The Offer to Purchase from the Agent's Perspective

Caution
The information provided here is not intended to be considered as legal advice. If you/the agent wish to obtain more information regarding clauses and contingencies in the offer as it relates to your customer or client, you should direct the customer/client to consult an attorney. If you have questions regarding how to write the offer and its clauses and contingencies you should consult your sales manager and/or the Hotline at WRA or your own attorney,

Fact
You will NEVER see two Offers to Purchase that are the exactly the same... write 3000 offers... write twice that many. They are all different. The basics of the offer are the same. The people, the agendas, the details, and the contingencies are never the same.

NOTE: We are not focusing on the details of an offer... only tips that will enhance the professionalism you represent when writing the contract.

Agency
Is the buyer your customer or your client? Are you the buyer's agent or the seller's agent, or are you working as a sub-agent of the listing broker? THERE IS A DIFFERENCE. Are you working in the best interest of the buyer or in the best interest of the seller? Are you a dual agent working in the role of an impartial mediator? If you are a dual agent, do you have the correct representation marked on the contract executed with each of your clients? It's important to have the correct documentation regarding whom you represent. What role are you operating within? Consider your role in the event you are on the witness stand in the chambers of the Supreme Court? Don't forget which hat you are wearing when you are writing the offer. Breaching your fiduciary relationship with a client is not acceptable. NOTE: We won't address the specifics of Buyer's Agency vs. Seller's agency here. In this report I am assuming you have a working knowledge of the issues involved with agency. If you don't feel that you fully understand agency, consult with your office manager, your legal counsel, or go to the WRA web site to find the information you need to best serve those with whom you are working. Understanding your fiduciary relationship with your client and your responsibilities to your customer is really important!

Make your contract is readable
Use Zip-form if at all possible. If not possible, a hand-written contract should be legible. Contracts that are scribbled with large messy characters are NOT professional. If you don't have good handwriting, then print carefully. If the contract is a mess the writer's credibility is greatly decreased. Again - when you are sitting on a witness stand in the court room and your contract is being handed to you by the "other side's" attorney, will you be proud of how it was written and its appearance? If there is a "close call" regarding which side prevails in the judge's opinion, the side that drafted the offer may have the ruling go against their position.

Fill in the blanks
That sounds pretty elementary. It is pretty elementary. Blank spaces in an offer are an invitation to trouble and misunderstanding. If you have NOTHING to write in a blank, mark that blank with a dash or n/a.

Cautions
When you read the CAUTION items in an offer, make a check next to the section - as you read it aloud to the buyer. Reading it aloud and checking it will bring the caution to the buyer's attention, and - when you're in a court of law, you have some evidence that you did, in fact, read it to the buyer - regardless of what they may be telling the court.

Inclusions
It doesn't matter what the listing contract says. It doesn't matter what the Multiple Listing information says. It doesn't matter was the Listing Office's information says. If you want it included, it MUST be written in the offer. Period. If you want the cupboards in the garage; if you want the work table in the workshop; if you want the water softener - whatever you want to be included should be listed. There are blank lines elsewhere in the offer if you need more space. If the buyer mentions it and thinks it's included - write it down to be sure. Never ASSUME anything. You know what that happens when you divide that word into three words.

Exclusions
Here is a place that trouble frequently occurs. For instance - the water softener often becomes a problem. Even if it's a rental, exclude it. There is verbiage in the offer that a buyer's attorney could argue it is considered a fixture. Once you end up buying a water softener for the buyer you likely won't forget again. It's an expensive lesson. Other items that appear to be staying and don't could be Jungle gyms in the yard, pool equipment, fireplace inserts, decorative lighting, custom window treatments. If the buyer mentions it specify as included or excluded on the offer. Once again, there's that word "assume."

Semantics
Be sure the buyer and seller know exactly what you're talking about. Early in my career I watched as an agent in my office found himself in a mess over "the stove." There was a kitchen range in the kitchen. There was a Ben Franklin stove in the family room. Buyer arrived at their new home after the closing. The Ben Franklin stove was still there. Seller was half-way to their new home in Pennsylvania with the kitchen "stove" on the moving van. Buyer wanted a kitchen stove. The selling agent bought them one!

