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Wisconsin REALTORS® Association Page 1 Legal Update, September 2020

Multiple offers come with risks for misunderstanding and missed

opportunities. Real estate professionals can best avoid missteps by

following basic license law and ethical rules and clearly communicating

with the parties to set their expectations. That is the best way to avoid

complaints and fair housing issues.

Multiple offers often arise when the inventory of properties falls short

of buyer demand, giving rise to bidding wars and different considerations

for sellers and buyers.

This Legal Update reviews various issues associated with multiple offer

scenarios and provides pointers for navigating the churning waters. The

Update ﬁrst looks at legal and ethical rules to keep in mind when there

are many buyers and offers in play. Then buyer strategies for becoming

the winning offer are overviewed including price escalation provisions,

excluding standard contingencies, and the controversial “pick me” or

buyer “love letters” appearing in many Wisconsin transactions.

Legal and Ethical Rules

When working with multiple offers, listing brokers are charged with

helping sellers get the highest price and the most favorable terms for

their property. Buyer’s brokers and cooperating brokers help buyers

purchase property at the lowest price and on favorable terms – all at a

very fast pace!

Amongst all the confusion and bedlam generated by multiple offers

and multiple buyers, real estate professionals should not forget their

duties to the various parties to ensure the proceedings are fair. The

Wisconsin Administrative Code and the REALTOR® Code of Ethics

regulate the sharing of information about pending offers on a property.

The Code of Ethics applies to multiple offer scenarios. Article 1

requires REALTORS® to protect and promote the interest of their client,

while treating all parties honestly.

Standard of Practice 1-6 requires that “REALTORS® shall submit

offers and counter-offers objectively and as quickly as possible.”

Wis. Admin. Code § REEB 24.12(1) states, in relevant part,

A licensee may, but is not required to, disclose information known by

the licensee regarding the existence of other offers on the property,

the fact that a seller has accepted an offer, that the offer is subject

to contingencies and that the offer is subject to a clause requiring

removal of certain contingencies upon the occurrence of an event such

as receipt, acceptance or conditional acceptance of another offer.

Therefore, unless the seller has required the broker to keep any

information about offers on the property conﬁdential, the agent may

disclose the existence of other offers under Wisconsin license law.

The Code of Ethics in Standard of Practice 1-15 provides,

REALTORS®, in response to inquiries from buyers or cooperating

brokers shall, with the sellers’ approval, disclose the existence of

offers on the property. Where disclosure is authorized, REALTORS®

shall also disclose, if asked, whether offers were obtained by the

listing licensee, another licensee in the listing ﬁrm, or by a cooperating

broker. (Adopted 1/03, Amended 1/09)

Therefore, with the seller's approval and prior to the acceptance of

an offer to purchase, the agent shall disclose information about other

offers. If, however, the seller directs the agent not to disclose, the broker

may document this fact and follow the instructions of the seller.

Standard of Practice 3-6 provides,

“REALTORS® shall disclose the existence of accepted offers,

including offers with unresolved contingencies, to any broker seeking

cooperation. (Adopted 5/86, Amended 1/04).”

Therefore, unless the seller has indicated that this information is

conﬁdential per Wis. Stat. § 452.133(1)(d), the broker would disclose

accepted offers. Any conﬁdentiality directive should be in writing in the

listing contract, or an addendum or amendment thereto, or on a copy of

an agency disclosure form.

SEPTEMBER 2020, 20.09

Multiple Offers and Love Letters

IN THIS ISSUE

Legal and Ethical Rules

Buyer Strategies

Love Letters

Multiple Offer Transaction Pointers

i MORE INFO

See the Code of Ethics & Arbitration Manual, Part 4, Appendix

IX — Presenting and Negotiating Multiple Offers at www.

nar.realtor/code-of-ethics-and-arbitration-manual/part-4-

appendix-ix-presenting-and-negotiating-multiple-offers.

Wisconsin REALTORS® Association Page 2 Legal Update, September 2020

Buyer Strategies

A tight market seems to bring out a ﬂood of offers for the properties

on the market. In a group of potential buyers, the challenge for buyers is

to write the offer the seller chooses. There are various techniques used

to make a buyer’s offer the most attractive and most advantageous for

the seller.

