SEPTEMBER 2015, 15 - WRA

Wisconsin REALTORS® Association Legal Update, September 2015

As the practice of real estate evolves, the forms used by real estate licensees must change to keep abreast of new developments and the standards of competent practice. This Legal Update reviews the revisions to four one-page forms used frequently in the daily practice of real estate professionals: the WB-40 Amendment to Offer to Purchase, the WB-41 Notice Relating to Offer to Purchase, the WB-44 Counter-Offer, and the WB-45 Cancellation Agreement and Mutual Release.

The revisions made by the Real Estate Examining Board (REEB) of the Department of Safety and Professional Services (DSPS) to all of the forms discussed in this Update were intended to fine-tune the existing approved forms to simplify and clarify the forms and make them more user friendly. The revisions predominantly improve the provisions already in place and make few substantive changes. Unnecessary language was removed to maximize the blank line space available for the insertion of language, in other words, there is more room to write. Check boxes were removed where they were not needed, eliminating the potential for the inadvertent oversight of a check box not being marked.

All of the forms discussed in this Update have an optional use date of October 1, 2015, and a mandatory use date of January 1, 2016. They are available from the WRA on zipForm and in hard copy as well as on the DSPS website.

WB-40 Amendment to Offer to Purchase

As stated in the caution immediately following the form title, the WB-40 Amendment to Offer to Purchase is used when both parties are agreeing to modify the terms of an accepted offer to purchase. Licensees should use the amendment when both parties mutually agree to change one or more of the terms or conditions of an accepted offer. An amendment may be used, for instance, to change the price or closing date, to extend the deadline on an inspection contingency, or to document any other new agreement made by the parties regarding the terms and conditions of an accepted offer.

The contents and format of the WB- 40 remain much the same as before. Some changes were made to simplify and streamline the form by removing unneeded language and creating more room for the insertion of provisions. A sample copy of the revised WB-40 Amendment to Offer to Purchase appears on page 10 of this Update and is referred to as the revised WB-40 in this discussion.

Changes to the WB-40 AmendmentThe specific changes made in the revised WB-40 include the following:

The lines regarding a change in the occupancy date and a change in the occupancy charge that appeared in the prior version of the WB-40 were removed. Such provisions regarding occupancy may be written in the blank lines should the need arise.

The items regarding a change in the closing date and a change in the purchase price, which are on lines 4-5 of the revised WB-40, no longer have check boxes. Rather the blank lines may simply be filled in without having to check any box. This will help take away the chance that an agent might inadvertently neglect to check the box and create a point of discussion or dispute between the parties, their agents or their attorneys.

At line 28 there is a new attachments line where documents and addenda associated with the amendment may be named and incorporated by reference to help make clear what documents are being made a part of the offer via the amendment.

The prior version of the WB-40 included a delivery line that indicated the name of an agent and brokerage firm as well as the date of delivery. This at times caused some confusion because it was not always clear if this was the delivery of the amendment from the drafting agent to the other agent, the delivery of the proposed amendment to the other party, or the delivery of the accepted amendment back to the agent working with the drafting party. In addition, there is no delivery line in the approved offers or other contracts. Hence it seemed that any

SEPTEMBER 2015, 15.09

WB-40 Amendment to Offer to Purchase

WB-41 Notice Relating to Offer to Purchase

WB-44 Counter-Offer

WB-45 Cancellation Agreement and Mutual Release

IN THIS ISSUEOne Page Form Revisions


need to confirm a time or manner of delivery should be left to external proof outside of the form itself, as is done with offers. Accordingly, the delivery line was removed from the revised WB-40.

With the remaining drafted by and presented by lines, the routing sequence is that the amendment is drafted by the agent working with the party offering the amendment with the drafter identified on lines 36-37. The WB-40 then is presumably sent to the agent working with the other party and is presented to the other party by the licensee identified in the presented by item on lines 38-39. If the amendment is accepted, it is delivered back but those details also are not documented because at that point the form has been completed and in other forms, such as the offer, there is no documentation of that delivery. That is established independently as needed. Also, once the party accepting the amendment has signed, it may be difficult to fill in further information in the electronic platforms used by many agents.

On the rejection lines on lines 46-47 of the revised WB-40, there is now a prompt for the rejecting party’s initials and the date to document the rejection. In the prior version, there was a blank where the rejecting party’s name was to be filled in, by the party or an agent. It was believed that having the party initial to indicate the rejection helps verify that the party did receive and review the amendment and confirms the rejection. With the blank line where an agent could insert the rejecting party’s name, there was the possibility of an agent misunderstanding the party’s wishes or the potential for misadventure where the agent decides to substitute his or her judgment and reject the amendment in lieu of the party.

Delivery and acceptanceSome of the same issues present in analyzing whether a binding

offer to purchase has been formed will be relevant to the determination of whether a binding amendment has been formed using the WB-40. As stated on lines 30-33 of the revised WB-40, there is a deadline for the delivery of an accepted amendment to the party offering the amendment and delivery of an accepted amendment may be made using any method specified in the offer to purchase.

USAGE POINTER: Amendment not a notice of defects

As pointed out in the caution within the Inspection Contingency in the various approved offers, “A proposed amendment is not a Notice of Defects and will not satisfy this notice requirement.” This is confirmed by the caution at the top of the WB-40 that explains an amendment is used when both parties must agree to a change in the terms of the offer while a notice is used when a party is giving a notice and the other party does not need to agree.

Licensees and parties often seem to have difficulty understanding the distinction between a Notice of Defects and a proposed amendment. A buyer may choose to give a Notice of Defects as described in

the Inspection Contingency, or may choose instead to propose an amendment to suggest a different way to address the defects that concern the buyer. Each performs a distinct function and they are not interchangeable. If the buyer wants to propose an amendment, for example, for a price reduction rather than having the seller repair the leaking crack in the basement, the buyer may do so but must be very careful to ensure that there will be enough time to give a Notice of Defects or take other action if the seller does not accept the proposed amendment.

The buyer may propose an amendment for repairs on the WB-40 Amendment that says, “This is not a Notice of Defects. Seller agrees to (perform the following repairs) (give the following credit at closing)(establish the following repair escrow): give details, time frames, etc. The Inspection Contingency at lines x — x of this offer is hereby deleted.” An attachment may be required for this, which would be noted on line 28 of the revised WB-40. The seller then has the option to accept or reject the buyer’s proposed amendment or propose a different amendment.

