtor friends and colleagues, and nothing in this post is meant to minimize the hard work they put in on a transaction.

[2] http://www.realtor.com/news/ask-a-realtor/do-i-really-need-a-real-estate-attorney/

Blog Series: Buying or Selling a Home

Spring is in the air (well, sort of).  Traditionally, the coming of spring brings to Wisconsin a number of things: the ability to occasionally go outside without looking like the kid from A Christmas Story, renewed hope (err…optimism for the future) in our Milwaukee Brewers, and the start of the real estate season.  Spring and summer months are traditionally the busiest times of year for residential home transactions – and the times when our firm is contacted most frequently by prospective buyers, sellers, or their agents.

Whether you are a first time homebuyer, or a seasoned veteran, the process of buying and selling a home – replete with deadlines, stacks of paperwork, and legal and technical jargon – may be intimidating.  Fear not!  We are here to help.  Over the next few weeks, this Blog will discuss the home buying or selling process, including the following concepts:

  • Listing Agreements,
  • Why and When to Hire an Attorney,
  • The Offer to Purchase,
  • Contingencies,
  • Legal Title and Title Insurance, and
  • The Closing.

Along the way, we hope to not only inform you, our readers, of the basics, but also to discuss some common misconceptions and pitfalls, answer your questions, and show you ways that we can help.

We hope you will join us for this discussion.  If along the way you decide you would like to meet with one of our real estate attorneys, please contact us at (608) 837-7386.

Disclaimer:  Please note that reading and/or commenting on this blog post does not create an attorney-client relationship with Eustice, Laffey, Sebranek & Auby, S.C. absent an express agreement between the firm and the client.  Contacting Eustice, Laffey, Sebranek & Auby, S.C. or any of its attorneys or employees via this website or via email does not create an attorney-client relationship.

Title: What Exactly are you Buying?

The previous post in this series briefly discussed the “title” or “merchantable title” contingency.  Simply put, a contingency requiring that the seller provide “merchantable title” means that the property received by the buyer is not encumbered (read: limited) by any conditions or restrictions not acceptable to the buyer.  Typically, in order to provide proof of merchantable title, the seller will order and provide the buyer with a title insurance commitment.

A title insurance commitment will have two main parts, or schedules.  Schedule A typically lists the following information:

  • A commitment number;
  • The name of the proposed insured party (the buyer);
  • The policy limit.  Typically the purchase price;
  • The current owner (the seller); and
  • The legal description, tax parcel number and address of the property.

In reviewing Schedule A, it is important to verify each of the above items to make sure they match up with your understanding of the transaction (for instance, that the seller really can sell the property).

Schedule B is broken up into two subsections: Requirements and Exceptions.  As the name implies, Requirements section provides the reviewer with a list of items to be complied with before the title company will provide insurance.  These typically include satisfying any existing mortgages on the property, and the provision of a deed in proper form.

The aptly-named Exceptions section provides a list of items that will not be covered by the title insurance policy once it takes effect.  Some exceptions may be removed by providing the title company with certain proof, usually in the form of affidavits or statements from knowledgeable parties.  Some may not be removed.  It is vitally important that buyers review these exceptions carefully, and if you are unfamiliar with any of these items, this would be a great time to contact a real estate attorney.  If a buyer does not satisfy any listed requirements to get the exceptions removed before the closing, the exceptions become permanent.

Some of the most common encumbrances include:

  1. Real Estate Taxes.  You will want to ensure that all taxes are paid on the property before taking ownership.  If not, even if the taxes accrued prior to your ownership, the taxing agency may hold you responsible for their payment.
  2. Judgments.  If someone is sued, and they lose, the victorious party will sometimes obtain a judgment for an amount of money.  They can then “docket” this judgment against real estate owned by the losing party.  Once a judgment is docketed it can only be released by payment, voluntary removal or court order.
  3. Easements.  Easements are agreements to allow certain parties access or use of some or all of the property.  It is fairly common for a title commitment to include easements for utilities or municipal services if the property is located in a city, village, town, etc.  Some other examples include access easements allowing for access to the property or to waterways, or joint-driveway agreements.  You may or may not be able to remove an easement depending on the type of the easement and the circumstances involving the sale.
  4. Protective Declarations or Covenants.  If the property is located in a municipality, it may be subject to certain covenants or rules.  These rules may govern any of a number of items, from the size and location of buildings on the property, to acceptable paint colors (like this), and even the scope and types of acceptable landscaping.
  5. Unpaid Assessments or Condo Fees (if applicable).  If the property is part of a condominium, or if there has been recent work by the municipality, these charges may be linked to the property’s title.  As a buyer you will want to ensure that any unpaid assessments or condominium fees are paid prior to your taking ownership of the property.