Some of the strategies employed follow the traditional suggestions to

submit a buyer’s highest and best offer. Buyers write offers for amounts

over the list price, include preapproval letters and may pay higher

earnest money deposits, for example, $5,000 or more. The mission is

to make the offer attractive to the seller. Cash buyers may include proof

of funds documentation to further sweeten the prospect of a cash offer.

Other non-traditional strategies may be used by buyers to make their

offers stand out. These may include price escalation provisions, writing

offers with few or no contingencies, or sending a letter to the seller along

with the offer describing why they are the perfect ﬁt for the seller’s home.

Price escalation provisions

A price escalation provision or an acceleration clause – they go by

various names – is a provision or a clause used to negotiate price at

an amount above another buyer’s offered price. The offer to purchase,

as a basic premise, must state the price the buyer is willing to pay

to purchase the property. The price, however, may be determined by

referencing the price of another offer to purchase.

The basics of price escalation are that a buyer is willing to increase

their offered price up to a certain amount over the highest offer, up

to a maximum dollar amount. Because agents are precluded by Wis.

Admin. Code § REEB 24.12 from sharing the terms of an offer, the seller

will have to provide a copy of that highest offer to the buyer directly in

order to implement the price escalation provision. Once the new price

is established, the parties are prudent to draft an amendment clarifying

the new price. If the buyer wants to use such a strategy, the equation

used to determine the offered price must be clear and unambiguous.

In response to multiple offers with price escalation provisions, a

seller has several options. The seller may choose to negotiate price

independent from any price escalation provisions. If the seller elects not

to use the price escalation provisions, the seller instead may counter

one buyer with a counter-offer. The seller may counter at the maximum

price the buyer was willing to pay if the price escalation provisions had

been triggered, or any other price. The buyer receiving the counter-offer

may accept, reject or counter the seller’s counter-offer. Alternately, a

WB-46 Multiple Counter Proposal may be used, allowing the seller to

negotiate simultaneously with more than one buyer. In response to a

seller's multiple counter-proposal, a buyer may approve, counter or

reject the multiple counter-proposal.

Another option for the seller is to accept one of the offers. If it is

one with a price escalation provision, the steps to implement the price

escalation provision would need to be followed. The seller, or the seller's

attorney, may provide the buyer with the price escalation provision along

with a copy of the other buyer's offer. It is important that the seller

provides the document – not the broker – because the broker must

observe the duty of conﬁdentiality to the other buyer. Under Wis. Admin.

Code § REEB 24.12(1), a licensee may not disclose "any of the terms

of one prospective buyer's offer to purchase … to any other prospective

buyer or to any person with the intent that this information be disclosed

to any other prospective buyer."

Offers without contingencies

Some buyers in a competitive market may leave out the contingencies

typically found in an offer. They may choose not to include an Inspection

Contingency, a Financing Commitment Contingency, an Appraisal

Contingency or a Radon Testing Contingency in order to ﬁnd favor

with the seller. These omissions do not come without a price and a

risk for the buyer: they are not learning information about the property

condition, they are taking the risk they can secure the funds to pay the

purchase price, they are taking the risk the property will appraise for the

purchase price or at least a price acceptable to their lender, and are

forgoing advance knowledge about radon levels in the property. The real

estate professional working with the buyer should discuss the pros and

cons with the buyer before the buyer makes their decision about what

contingencies to include in the offer.

Love Letters

One of the most controversial strategies used by buyers is the inclusion

of a “pick me” or buyer’s “love letter.” To entice a seller to choose their

offer, buyers sometimes write letters to the seller to describe the many

reasons why the seller should “pick them.” A buyer “love letter” may

include personal messages, videos, family photos or any communication

submitted to the seller along with the offer to purchase. These letters

will often provide details about the buyers and gush about how much

they love the home and how happy they would be there. The letter may

come with their child’s drawing of the home as a special touch. Why go

to such lengths? Buyers and their agents use these letters because they

often work and may be crucial in bidding wars.