Acceptance
Acceptance occurs when all buyers and sellers have signed a copy of the Offer to Purchase. Binding acceptance occurs when that fully signed document is properly delivered per at least one of the options for delivery. Be aware of the differences when you are counting "Time is of the Essence" deadlines for acceptance and performance. Deadlines are commonly calculated from acceptance. Specify Binding acceptance if that's what you want. Do the printed words convey your intentions and expectations? Carefully consider how much time you need for performance of contingencies and deadlines.

Delivery

Personal Delivery - that's easy. Walk up to the Party or the Party's contracted recipient and hand it to them.
Commercial Delivery - depositing it, postage/fees prepaid, addressed to the Party or the Party's contracted recipient.
Fax - eeither the buyer's, the seller's or the agent's fax number. If the buyer's fax is on the contract and you send it to the agent's fax; It is NOT properly delivered.
CAUTION: If the agent has his/her fax number on the contract, the agent/broker will be responsible if it comes into the office as binding and you don't know it's there. Problems have arisen when all parties are not immediately aware the fax was sent and had accomplished binding acceptance.
US Mail - Depositing, postage prepaid in the mail.
SUGGESTION: I'd suggest you get something stamped to prove the time you deposited it or bring along a witness, just in case you have to prove the time you dropped it in the mailbox. BEST SUGGESTION: Unless it's in the middle of the night and the post office is closed - send it with return receipt requested. That gives you proof of when you did it and you have proof that it has arrived at its destination.
E-Mail - At this writing, this clause may be on of the most misunderstood clauses in the offer to purchase. FIRST - the transaction must be a consumer transaction (not commercial) and the property is going to be used for personal, family or household purposes. SECOND - "each" consumer providing their e-mail address must have first consented electronically to the use of electronic documents..." (All required documents are found on Zip-form.) This is a federal law. In 2010 every offer I received on my listings had the agent's or the agent's business office e-mail address in this part of the contract. Unless the agent is the consumer AND unless that agent/consumer has first consented electronically to the use of electronic documents, the agent's e-mail is NOT an acceptable method for binding acceptance to occur.

NOTE: The specifics of Electronic Signatures as a method of binding acceptance is covered completely on the WRA web site and in many other publications. Additionally, your office manager should be able to explain the process.

Occupancy
Is the buyer selling their current home? Do they have an accepted offer? Find out the details of occupancy on that offer. Be sure the date they are giving occupancy of their current home coincides with the date they can get into their new home. An agent in my office, a few years back, actually ended up letting the buyer come home and stay with him over the weekend because they got caught in an occupancy squeeze. Campers and tents also work well as interim housing when you haven't coordinated occupancy dates!

Definitions
Don't pass over this section. There are words in there that can bite badly if they apply and the agent doesn't know that. The listing agent has primary responsibility to find out about these items. The sub-agent/buyer's agent also has responsibility. Ignorance is not a defense when due diligence could have saved the situation. ALSO - when the listing agent gives you verbal answers to your questions when you are obtaining important information... write what they say into your offer. I have a personal story that cost me. I was showing a home. Third showing. Buyer asked, "Where are the property lines?" I called the listing agent. "The woodpile to the west. The telephone pole at the top of the hill. The lot to the east. In fact, the neighbor to the east would be willing to buy that lot for his garden." Buyer didn't want a survey. A month or so after the closing, buyer's boyfriend moved in. He had a corvette. He wanted a garage. They called a surveyor! The woodpile was on the neighbor's land. That lot that the neighbor may have been willing to buy actually belonged to someone in Milwaukee. AND - the dedicated roadway actually ran through the sunporch attached to the house. The blacktopped road followed the lines that the cars had been driving on since the beginning of the subdivision. I should have written into the offer. "Seller states that the woodpile... ." Not long after that the process server walked up my sidewalk. I lost.