These are just a few of the examples of items to be aware of with regards to the title of the property.  If you have any questions regarding whether your seller is providing merchantable title, or would like someone to assist you with your real estate transaction, feel free to contact one of our experienced real estate attorneys at (608) 837-7386.

P.S.  Go Brewers!

Contingencies: Providing Protection from Uncertainty

This gallery contains 1 photo.

So you’ve decided on a property.  It looks great. You think you can afford it.  And you are closing on your current home soon.  What could possibly go wrong?  Hopefully nothing. However, in the event the house isn’t as great as it looks, you can’t actually afford it, or your current house doesn’t sell, your Offer should address what happens.

A contingency is a future event that might occur, but is not certain.  Essentially, it is a paragraph in your Offer to deal with the uncertainty.

Contingencies have three basic parts:

  1. The action necessary to satisfy the contingency;
  2. A deadline for the action to occur; and
  3. Consequences if the action does not occur.

An example:

Buyer’s obligation to close this transaction are contingent upon Buyer closing on the sale of Buyer’s current home located at 100 Wilburn Road, Sun Prairie, Wisconsin by March 30, 2014.  If the sale does not close by March 30, 2014, Buyer may terminate this contract and Seller shall return the earnest money.

As set forth above, there are consequences if the contingency is not satisfied on or before the deadline.  A well-drafted contingency will clearly state these consequences so that everyone is aware ahead of the deadline.  Most often, the consequences involve the termination of the contract and a distribution of the earnest money.  A buyer or seller can always choose to waive any unsatisfied contingency.

The most common examples of contingencies in residential real estate transactions are those for financing, appraisal, inspection, and title.[1]  These “standard” contingencies are located on the form Offer.  Depending on the particulars of the transaction and the real estate, additional standard contingencies may be necessary.  These may be included on an addendum to the form Offer.

Financing

Most residential real estate purchases will involve some sort of financing.  A financing contingency will set forth not only the basic loan terms (amount, interest rate, term, etc.), but also the type of loan.  A financing contingency is satisfied when a buyer provides the seller with a loan commitment for a loan meeting the terms set forth in the Offer.

Inspections

Unless you are intimately familiar with the home you are purchasing (and even if you are), an inspection is a vital part of any transaction.  It will inform you of the current condition and any defects in the house you are purchasing.  If defects are found, the inspection contingency will provide whether the Seller will be allowed to fix – or cure – the defects.  If so, the seller will have an agreed upon time to make any required repairs.  Disputes regarding inspection contingencies often arise as to who will actually conduct the repairs, and whether the defects were sufficiently cured.

Appraisal

An appraisal is a valuation of the real estate you are purchasing.  An appraisal contingency will require that the valuation state the home is worth at least the amount of the purchase price.  If the appraisal comes back below the purchase price, the Buyer will typically have a right to terminate the Offer.  In some cases, rather than lose the transaction, parties may agree to decrease the purchase price accordingly.  If, however, the appraisal comes back higher than the purchase price, the contingency is simply satisfied and no action is necessary.

Title

When you are buying real estate, you will want to ensure that you are receiving merchantable title.  This means there are not unexpected easements, judgments or other liens, or other encumbrances preventing you from fully enjoying the real estate.  In order to satisfy this contingency, the seller will have to provide the buyer with a title insurance policy showing either (1) there are no issues on the title; or (2) if there are, they will be taken care of on or before the closing.