The buyer’s proposal must go on the amendment form because the buyer is trying to get the seller to change the terms of the accepted offer by eliminating the procedures for a Notice of Defects/election to cure, and substituting a different provision for repairs in its place. This change has no effect unless the seller agrees and signs the amendment that was proposed by and signed by the buyer. If the seller declines to sign, the proposed amendment has no effect on the accepted offer. A change was proposed, but there was no mutual agreement, so the offer remains as it was before.

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REALTOR® Practice Tip

Licensees should remember that an accepted amendment that is emailed, mailed or faxed need only be sent or transmitted by the deadline. The offering party need not receive the amendment by the deadline.


A Notice of Defects goes on a WB- 41 Notice Relating to Offer to Purchase. A WB-40 Amendment to Offer to Purchase will not work for a Notice of Defects. Using a WB-40 for a Notice of Defects will be subject to challenge by the seller as non-compliant with the stated contract procedures and requirements. If there is no time remaining in the contingency for the buyer to give a Notice of Defects, the submittal of an amendment may be tried but if the seller does not agree, the buyer may be left unable to object to defects and having to purchase the property in its present condition without any seller repairs.

i MORE INFORMATION

For more information about the use of amendments and notices with respect to inspection contingencies see the articles in the June 2014 Wisconsin Real Estate Magazine at www.wra.org/WREM/Jun2014 and the June 2013 Wisconsin Real Estate Magazine at www.wra.org/WREM/Jun13/. Also see the WRA LegalTalks video series on Home Inspections at www.wra.org/LegalTalks/InspectionContingency.


WB-41 Notice Relating to Offer to Purchase

As stated in the caution immediately following the form title, the WB-41 Notice Relating to Offer to Purchase is used when one party unilaterally is giving a notice to the other party relating to an accepted offer to purchase. A WB-41 should be used, for instance, to give notice that a party’s attorney has approved the offer, to give a bump notice, to give a Notice of Defects, or to notify the other party that a contingency has been satisfied.

The contents and format of the WB-41 remain much the same as before. Some changes were made to simplify and streamline the form by removing unneeded language and creating more room for the insertion of provisions. A sample copy of the revised WB-41 Notice Relating to Offer to Purchase appears on page 11 of this Update and is referred to as the revised WB-41 in this discussion.

There was discussion regarding making the Notice form more universal such that it could be readily used with other contracts, but it was ultimately decided to leave the language as it was, with the understanding that licensees could modify the form for use with other contracts.

Changes to WB-41 noticeThe specific changes made in the revised WB-41 include the following:

Where before there was introductory language in the revised WB-41 for contingencies and conditions that were being removed, now there is only language at line 4 of the revised WB-41 stating, “Notice is given that (Attach supporting documents, if required):” The check boxes were removed.

At line 27, there is a new attachments line where documents and addenda associated with the notice may be named and incorporated by reference to help make clear what documents go together and are part of the notice.

The revised WB-41 provides some new terminology for the parties involved with the Notice. The party drafting and giving the notice is referred to as the Initiating Party or Party Initiating Notice while the party to whom the notice is being given is referred to as the Receiving Party.

In the sequence of activity, the Notice is drafted by the agent working with the Initiating Party. The agent's name, firm name and date are then placed on line 28.

The previous “Withdrawal Warning” has been replaced with a caution on lines 30-31 of the revised WB-41 that indicates, “Once delivered, a Notice cannot be withdrawn by the Initiating Party without the written consent of the Receiving Party.”

What had been the signature block for the “Party Giving Notice” is now the signature block for the “Party Initiating Notice” on lines 32-34 of the revised WB-41.

The delivery provision on lines 35-37 of the revised WB-41 has been changed. The revised provision is completed by inserting the name and firm of the agent working with the Initiating Party. These lines also ask for the date and time of delivery of the notice by the identified agent who is to use an authorized delivery method. It is assumed that delivery often will go to the agent working with the Receiving Party because, for example, the agent’s email address is identified as the email to use in the offer or the agent was named as the Receiving Party’s recipient for delivery. In those cases, the agent has undertaken the responsibility to see that the notice gets to the party in a prompt manner.

Actual receipt“Actual Receipt” means that a Party, not the Party’s recipient for

delivery, if any, has the document or written notice physically in the Party’s possession, regardless of the method of delivery. The REEB elected to insert an optional “Actual Receipt” item on the revised WB-41 because the offers often include time periods that run from the time of Actual Receipt rather than the time of delivery.

Lines 38-44 of the revised WB-41 are new and pertain only to those situations where the offer requires Actual Receipt, such as a bump notice or the seller termination provision. On line 38, “ACTUAL RECEIPT” appears in a box and “If the Offer requires Actual Receipt the following may be completed,” is in bold to create a sense that lines 38-44 are a separate section on the revised WB-41.

The concept is that once the notice is delivered, generally to the agent working with the Receiving Party, there will be a need to get that notice to the Receiving Party when Actual Receipt is required. Therefore, in this section, the agent for the Receiving Party can indicate on lines 39-41

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when and how the notice was sent to or forwarded to the Receiving Party. There is also an area on lines 42-44 where the Receiving Party may initial and provide the date and time when the Receiving Party actually received the notice. This may be critical with bump notices or seller termination notices.

USAGE POINTER: Inspection contingency scenarios

A good illustration of the distinction between the use of the WB-40 Amendment and the WB-41 Notice can be found when implementing the inspection contingencies in many of the approved offers to purchase. With respect to those items that are defects, such as a cracked heat exchanger on the furnace, the buyer may consider giving a Notice of Defects. If the seller has the right to cure, the seller may choose, in his or her discretion, whether to cure the listed defects or let the offer become null and void. If the seller has another more desirable offer, the seller may let the first offer die. Accordingly, the buyer may not wish to give a Notice of Defects unless the defects are “deal breakers” which must be fixed if the buyer is to continue with the offer.