Closing
If your closing is delayed, you are REQUIRED to extend the date in writing. Verbal is not binding. There have been more than a few agents who received DRL reprimands for not putting agreements in writing on an approved form.

Closing Prorations
The pre-printed contract verbiage is self-explanatory. Real estate taxes may be more complicated than more constant pro-rations like subdivision dues, assessments, etc. There are a few things to be considered. Is the buyer paying a lot more for the property that the current assessment? Or, a lot less? Will there be a new assessment in place before the closing? Is the property described on the tax bill the exact same property that is being transferred? Is the buyer purchasing more or less than the parcel described in the legal description? Is there an assessment payable from previous municipal or association projects? Will that be paid off at the closing which would change the pro-ration calculation. Read the bold print out loud to the buyer.

Leased Property
The word "if" defines your use of this clause. The clause is self-explanatory. If applicable, be sure you address it with the buyer. If the listing agent hasn't provided enough information, obtain what you need or write a contingency that addresses the missing information.

Rental Weatherization
Have you ever heard a buyer say they are really going to rent it but not right away? If you know the property won't be officially owned and occupied by the buyer, it isn't exempt. You will be held responsible if you "don't hear what they said."

Real Estate Condition Report
Draw this to the buyer's attention: "... A prospective buyer who does not receive a report within 10 days may, within two business days after the end of the 10 day period, rescind the contract of sale... by delivering a written notice of rescission to the owner or the owner's agent... " (Regarding rescission rights, buyer should consult an attorney for additional information.)

Additional Provisions/Contingencies
Every Contingency requires a Condition, a Consequence, and a Deadline. No exceptions!

An example: "Buyer to provide financing pre-approval 2 days from acceptance." So - what happens if they don't do it? Likely Nothing. There is no stated consequence if they do not perform. A good attorney would catch that glitch quickly and turn the situation in his/her client's favor. A well-written contingency needs some teeth in it for non-performance in a timely manner.

State the conditions of the contingency, the consequences if they don't, and the deadline for performance. Example: " Seller reserves the right to withdraw from this offer if buyer, within 3 working days of this accepted offer, does not provide to seller/seller's agent a written statement from a bona fide lending institution that the buyer is pre-approved for financing as stated in this offer to purchase."

Anytime you write a contingency for absolutely anything, you need: a condition (what do you want done), a consequence (what happens if it doesn't happen) and a deadline (if not performed in time). The example shown here is just a guideline. Whether the condition is a requirement of the buyer or a requirement of the seller, use the same principle:
Contingency = Condition, Consequence, and Deadline.
C = C + C + D

When Should You Include A Contingency In An Offer You Are Writing?
When you know the buyer has an expectation of use that may not be consistent with legal use or the current use; when a conditional use permit may be required; when you know the buyer only wants to buy the property if they will be allowed to do something - such as have a horse, a pig or a duck! Maybe they want to fence the yard, have 3 or 4 dogs; or raise chickens. Do they plan to run a home-based business in their basement? Perhaps they want to build a second garage or maybe a pole building; put in a pool, or build an addition. The list can be endless. In other words - if the buyer has specific needs they should be encouraged to include a contingency that gives them time to confirm they can do what they want to do with the property.When you know the buyer has an expectation of use that may not be consistent with legal use or the current use; when a conditional use permit may be required; when you know the buyer only wants to buy the property if they will be allowed to do something - such as have a horse, a pig or a duck! Maybe they want to fence the yard, have 3 or 4 dogs; or raise chickens. Do they plan to run a home-based business in their basement? Perhaps they want to build a second garage or maybe a pole building; put in a pool, or build an addition. The list can be endless. In other words - if the buyer has specific needs consider including a contingency that gives them time to confirm they can do what they want to do with the property.