As stated above, this is by no means an exhaustive list of the possible or appropriate contingencies for any particular real estate transaction.  In order to determine which contingencies are appropriate for your transaction, we strongly recommend you meet with an experienced real estate attorney.  If you would like to meet with one of our experienced real estate attorneys, please contact us at (608) 837-7386.


[1] Note: This list is by no means exhaustive.  Entire books are written about contingencies for use by real estate lawyers in residential real estate transactions.

Blog Series: Buying or Selling Your Home

Spring is in the air (well, sort of).  Traditionally, the coming of spring brings to Wisconsin a number of things: the ability to occasionally go outside, renewed hope in our Milwaukee Brewers, and the start of the real estate season.  Traditionally, the spring and summer months are the busiest times of year for residential home transactions – and the times when our firm is contacted most frequently by prospective buyers and sellers.

Whether you are a first time homebuyer, or a seasoned veteran, the process of buying and selling a home – replete with deadlines, stacks of paperwork, and legal and technical jargon – may be intimidating.  Fear not!  We are here to help.  Over the next few weeks, this Blog will discuss the home buying or selling process, including the following concepts:

  • Listing Agreements,
  • Why and When to Hire an Attorney,
  • The Offer to Purchase,
  • Contingencies,
  • Title and Title Insurance, and
  • The Closing.

Along the way, we hope to not only inform you, our readers, of the basics, but also to discuss some common misconceptions and pitfalls, answer your questions, and show you ways that we can help.

We hope you will join us for this discussion.  If along the way you decide you would like to meet with one of our real estate attorneys, please contact us at (608) 837-7386.

Disclaimer:  Please note that reading and/or commenting on this blog post does not create an attorney-client relationship with Eustice, Laffey, Sebranek & Auby, S.C. absent an express agreement between the firm and the client.  Contacting Eustice, Laffey, Sebranek & Auby, S.C. or any of its attorneys or employees via this website or via email does not create an attorney-client relationship.

The Wisconsin 2013-2014 Budget Bill May Have Severe Results for Medicaid Recipients

This is a very good article by Carol Wessels, who is an attorney who practices elder law in the Milwaukee area at the firm of Nelson, Irvings & Wessels, S.C.

http://wesselselderlaw.wordpress.com/2013/07/09/will-medicaid-recipients-ever-be-able-to-sell-their-homes-under-wisconsins-new-budget-law/

This article discusses the potential impact of the new real estate notice requirements for recipients of Medicaid. These new notice requirements were part of Wisconsin’s 2013-2014 Budget Bill that was signed into law on June 30, 2013.  This Budget Bill incorporates changes to the Medicaid program, including changes to the rules governing estate recovery, which expand the state’s ability to recover Medicaid costs from the estate of a deceased recipient of Medicaid.  The new real estate notice requirements are part of these changes to the estate recovery rules.  As pointed out in this article, these new rules could have severe effects on recipients of Medicaid and those recipients’ families.

If you or a close family member is a Medicaid recipient, you may want to consult an elder law attorney on what effects these new rules may have on you and what planning options may be available to avoid those effects.

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..

Attorney Joshua J. Kindkeppel Announced as Shareholder

Eustice, Laffey, Sebranek & Auby, S.C. is pleased to announce that Joshua J. Kindkeppel has been named a shareholder with the firm.  Attorney Kindkeppel has been practicing law in Dane County since 2003 and joined Eustice, Laffey, Sebranek & Auby, S.C. in 2007.  His practice areas include business law, civil litigation, real estate, employment and administrative agency matters.  He is licensed to practice in Wisconsin and Minnesota and has been recognized as a Wisconsin “Rising Star” by Wisconsin Super Lawyers Magazine.

Attorney Kindkeppel is an active member of the Dane County Bar Association, currently serving as president-elect.  Attorney Kindkeppel takes great pride in the work that he and long-time Madison attorney Joe Melli did in developing and establishing Dane County’s attorney mentorship program, now known as the Joseph A. Melli Mentorship Program.  He also serves on several State Bar committees, is a member of the James E. Doyle Inns of Court and the Sun Prairie Rotary Club.

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