A Notice of Defects may be prepared on the WB-41 Notice. This is a unilateral notice that does not require the agreement of the seller. The WB-41 should specify on lines 4-26 that, “This is a Notice of Defects. Buyer objects to the defects listed below which appear in the attached copy of the inspection report of XYZ Home Inspector.” The defects are then listed in the notice and the inspection report may be referenced on line 27 of the revised WB-41 and attached. This will help everyone remember to make sure the inspection reports are delivered. The seller will also use the WB-41 Notice if the seller has the right to cure and gives the buyer a notice of the seller’s election to cure (or to not cure) the defects.

USAGE POINTER: Financing contingency scenarios

The Financing Contingency in many of the approved offers provides, “Buyer and Seller agree that delivery of a copy of any written loan commitment to Seller (even if subject to conditions) shall satisfy Buyer’s financing contingency if, after review of the loan commitment, Buyer has directed, in writing, delivery of the loan commitment. Buyer’s written direction shall accompany the loan commitment. Delivery shall not satisfy this contingency if accompanied by a notice of unacceptability.” Thus, the buyer must review the loan commitment and give written delivery instructions for the delivery of the loan commitment and that written directive that must accompany the loan commitment when it is delivered to the seller. One way that a buyer could give those written directions to deliver the loan commitment would be to use a WB-41 Notice. Likewise, a notice of unacceptability may be drafted by REALTORS® in the same way that a Notice of Defects is prepared, that is, using the WB-41 Notice Relating to Offer to Purchase.

Also the Financing Contingency in many of the approved offers allows the seller to terminate the offer if a financing commitment has not been delivered by the deadline: “SELLER TERMINATION RIGHTS: If Buyer does not make timely delivery of said commitment, Seller may terminate this Offer if Seller delivers a written notice of termination to Buyer prior to Seller’s Actual Receipt of a copy of Buyer's written loan commitment.” Therefore, the financing contingency is not removed and the offer is still alive until the written notice of termination is delivered by the seller. The seller may use a WB-41 Notice to draft a notice of termination and bring the contingency, and the offer, to a conclusion. Optimally that termination notice would be accompanied by a WB-45 Cancellation Agreement and Mutual Release in most circumstances.

USAGE POINTER: Bump noticesThe WB-41 Notice Relating to Offer to Purchase is the approved

form for real estate licensees to use to give written notices. This form generally should be used for notices drafted by licensees, including bump notices. The bump notice must be delivered using one of the delivery methods authorized on the first page of the offer. Not only must there be proper delivery, but a second standard must also be met: Actual Receipt.

Per the Closing of Buyer’s Property Contingency on lines 304-311 of the WB-11 Residential Offer to Purchase, the time period indicated on line 310 does not begin to run until the buyer is in Actual Receipt of the seller’s bump notice indicating that the seller has accepted a bona fide

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i MORE INFORMATION

For more information about the use of amendments and notices with respect to inspection contingencies see the articles in the June 2014 Wisconsin Real Estate Magazine at www.wra.org/WREM/Jun2014 and the June 2013 Wisconsin Real Estate Magazine at www.wra.org/WREM/Jun13/. See also the WRA LegalTalks video series on Home Inspections at www.wra.org/LegalTalks/InspectionContingency.


A Notice of Defects goes on a WB- 41 Notice Relating to Offer to Purchase. It is extremely helpful if it is prepared to identify what it is: “This is a Notice of Defects.” The Notice of Defects just lists the defects. A Notice of Defects does not specify the details of the seller’s repairs; rather that would require an amendment. A copy of the inspection report(s) must accompany a Notice of Defects and may be referenced at line 27 of the revised WB-41 as being made part of the Notice. This means the entire inspection report as the inspection contingency does not provide for the submission of just the summary pages or a partial report.

i MORE INFORMATION

See “Uncovering the Truth: Financing Contingency Urban Legends,” in the February 2013 Wisconsin Real Estate Magazine at www.wra.org/WREM/Feb13/UrbanLegend, pages 10-12 of the November 2009 Legal Update, “WB-11 Residential Offer to Purchase - 2010 Edition,” at www.wra.org/LU0911, and page 5 of the February 2011 Legal Update, “2011 WB-11 Residential Offer to Purchase,” at www.wra.org/LU1102 for further discussion of this provision.


secondary offer. “Actual Receipt” is defined on lines 62-63 to mean that “a Party, not the Party’s recipient for delivery, if any, has the document or written notice physically in the Party’s possession, regardless of the method of delivery.” The definition clarifies that Actual Receipt has not occurred when the agent gets a notice, only when the party does. Therefore delivery to the agent will not start the clock; only Actual Receipt by the buyer will do so. Actual Receipt generally means that the buyer has the written notice in his hands, regardless of whether it came by personal delivery, mail, fax or email. The Actual Receipt section on the revised WB-41 is designed to help track the progress of the bump notice and, if possible, document Actual Receipt.

If the buyer is willing and able to waive the Closing of Buyer's Property Contingency, the agent could submit a WB-41 Notice Relating to Offer to Purchase to the listing agent indicating that the buyer agrees to waive the Sale of Buyer's Property Contingency (and whatever else was agreed upon in lines 307-308 of the WB-11 residential offer) within the number of hours provided. The time frame will be measured from the buyer's Actual Receipt of the seller's bump notice. Some brokers prefer that the buyer confirm in the Notice that the closing date shall remain as stated in the accepted offer to purchase. If the parties agree to a new closing date or alternative terms, a WB-40 Amendment to Offer to Purchase should be drafted and accepted by all parties. Any action should be taken promptly because if no response is made by the bump notice deadline, the first offer could become null and void.

If the first offer becomes null and void, then the seller may give written notice to the second buyer that his offer is now primary, using the WB-41 Notice.

WB-44 Counter-OfferA counter-offer can be understood as a new offer that is being issued

by a party who has previously received an unacceptable offer. The legal effect of writing and delivering a counter-offer is the same as the rejection of the previous offer and the presentation of a new offer to the party who had submitted the previous offer. The reason we don’t reject the offer and write a whole new offer is simply to avoid the unnecessary drafting of an offer whose terms are 95 percent identical to an offer previously written. By using the counter-offer form, only the terms that vary from the original offer are written out, and all terms remaining the same from the original offer are incorporated by reference. This approach helps keep some sense of continuity in the negotiations and saves time.

The contents and format of the WB-44 Counter-Offer remain much the same as before. Some changes were made to simplify and streamline the form by rearranging the content of the previous WB-44. A sample copy of the revised WB-44 Counter-Offer appears on page 12 of this Update and is referred to as the revised WB-44 in this discussion.