While not every buyer letter written to a seller comes with risks

of liability for the buyer, the seller and the real estate agents in the

transaction, several possible liability landmines may be present when

love letters are used. It all depends on the speciﬁcs of the transaction

and the contents of the buyer’s communication. For instance, letters

admiring a home’s historical signiﬁcance or discussing signiﬁcant

features of the landscaping would seem to be innocuous.

i MORE INFO

For information about using price escalation provisions and

multiple counter-proposals, see the WRA LegalTalks video,

"Escalation Clauses and Multiple Counter Proposals," with

Tracy Rucka at www.wra.org/LegalTalks/EscalationClause,

“The Best of the Legal Hotline: Price Escalation” in the July

2020 Wisconsin Real Estate Magazine at www.wra.org/

WREM/Jul20/Hotline, the January 2017 Legal Update, "Price

Escalation Clauses and Multiple Counter-proposals," at www.

wra.org/LU1701 and, regarding the multiple counter-proposal,

pages 4-5 of the Legal Update 99.07, "Form Revisions," at

www.wra.org/LU9907.

i MORE INFO

For a discussion of the considerations involved when a buyer

entertains the idea of not including an Appraisal Contingency,

read “Pick Me! I Didn’t Include an Appraisal Contingency!” in

the October 2020 Wisconsin Real Estate Magazine at www.wra.

org/WREM/Oct20/PickMe.

Wisconsin REALTORS® Association Page 3 Legal Update, September 2020

The information contained in the letter could raise a misrepresentation

issue if it is inaccurate and the seller relied on the information when

accepting the offer. Buyers may paint a picture to appeal to the seller, but

they may not be telling the truth and thus the letters are unreliable. The

contents of the letter could also lead to fair housing issues if decisions

regarding the sale are made based on the buyer’s protected class

status. The information contained in the letter could create contractual

obligations between the buyer and seller for the closing of transaction.

Likewise, if there are any promises or conditions contained in the letter

that were to be implemented after closing, that could be problematic.

The primary discussion regarding buyer letters is the risk they

will contain information that will lead to the seller deciding among

comparable offers based upon the buyer’s personal characteristics

relative to the fair housing protected classes. The letters might provide

information to a seller enabling them to choose an offer based, for

example, upon the race, family status, sexual orientation or religion of

the buyers.

These “love letters” often – deliberately or innocently – include personal

information that reveals a prohibited basis for discrimination, such as

“we can see our family celebrating Christmas around the ﬁreplace” or

“the wide hallways will accommodate my wheelchair.” A love letter can

trigger implicit bias, putting a seller in the position of preferring a buyer

based on a “feeling” or something that the seller “just likes” about the

buyer. In some cases, sellers may knowingly choose a buyer based on

the characteristics revealed in the buyer’s communication, a clear fair

housing law violation if it can be proved. Accepting an offer based on

anything other than the price, terms and merits of the offer might violate

fair housing law.

NAR generally discourages use of buyer “love letters” because of their

potential to encourage violations of fair housing laws.

Consider an example from the NAR Fair Housing Corner: Love Letters

or Liability Letters? (www.nar.realtor/fair-housing-corner/love-letters-

or-liability-letters):

A potential buyer writes to the seller that they can picture their

children running down the stairs on Christmas morning for years to

come in the house. This seemingly innocuous statement indicates

the potential buyer’s familial status and their religion, both

protected characteristics under fair housing laws. Using protected

characteristics as a basis to accept or reject an offer, as opposed to

price and terms, would violate the Fair Housing Act.

Consider the following scenarios recounted by an attorney presenting

to a NAR conference (www.inman.com/2016/11/18/homesellers-

shouldnt-accept-buyer-love-letters):

A buyer is a visible member of a historically oppressed minority.

He made a $145,000 offer on a home. The offer was rejected.

Through public records, the buyer later found out that the home

sold for $110,000. “If we had had his life experiences, we might

have perceived what he perceived” — that his offer was rejected

because he was a member of this minority, in violation of the Fair

Housing Act. The Fair Housing Act prohibits discrimination based on

an individual’s race, color, religion, sex, disability, familial status or

national origin. To win this type of case, it would be really helpful to

be able to show that listing brokers and agents don’t know anything

about a buyer other than what’s in the offer, according to Goodman.

“Love letters change all of that,” he said.

He described a situation in which buyers extolled the virtues of a

home and promised to keep it as-is, prompting the sellers to accept

their offer. The buyers tore the house down two months after buying

it, Goodman said. “Sellers shouldn’t be relying on [love letters]. In

a perfect world, [they] wouldn’t make a difference,” he said. One

conference attendee noted that sellers very often Google the buyers

and look them up on Facebook. To that, Goodman said, “Remember

all this is a risk management technique. There’s nothing you can do

to prevent that.”