NOTE: Story. The family who bought a property in an area that seemed like country. They were avid 4-H members and were active in the horse project. They were moving so their children could raise their horses for the fair. It surely looked like they could do that. The seller's had a horse in the back yard and there was a small barn. It turns out the property had been in the family a long time and nobody said anything about their horse. But the neighbors did say something when the "new people" moved in with their 3 horses. The residential zoning of the property didn't allow farm animals. A lawsuit ensued. Guess who lost? A well-worded contingency would have saved a lot of heartache.

Financing
Use care when completing the finance contingency. Of special note is the blank for the interest rate "not to exceed _____." D not write "market" in the blank. An actual number should be written there. (see excerpt below)

NOTE: I suggest adding at least a 1/4% to the rate the buyer expects. If the rates fluctuate during the financing process, the buyer could be in a position of either having an out if they want one, or asking for an amendment from the seller. If the seller has another offer in the wings problems with the transaction could arise.

From the Wisconsin Real estate Magazine, October, 2010: "REALTORS® must take all possible steps to ensure a transaction is performed correctly to avoid being sued, and this should include correctly completing contracts. When contracts have a blank space where the interest rate is to be named, some agents insert the word "market to mean the market interest rate. An actual number is supposed to be written ther... Agents would be wise to write their contracts in such a way that if they were questioned by a lawyer they could defend each step of the contract process."

UNAVAILABLE FINANCING. If financing per the terms of the offer turn out to be unavailable, be sure the buyer understands that the seller has the right to offer them seller financing at the same terms as found in the offer. If the buyer's offer is a cash offer, put a check mark by the CAUTION note to confirm you have brought it to the buyer's attention. Be sure the buyer is fully aware of this part of the pre-printed offer.

Buyer's Loan Commitment
Pay close attention to the following and read it aloud to the buyer: "BUYER, BUYER'S LENDER AND AGENTS OF BUYER OR SELLER SHALL NOT DELIVER A LOAN COMMITMENT TO SELLER OR SELLER'S AGENT WITHOUT BUYER'S PRIOR WRITTEN APPROVAL OR UNLESS ACCOMPANIED BY A NOTICE OF UNAVAILABILITY." The Buyer should be encouraged to remind their loan officer not to send out a written loan commitment without their/the buyer's written approval.

Appraisal Contingency
Tell the buyer to stay in touch with their lender so that the appraisal is ordered and completed in time to match with the timeline in this contingency.

Closing Of Buyer's Property Contingency
This clause may be written differently, depending on whether you are a buyer's or a seller's agent. The seller's agent may opt to add to the blank line at lines 310-311 may include the following: "written waiver of the Closing of Buyer's Property Contingency and [the financing contingency, the professional inspection report, and any contingencies that reference property conditions required by the buyer in the accepted offer to purchase - except water, well, and sanitary disposal systems performed by a licensed plumber.]
NOTE: You may consider exempting the water, well, and sanitary disposal systems from inspections stated in this clause.)

Time Is Of The Essence
When writing an offer, remind the buyer what "Time is of the Essence" means.

NOTE: When doing a counter, Time is of the Essence may not survive all of the dates in the offer unless "Time is of the Essence as to all dates in this offer" is restated. Consult an attorney if you have questions. If in doubt, restate it if that is the intention of the person making the offer/counter offer.

Title Evidence
It is prudent for the seller's agent to do a Search & Hold on their listings to find out early if there are problems that need to be addressed. The sooner you find out about mortgages that were satisfied but not properly recorded, deaths that occurred without termination of ownership, judgments, unsatisfied liens, etc.

NOTE: If dealing with a foreclosure or short sale, special care should be taken to be sure that the lending institution has the right to foreclose, deficiencies in short sales have been satisfied, etc. Take special care with short sale and foreclosure properties. Buyer's consultation with an attorney is suggested. Horror stories are often told that may have been avoided with competent legal representation.

Special Assessements and Other Expenses
Due diligence by the agents, the buyers and the sellers is important when it comes to assessments and other expenses that may be legally attached to the property being sold.