Changes to the WB-44 Counter-OfferThe specific changes made in the revised WB-44 Counter-Offer

include the following:

The idea of making the WB-44 more generic to relate to “counter-proposals” regarding all variety of bilateral contracts negotiated by licensees was rejected because it was believed that the Counter-Offer is a term of art that should be left alone.

The Note regarding the numbering of Counter-Offers was moved from the very bottom of the form to the top of the revised WB-44, directly following the blank line for numbering the Counter-Offer.

On lines 4-6, the Caution now comes first on lines 4-5: “CAUTION: This Counter-Offer does not include the terms or conditions in any other counter-offer or multiple counter-proposal unless incorporated by reference”; followed on lines 6 by “All terms and conditions remain the same as stated in the Offer to Purchase except the following:” On lines 4-5 the phrase “or multiple counter-proposal” was inserted after the second “counter-offer.” The bold was removed from line 6 since it is not part of the Caution.

At line 28, there is a new attachments line where documents and addenda associated with the Counter-Offer may be named and incorporated by reference to help make clear what documents are being made a part of the contract via the WB-44.

The other change was to make the signature blocks appear on the WB-44 in the same manner as on other REEB forms. The signature blocks for one party should be stacked vertically, not horizontally, as they did in the prior WB-44.

Use of counter-offers in practiceIn the simplest situation, a seller counters the buyer’s offer. After

the buyer’s receipt of the seller’s counter-offer, the seller attempts to withdraw the counter-offer so that the original offer can be accepted (with time remaining for acceptance). In this situation, the seller clearly would be unable to accept the buyer’s initial offer because the seller’s counter-offer acted as a rejection. A rejected offer is null and void and cannot be accepted. Once a counter-offer has been made, the preceding offer cannot be revived by acceptance or performance.

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If a party wants to have a separate bump clause in conjunction with any other provision or contingency, it may be stated in additional provisions or in an addendum. A separate bump clause may be constructed by copying the last two sentences of the Closing of Buyer’s Property Contingency from the offer and substituting the name of the contingency or provision that is to be tied to the bump in place of the reference to “Closing of Buyer’s Property Contingency.”

i MORE INFORMATION

For further discussion of the Actual Receipt definition, see the November 2009 Legal Update, “WB-11 Residential Offer to Purchase — 2010 Edition,” at www.wra.org/LU0911. For further discussion of bump clause issues see the November 2009 Legal Update, “WB-11 Residential Offer to Purchase — 2010 Edition,” at www.wra.org/LU0911 and pages 14-15 of the August 2007 Legal Update, “‘Favorite’ Offer to Purchase Provisions,” at www.wra.org/LU0708.


The counter-offer legally operates as a rejection of the offer. Once rejected, the offer can never be accepted. Thus the acceptance deadline in the offer becomes irrelevant. The counter-offer is essentially a new offer that has its own acceptance deadline. Therefore, a seller could counter a buyer’s offer weeks after receiving it. The only relevant deadline for acceptance in the counter-offer is the acceptance date stated in the counter-offer itself.

The WB-44 Counter-Offer formAt the top of the revised WB-44, the parties are to state, on the blank

line provided, the number of the particular counter-offer in the sequence of the negotiations and identify, by striking, whether the counter-offer was originated by the seller or by the buyer. The number designation refers to the total number of counter-offers that have been issued in the transaction, not to the number of counter-offers issued by the particular party. If there is more than one counter-offer, they should be numbered sequentially with reference to the entire transaction, not just by party, for example, Counter-Offer No. 1 by Seller or Counter-Offer No. 2 by Buyer. The third counter-offer issued in a back-and-forth negotiation would be: “Counter-Offer No. 3 by (Buyer/Seller).”

Incorporation of terms from prior counter-offers by reference

Lines 4-6 of the revised WB-44 provide indicate that the terms of the Offer to Purchase remain as stated in the Offer, except as stated in lines 6-27 or in attachments to the counter-offer. Practitioners are cautioned that the terms or conditions from any other counter-offers or multiple counter-proposals are not included unless incorporated by reference.

This language means that the only offer provisions under consideration are those stated in the original offer to purchase and those stated in the current counter-offer. Provisions from previous counter-offers are not automatically brought forward, but may be included by repeating the entire provision in the current counter-offer or through incorporation by reference. Provisions incorporated by reference may be identified by specifying the number of the counter-offer, and the number of the counter-offer provision (if numbered) or the line numbers of the lines containing the provision in the prior counter-offer.

For example, “paragraph 3 of Counter-Offer No. 2 by Buyer is acceptable and is included in this Counter-Offer,” or “lines 10-16 of Counter-Offer No. 3 by Seller are incorporated herein” would accomplish the goal of carrying forward a provision from a previous counter-offer without having to restate the entire provision. A Note explaining these techniques for bringing forward terms and conditions stated in previous counter-offers appears at lines 47-50 of the revised WB-44.

Delivery languageAs every practicing licensee knows, binding acceptance, as stated in

the approved offers, consists of acceptance by signing the offer, and delivery back to the other party. The same is true with counter-offers. The delivery language at lines 30-33 of the revised WB-44 states that:

“This Counter-Offer is binding upon Seller and Buyer only if a copy of the accepted Counter-Offer is delivered to the Party making the Counter-Offer on or before ________ (Time is of the Essence). Delivery of the accepted Counter-Offer may be made in any manner specified in the offer to purchase, unless otherwise provided in this Counter-Offer.”

Note regarding withdrawalLines 34-35 of the revised WB-44 reads as follows: “The Party making

this Counter-Offer may withdraw the Counter-Offer prior to acceptance and delivery as provided at lines 30-33.”

This language is provided to educate the parties that the time period for acceptance stated in the contract does not prevent the party who issued the counter-offer from withdrawing it any time prior to binding acceptance per the terms of the contract. Too often a party in receipt of an offer or counter-offer mistakenly believes he or she has until the date stated in the contract to accept the offer or counter-offer. In reality, the party has only until the earlier of (1) the date set for acceptance or (2) actual notice of withdrawal by the issuing party.

A party who has made a counter-offer is, in all but relatively few situations, able to withdraw the counter any time prior to its binding acceptance. The law requires the party withdrawing the counter-offer to notify the person in receipt of the counter that it is withdrawn. Binding acceptance occurs when the signed counter-offer is delivered, per an authorized method. If the notice of withdrawal arrives before binding acceptance, the counter-offer becomes null and void. Any attempt at acceptance of the counter-offer thereafter — even if prior to the stated time limit for acceptance — will have no legal effect.

Notice of withdrawal does not technically have to be in writing. It may be wise, if charged with the mission of withdrawing the seller's counter-offer, to first telephone the cooperating agent to tell her the counter is withdrawn and immediately follow up with written confirmation transmitted via email, fax or mail. Sending the confirmation using multiple methods provides good backup. During this conversation, the listing agent can also ask if the counter had been signed or if delivery had been initiated. The written confirmation may state who had the conversation, that the person called was advised that the seller's counter-offer was withdrawn, indicate what was said when the caller asked whether the buyer had signed or delivered the counter, and perhaps most importantly, give the exact date and time of that call.

Ideally the party attempting to withdraw the counter-offer would want to make certain that proof is available that the counter had not already been accepted and delivered at the point in time when the verbal withdrawal message was given, but that is not always possible. If it can be verified — and hopefully documented — that the counter-offer had

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To avoid charges of incompetent practice before the REEB, one good rule of thumb is that every contractual document should make the round trip from one party to the other and back again. When a seller is countering a buyer's offer, to ensure proper delivery, the seller needs to deliver back the entire offer to purchase and the WB-44 Counter-Offer. However, if the parties already have a copy of the offer that has made the round trip, it is not legally necessary to include a copy of the offer when delivering another counter-offer. For example, if the buyer submitted an offer and the seller countered by noting this on line 461 of the WB-11 and delivering the entire contract back to the buyer, including the seller’s counter-offer, the buyer would not need to send the original offer back if he or she countered back to the seller.

Wisconsin REALTORS® Association Legal Update, July 2015

not been signed and/or delivered, then notice of withdrawal is less likely to be challenged.

WB-45 Cancellation Agreement and Mutual Release

The WB-45 Cancellation Agreement and Mutual Release is a form that permits the parties to an agreement or contract to cancel the contract and to authorize any real estate broker holding funds on behalf of the parties to disburse that money. Having a signed CAMR gives the parties confidence that they may each proceed under contract with a new party, without concern of possible liability under the first contract.

The contents and format of the WB-45 remain substantially the same as before. Some minor changes were made to clarify the form by rearranging the content of the previous WB-45. A sample copy of the revised WB-45 Cancellation Agreement and Mutual Release appears on page 13 of this Update and is referred to as the revised WB-45 or revised CAMR in this discussion.

Changes to the WB-45 CAMRThe specific changes made in the revised WB-

45 include the following:

On lines 1-5 of the revised CAMR, the phrase “contract of sale” was changed to “offer to purchase” and “Agreement” was changed to “Contract” throughout the form. At line 1, the word “UNDERSIGNED” was taken out of all caps.

On lines 6-11 of the prior WB-45 with regard to the disbursement of trust funds, there was confusion due mostly to the spacing within the WB-45 layout: the last line of this section, which is line 11, was being interpreted to relate only to the immediately preceding lines 9-10 instead of inclusively to lines 6-10. To correct this, the language regarding the release of the brokers by the parties was moved from the end of this section to the beginning to make it clear that all disbursements authorized within this section on lines 6-11 of the revised WB-45 would release the brokers from liability with regard to the disbursements.

A Note was added on lines 16-17 of the revised CAMR, similar to the one in the WB-44 Counter-Offer, reminding the parties that the CAMR may be withdrawn prior to acceptance and delivery back to the party initiating the CAMR.

Starting at line 12, the WB-45 adopts the familiar acronym CAMR and uses it throughout the rest of the form.

The WB-45 CAMR formThe WB-45 Cancellation Agreement and Mutual Release allows the

parties to a contract to cancel the contract by mutual agreement and to authorize any real estate broker holding funds on behalf of the parties to disburse those funds. The WB-45 can be used to cancel offers as well as other bilateral contracts such as option agreements, exchange agreements and rental agreements.

Not just for offersInstead of limiting the references in the form to buyers and sellers, the

CAMR instead refers to the “Parties.” Who the “Parties” are is defined in terms of the underlying Contract. For example, if the CAMR is used with the WB-11 Residential Offer to Purchase, it is evident that the parties referred to in the offer are the buyer and seller. The drafter would fill in “Offer to Purchase” on line 1, the date of the offer on line 2, and the address of the property on lines 3-4. At the same time, the WB-45 could be used with a lease that was being cancelled. The drafter would fill in “Lease” on line 1, the date of the lease on line 2 and the address of the rental property on lines 3-4. In this example, the Parties would be the landlord and tenants. This information on lines 1-4 is sufficient to identify the contract that is being cancelled.

All claims releasedLines 4-5 of the CAMR contain the language

that cancels the identified Contract. The CAMR states that the parties agree that the Contract “be canceled and the Parties hereby release all of their right, title and interest in and to the Contract, and any and all claims arising out of the transaction.” Any party signing the CAMR is releasing all claims against the other party and will not be able to sue the other party regarding any matter relating to the contract or transaction.

Disbursement of trust fundsIn lines 6-11 of the CAMR, the parties authorize

the broker holding trust funds pertaining to the transaction to disburse the specified amounts to the named persons at the stated addresses. This

is the part of the CAMR that constitutes the “written earnest money disbursement agreement” referred to in Wis. Admin. Code § REEB 18.09(1)(b) and in the disbursement section of the approved offers.

Delivery backThe CAMR requires that the fully signed CAMR (this may include

one or more separate copies of the CAMR) be delivered to the party initiating the CAMR by the deadline stated on lines 14-15. If this is not done, the CAMR will not be effective. As noted at line 15, delivery must be accomplished using a delivery method authorized in the underlying Contract.


If there are five sellers in five different states and the listing agent sends them each a separate copy of the CAMR to sign, it may take some time before the listing agent gets them all back and delivers them back to the buyers. Hence the party initiating the CAMR should carefully consider the number of parties and their availability when choosing the deadline.