Earnest Money
My advice? Be sure that BOTH parties know, at the time of the offer, that the agent has little or nothing to say about who gets the earnest money when a transaction fails and an argument ensues over its dispersal. Explain that the procedure is specifically regulated by written rules; Attorneys are involved; And explain that the verbiage in the Offer to Purchase is a very short version of the complicated process of disbursing contested funds. Every now and then you meet a buyer who thinks they get the earnest money back if they don't close or a seller who thinks they get it if the buyer doesn't close. They need to know up front that it doesn't work that way. Agents tend to be blamed if earnest money isn't disbursed according to the party's expectations. Address it before it's a problem and you often avoid the problem.

NOTE: I learned that lesson when the septic failed on my listing. Seller wouldn't fix it. Buyer didn't want a failed septic. Buyer wanted their earnest money back. (They had the proper contingency in place.) Seller refused to sign the Cancellation and Mutual Release. In the time period as spelled out in the pre-printed portion of the offer the buyer sent off an angry letter to DRL telling them I wouldn't give them their money back. It was resolved, but I had to take the time to answer the complaint and file the papers the DRL wanted. It's called learning by doing - the old 4-H motto.

Inspection Contingency
With very few exceptions, an offer has much less chance of coming back to bite you after the closing if the buyer has had a professional inspection. For almost as many years as I was in the business I "strongly encouraged" a buyer to hire a professional inspector. If they didn't want one I would ask them to sign a statement that I told them to. If they didn't want to do that I noted their refusal on the form, dated it and put it in the file. Suggested verbiage on the decision not to perform the inspection:"Buyer has been advised of the benefits of having a third-party, professional inspection of the subject property and waives their right to said inspection."

NOTE: Sometimes well or septic inspections come back with notes that indicate there may be some issues with the systems. It is not your place to interpret the report. Buyers should be referred to the inspector for clarification. Always have any well or septic inspection initialed and kept in your file. I have seen trouble occur 3 years after a closing. Initials can save the day! In this case, I didn't have initials, but I did have a list of everyone who received the report with a check mark by each one as the report went out.(There were the sellers, the buyers, the attorneys for both sellers and the FVA who needed a copy). The checklist saved a lawsuit. But, now I get initials.

THERE IS A DIFFERENCE BETWEEN A PROPOSED AMENDMENT AND A NOTICE OF DEFECTS. Read the Caution aloud and mark a check by the Inspection Contingency - "A PROPOSED AMENDMENT IS NOT A NOTICE OF DEFECTS AND WILL NOT SATISFY THIS NOTICE REQUIREMENT." Often those forms are not used properly. Allow enough time if you wish to present an amendment requesting that the seller fix something. If it is a deal-breaker if they won't, the deadline for Notice of Defects is crucial.

My Personal Note
In Wisconsin, real estate agents are required to complete Continuing Education classes in order to renew their license. The concept of requiring Continuing Education credits was begun to ensure that licensees were proficient in writing contracts and were up-to-date with the changes that are frequently occurring and to revisit information that was known well (once upon a time) and perhaps set aside or forgotten. Just as there is a difference between real estate agents, so also is there a difference between Continuing Education instructors. It is the agent's responsibility to search out classes where they will LEARN something and not just to fulfill the requirement to sit in a class long enough to get the instructor to hand out the Certificate of Completion needed for license renewal. Seek out the instructor who will teach you the most, rather than the instructor who will get you home the soonest. The integrity of the meaning of the word "Professional" depends upon the licensee's commitment to excellence in the craft. Personally, I have occasionally grumbled about being required to "learn" how to write an offer after I have been writing them for three decades, teaching them when I was the owner/broker, and being required to sit in the "same" classes every 2 years for license renewal. SO - I seek out the best teachers... and have never walked away from my 12-18 hours of education without having learned something new or having been reminded of something I once knew and had forgotten. To call ourselves professional we must act like professionals. There are instructors out there who will rush through the classes in 1/3 the required time, give you the answers to the questions, hand out your certificate and send you home. The agent who knowingly walks into classes like that, in my opinion, is guilty of gross malpractice and not worthy of the license they represent; to say nothing of the instructors who take cash for those classes.