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“Any party signing the CAMR is releasing all

claims against the other party regarding any matter relating to the contract or

transaction.”

i MORE INFORMATION

For further information about counter-offers, see the February 2013 Legal Update, “Contract Law Drafting Pointers,” at www.wra.org/LU1302 and pages 6-7 of the November 2001 Legal Update, “Best of the Legal Hotline — Offer to Purchase Issues,” at www.wra.org/LU0111.


USAGE POINTER: Canceling the ContractThe need to cancel a real estate contract or agreement may arise

under many different scenarios. One or both parties may wish to cancel the contract or agreement because, for example, (1) a party has died, (2) the buyer has not fulfilled the financing contingency, (3) the seller wants to be sure that the primary offer is canceled before making the secondary offer become primary, (4) the offer is not conclusively over, (5) the tenant bought a house, or (6) a party has changed his or her mind.

The seller never received a loan commitment from the first buyer who failed to close. The seller delivered a notice of termination based on the buyer’s failure to deliver a loan commitment and declared the contract null and void. The first buyer received the notice, and the buyer's agent acknowledged the same. The seller accepted an offer from a second buyer, which is set to close. The title company representative of the second buyer won't close until they receive a CAMR signed by the first buyer, or proof of the return of the earnest money to the first buyer. Can the seller close, legally, without returning earnest money and/or a buyer-signed CAMR? Can the first buyer hold up the sale and closing of this property?

Without a fully executed CAMR, the first buyer may retain some rights or interest in the property. The title company is apparently requesting the CAMR from the first transaction as evidence of the buyer's release of any rights or interest based on the original contract.

A CAMR signed by all parties to the first offer would clearly document the release of all rights and interest in the first offer and authorize the disbursement of earnest money. Having a signed CAMR gives both the seller and the buyer confidence that they may each proceed under contract with a new party, without concern of possible liability under the first offer. However, a CAMR is not a legal requirement for terminating an offer.

A seller may not be willing to sign if they intend on suing the first buyer. Likewise a buyer may not sign if they intend to bring legal action against the seller. In the event the parties agree to release the earnest money without a fully executed CAMR, the buyer may retain rights and interest in the property. Only an attorney who reviews the transaction documents and the entire course of events will be able to offer an opinion about the buyer's possible legal claims regarding the property. Although it is possible for a transaction to close with a second buyer, there may be a cloud on title based on the first transaction unless the title company is satisfied.

The second buyer may consult with the title company to determine if they will write over/endorse over the absence of the executed CAMR and what would be required for them to do so. The broker is practicing competently by referring the parties to legal counsel for an opinion on the title and/or to address the title company's concern with the unresolved first offer and any possible rights remaining with the first buyer.

USAGE POINTER: Disbursing fundsAnother important function of a CAMR is to provide authorization for

the disbursement of earnest money or other funds held in a broker’s trust account.

The buyer gave a Notice of Defects to the seller regarding defects listed in the inspection report. Within the notice, the seller was reminded that they do not have the right to cure and the offer is null and void. The seller will not sign a WB-45, thus the earnest money has not been returned to the buyer. The other agent on the transaction is telling the broker that the listing broker can release the earnest money because of the notice, but the broker disagrees and wants all parties’ signatures on a WB-45. What is correct?

A broker is unable to disburse the earnest money based upon the direction of one party only or based upon a Notice of Defects, even under circumstances where the notice results in the offer becoming null and void. Wis. Admin. Code § REEB 18.09(1) & (2) establish the rules allowing a broker to disburse the funds. Nowhere in those rules does it provide a safe harbor for a disbursement based upon the direction of the seller alone.

Wis. Admin. Code § REEB 18.09(1)(b) authorizes disbursement

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A CAMR is prudent practice for licensees because it provides a way to have certainty for the parties that a contract is over with, rather than having the parties expect the agents to tell them whether the transaction is over and done, which requires a legal opinion. That is why an attorney's opinion is often stated as the alternative to having the CAMR signed by the parties.

i MORE INFORMATION

For further discussion of CAMR usage review Legal Update 00.03, “Cancellation Agreement and Mutual Release; and Bill of Sale,” at www.wra.org/LU0003.

EDITORIAL STAFFAuthorDebbi Conrad

ProductionLauren B. Hubbard

ASSOCIATION MANAGEMENT ChairmanDan Kruse

President & CEOMichael Theo, CAE

CONTACT INFORMATIONWisconsin REALTORS® Association4801 Forest Run Road, Suite 201Madison, WI 53704608-241-2047800-279-1972

LEGAL HOTLINEPh: 608-242-2296 Fax: 608-242-2279 Web: www.wra.org

The information contained herein is believed accurate as of September 1, 2015. The information is of a general nature and should not be considered by any member or subscriber as advice on a particular fact situation. Members should contact the WRA Legal Hotline with specific questions or for current developments.

Reproduction, use or inclusion of this material in other publications, products, services or websites is not permitted without prior written permission from the WRA or its Legal Department.

SUBSCRIBEThis Legal Update and other Updates beginning with 94.01 are available to members in the legal section of www.wra.org.

A Legal Update subscription is included with member dues. Members are alerted via e-mail when a new issue is available online.

The non-member subscription rate for the Legal Update is $75. A subscription includes 12 monthly issues.

Contact the Wisconsin REALTORS® Association to subscribe:

4801 Forest Run Road, Madison, WI 53704-7337

608-241-2047800-279-1972www.wra.org

WRA Legal Update © 2015


based on a written earnest money disbursement agreement, such as the CAMR, signed by all parties, not just by the seller. Pursuant to lines 376-394 of the WB-11 Residential Offer to Purchase, a broker is to do nothing with the earnest money for 60 days after the scheduled closing date unless the parties reach a written agreement for the disbursement of the earnest money. The broker may wish to write a memorandum or letter to the buyer, the seller and their respective attorneys, if any, pointing out lines 376-394 and explaining that this is how the earnest money disbursement must be handled. It is then up to the parties to work out their differences by negotiation or by going to small claims court.

After the 60 days has passed, the listing broker may choose to initiate a small claims action or seek an impartial attorney’s written opinion as to who should receive the earnest money. The broker may deduct up to $250 from the earnest money for the legal fees involved in either of these alternatives. The broker also may continue to do nothing and allow the parties to find a way to resolve the earnest money dispute themselves or through their attorneys.


If the listing broker unilaterally decides to disburse the earnest money to the seller or to the buyer, the broker loses the safe harbor protections of the provisions in Wis. Admin. Code § REEB 18.09. The broker may potentially be subject to REEB discipline for disbursing trust account funds without authority, in violation of this rule. While it is natural to want to help the side that “deserves” it, the disbursement of earnest money and other trust funds from a real estate trust account is controlled by rules that do not concern themselves with who is right or wrong, but rather establish a procedure that gives everyone a fair chance to make a claim on the funds. The CAMR represents the most frequently used tool to provide safe harbor protection on a standardized basis.

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i MORE INFORMATION

For further discussion of earnest money issues, see Legal Update 00.10, “Trust Account Basics,” at www.wra.org/LU0010, the Fall 2011 WRA Broker Supervision Newsletter, “Trust Accounts: Are You Prepared for an Audit?” at http://www.wra.org/bsnfall11/ and pages 9-13 of the May 2014 Legal Update, “Revisions to Forms Use and Trust Account Rules,” at www.wra.org/LU1405.

Watch the Legal Update Video Online:

http://www.wra.org

https://www.youtube.com/watch?v=k7YPTxBJ9hw

http://www.wra.org

https://www.youtube.com/watch?v=k7YPTxBJ9hw

Wisconsin REALTORS® Association Legal Update, August 2015

P10 Ply 1,2,3 face: black (8.5 x 11.625)

Approved by the Wisconsin Real Estate Examining Board 10-1-15 (Optional Use Date) 1-1-16 (Mandatory Use Date)

WB-40 AMENDMENT TO OFFER TO PURCHASE CAUTION: Use a WB-40 Amendment if both Parties will be agreeing to modify the terms of the Offer.

Use a WB-41 Notice if a Party is giving a Notice which does not require the o agreement.

Buyer and Seller agree to amend the Offer dated ___________________, and accepted _____________________, for 1 the purchase and sale of real estate at ________________________________________________________________ 2 _____________________________________________________________________________, Wisconsin as follows: 3

Closing date is changed from ______________________, ______, to _______________________________, ______. 4

Purchase price is changed from $________________________________ to $________________________________. 5

Other: _________________________________________________________________________________________ 6 _______________________________________________________________________________________________7 _______________________________________________________________________________________________ 8 _______________________________________________________________________________________________9 _______________________________________________________________________________________________ 10 _______________________________________________________________________________________________ 11 _______________________________________________________________________________________________12 _______________________________________________________________________________________________ 13 _______________________________________________________________________________________________14 _______________________________________________________________________________________________ 15 _______________________________________________________________________________________________16 _______________________________________________________________________________________________ 17 _______________________________________________________________________________________________18 _______________________________________________________________________________________________19 _______________________________________________________________________________________________ 20 _______________________________________________________________________________________________21 _______________________________________________________________________________________________ 22 _______________________________________________________________________________________________ 23 _______________________________________________________________________________________________ 24 _______________________________________________________________________________________________ 25 _______________________________________________________________________________________________ 26 _______________________________________________________________________________________________ 27 The attached ______________________________________________________ is/are made part of this Amendment. 28 ALL OTHER TERMS OF THE OFFER TO PURCHASE AND ANY PRIOR AMENDMENTS REMAIN THE SAME. 29 This Amendment is binding upon Seller and Buyer only if a copy of the accepted Amendment is delivered to the Party 30 offering the Amendment on or before _____________________________________ (Time is of the Essence). Delivery 31 of the accepted Amendment may be made in any manner specified in the Offer to Purchase, unless otherwise provided 32 in this Amendment. 33 NOTE: The Party offering this Amendment may withdraw the offered Amendment prior to acceptance and 34 delivery as provided at lines 30-33. 35

This Amendment was drafted by ________________________________________________on _________________ 36 Licensee and Firm Date 37

This Amendment was presented by ______________________________________________on _________________ 38 Licensee and Firm Date 39

(x) ___________________________________________ (x) _____________________________________________ 40 Date Date 41

Print name Print name 42

(x) ___________________________________________ (x) ______________________________________________ 43 Date Date 44

Print name Print name 45

This Amendment was rejected _______________________ __________ __________________________ _________46 Party 47

WISCONSIN REALTORS® ASSOCIATION4801 Forest Run Road

Madison, Wisconsin 53704

DISTRIBUTED BY WISCONSIN REALTORS® ASSOCIATIONWB-40

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WB-41 NOTICE RELATING TO OFFER TO PURCHASE CAUTION: Use a WB-41 Notice if a Party is giving a Notice which does not require the other Party's agreement.

Use a WB-40 Amendment if both Parties will be agreeing to modify the terms of the Offer. This Notice by (Seller)(Buyer) STRIKE ONE relates to the Offer to Purchase dated _____________________, _______ 1 and accepted __________________, ______, for the purchase and sale of real estate at ________________________ 2 _____________________________________________________________________________________, Wisconsin. 3 Notice is given that (Attach supporting documents, if required): ____________________________________________ 4 _______________________________________________________________________________________________ 5 _______________________________________________________________________________________________ 6 _______________________________________________________________________________________________ 7 _______________________________________________________________________________________________ 8 _______________________________________________________________________________________________ 9 _______________________________________________________________________________________________ 10 _______________________________________________________________________________________________ 11 _______________________________________________________________________________________________ 12 _______________________________________________________________________________________________ 13 _______________________________________________________________________________________________ 14 _______________________________________________________________________________________________ 15 _______________________________________________________________________________________________ 16 _______________________________________________________________________________________________ 17 _______________________________________________________________________________________________18 _______________________________________________________________________________________________ 19 _______________________________________________________________________________________________20 _______________________________________________________________________________________________ 21 _______________________________________________________________________________________________ 22 _______________________________________________________________________________________________ 23 _______________________________________________________________________________________________ 24 _______________________________________________________________________________________________ 25 _______________________________________________________________________________________________ 26 The attached ___________________________________________________________ is/are made part of this Notice. 27 This Notice was drafted by _________________________________________________ on _____________________ 28

Licensee and Firm for Initiating Party Date 29

CAUTION: Once delivered, a Notice cannot be withdrawn by the Initiating Party without the written consent of 30 the Receiving Party. 31 (x) ________________________________________________ (x) ___________________________________________________ 32 Signature of Party Initiating Notice Date Signature of Party Initiating Notice Date 33

34 This Notice was delivered by ________________________________________________ on ___________________ 35

Licensee and Firm for Initiating Party Date 36 at ____________a.m./p.m. STRIKE ONE using an authorized method of delivery. 37

ACTUAL RECEIPT If the Offer requires Actual Receipt the following may be completed 38

This Notice was sent to the Receiving Party by ___________________________________________ on ___________39 Licensee and Firm for Receiving Party Date 40 at _____________a.m./p.m. STRIKE ONE 41

Receiving Party acknowledges Actual Receipt of this Notice occurred on ___________________ at ______________ 42 a.m./p.m. STRIKE ONE (x) ________________________________________________________________________ 43 Initials of Receiving Party 44




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Approved by Wisconsin Real Estate Examining Board 10-1-15 (Optional Use Date) 1-1-16 (Mandatory Use Date)

WB-44 COUNTER-OFFER

Counter-Offer No. __________ by (Buyer/Seller) STRIKE ONE NOTE: Number this Counter-Offer sequentially, e.g. Counter-Offer No. 1 by Seller, Counter-Offer No. 2 by Buyer, etc.

The Offer to Purchase dated ____________________ and signed by Buyer __________________________________ 1 for purchase of real estate at _______________________________________________________________________ 2 _______________________________________________ is rejected and the following Counter-Offer is hereby made. 3 CAUTION: This Counter-Offer does not include the terms or conditions in any other counter-offer or multiple 4 counter-proposal unless incorporated by reference. 5 All terms and conditions remain the same as stated in the Offer to Purchase except the following: _________________ 6 ____________________________________________________________________________________________________________________7 ____________________________________________________________________________________________________________________8 ____________________________________________________________________________________________________________________9 ____________________________________________________________________________________________________________________10 ____________________________________________________________________________________________________________________11 ____________________________________________________________________________________________________________________12 ____________________________________________________________________________________________________________________13 ____________________________________________________________________________________________________________________14 ____________________________________________________________________________________________________________________15 ____________________________________________________________________________________________________________________16 ____________________________________________________________________________________________________________________17 ____________________________________________________________________________________________________________________18 ____________________________________________________________________________________________________________________19 ____________________________________________________________________________________________________________________20 ____________________________________________________________________________________________________________________21 ____________________________________________________________________________________________________________________22 ____________________________________________________________________________________________________________________23 ____________________________________________________________________________________________________________________ 24 ____________________________________________________________________________________________________________________25 ____________________________________________________________________________________________________________________ 26 ___________________________________________________________________________________________________________________ 27 The attached _____________________________________________________ is/are made part of this Counter-Offer. 28 Any warranties, covenants and representations made in this Counter-Offer survive the closing of this transaction. 29 This Counter-Offer is binding upon Seller and Buyer only if a copy of the accepted Counter-Offer is delivered to the 30 Party making the Counter-Offer on or before ________________________________________________________ 31 (Time is of the Essence). Delivery of the accepted Counter-Offer may be made in any manner specified in the Offer to 32 Purchase, unless otherwise provided in this Counter-Offer. 33 NOTE: The Party making this Counter-Offer may withdraw the Counter-Offer prior to acceptance and delivery 34 as provided at lines 30-33. 35

This Counter-Offer was drafted by _________________________________________ on _______________________ 36 37

(x) ___________________________________________ (x) ____________________________________________ 38 Signature of Party Making Counter- Signature of Party Accepting Counter- 39 Print name Print name 40 (x) ___________________________________________ (x) ____________________________________________ 41 Signature of Party Making Counter- Signature of Party Accepting Counter- 42 Print name Print name 43 This Counter-Offer was presented by __________________________________________ on ____________________ 44

45

This Counter-Offer is (rejected)(countered) STRIKE ONE 46

NOTE: Provisions from a previous Counter-Offer may be included by reproduction of the entire provision or 47 incorporation by reference. Provisions incorporated by reference may be indicated in the subsequent Counter-48 Offer by specifying the number of the provision or the lines containing the provision. In transactions involving 49 more than one Counter-Offer, the Counter-Offer referred to should be clearly specified. 50




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WB-45 Cancellation Agreement & Mutual Release The undersigned Parties agree that the _______________________________________________________________ 1

insert type of contract, e.g., offer to purchase, lease, option, etc. (Contract) dated _______________________, for the 2 property located at _____________________________________________________________________________, in 3 the ______________________of_______________________, State of Wisconsin, be canceled and the Parties hereby 4 release all of their right, title, and interest in and to the Contract, and any and all claims arising out of the transaction. 5 The Parties hereby release the broker(s) from any and all liability for disbursing the trust funds as directed and hereby 6 authorize and direct the broker(s) to disburse the trust funds held on behalf of the Parties as follows: 7 $ ________________________ shall be disbursed to __________________________________________________ at 8

the following address _____________________________________________________________________________, 9

$ ________________________ shall be disbursed to __________________________________________________ at 10

the following address _____________________________________________________________________________. 11 This Cancellation Agreement and Mutual Release (CAMR) shall be effective only if all Parties to the Contract have 12 signed an identical copy of this CAMR (including signatures on separate but identical copies of the CAMR), and if the 13 fully-executed CAMR has been delivered to the Party initiating the CAMR on or before _________________________ 14 __________________________________________. Delivery may be made in any manner authorized in the Contract. 15 NOTE: The Party initiating this CAMR may withdraw the CAMR prior to acceptance and delivery as provided at 16 lines12-15. 17 (X) ______________________________________________________________________ _____________________ 18 Party's Signature Print Name Here Date 19 (X) ______________________________________________________________________ _____________________ 20 Party's Signature Print Name Here Date 21 (X) ______________________________________________________________________ _____________________ 22 Party's Signature Print Name Here Date 23 (X) ______________________________________________________________________ _____________________ 24 Party's Signature Print Name Here Date 25 (X) ______________________________________________________________________ _____________________ 26 Party's Signature Print Name Here Date 27 (X) ______________________________________________________________________ _____________________ 28 Party's Signature Print Name Here Date 29 (X) ______________________________________________________________________ _____________________ 30 Party's Signature Print Name Here Date 31




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