 REALTOR® Practice Tip

For these reasons, real estate professionals should discourage

the use and consideration of buyer “love letters” to reduce the

risk of discrimination and liability for fair housing violations.

Wisconsin REALTORS® Association Page 4 Legal Update, September 2020

Rules for presentation of buyer “pick me”

communications

Another issue that arises with regard to "pick me" or “love letters”

is whether the letter or similar communication is sent separately along

with the offer or is incorporated by reference as a part of the offer.

As usual, there are pros and cons. A letter sent separately and not

incorporated by reference may not be presented to the seller. Any

document can be made part of an offer if it is incorporated by reference

into the offer to purchase.

The offer presentation rules in Wis. Admin. Code § REEB 24.13

regulate the submission of all written proposals to parties, not just

offers:

Wis. Admin. Code § REEB 24.13(1) provides:

Refusal prohibited. Licensees shall not refuse to draft or submit any

written proposal unless the terms of the written proposal would be

contrary to speciﬁc instructions of the other party.

Wis. Admin. Code § REEB 24.13(3)(a) states:

Fair presentation of written proposals. (a) Licensees shall present

all written proposals in an objective and unbiased manner to their

clients and customers. Licensees shall inform their clients and

customers of the advantages and disadvantages of all submitted

written proposals.

Wis. Admin. Code § REEB 24.02(19) indicates:

“Written proposal" means any written document provided by one

party to another during the course of a transaction, including but not

limited to notices, offers, counteroffers, options, exchanges, rental

agreements, and amendments.

“Love letter” considerations for cooperating agents

• Point out the problems that can occur when the letters include

misrepresentations, inaccuracy, misleading statements,

contractual obligations, and unrealistic promises and conditions.

• Educate buyers about fair housing law and the pitfalls of buyer

“love letters;” point out the non-discrimination provision in the

buyer agency agreement if the buyer is a client.

• What the buyer decides to do is their decision and Wisconsin

licensees are obligated to draft as instructed by the party they

are working with or representing.

“Love letter” considerations for listing agents

• Remind sellers their decision to accept or reject an offer should

be based on objective criteria only.

• Point out the fair housing provision in the listing contract and

discuss fair housing laws and the potential liability if the seller

selects an offer based on buyer “love letters.”

• Discuss whether you will deliver or submit buyers’ “pick me”

letters, videos, photos or other personal communications to the

seller; put the seller’s directions in writing in the listing contract

or an amendment thereto.

• Document all offers received and the seller’s objective reason for

accepting an offer.

i MORE INFO

See pages 8-9 of the September 2017 Legal Update, “Fair

Housing Advancements,” at www.wra.org/LU1709, NAR Fair

Housing Corner: Love Letters or Liability Letters? at www.

nar.realtor/fair-housing-corner/love-letters-or-liability-letters

and “Why a Buyer Love Letter Could Turn Into a Poison Pen”

at https://magazine.realtor/daily-news/2020/10/27/why-a-

buyer-love-letter-could-turn-into-a-poison-pen.

 REALTOR® Practice Tip

Under § REEB 24.13(1) sellers and listing brokers have the

opportunity to specify in the listing contract that no separate

love letter communications and no offer that includes such

personal overtures by the buyer written into the offer or

incorporated by reference will be read by the listing ﬁrm and its

agents nor submitted to the seller. Such an agreement would

best be speciﬁed in the listing contract as non-conﬁdential so

the listing ﬁrm can share the directive with cooperating ﬁrms

and buyers and let them know the seller will not see any buyer

love letters submitted.

EDITORIAL STAFF

Author

Debbi Conrad

Production

Emily Zampardi

ASSOCIATION MANAGEMENT

Chairman

Steve Beers

President & CEO

Michael Theo, CAE

CONTACT INFORMATION

Wisconsin REALTORS® Association

4801 Forest Run Road, Suite 201

Madison, WI 53704

608-241-2047

800-279-1972

LEGAL HOTLINE

Ph: 608-242-2296

Fax: 608-242-2279

Web: www.wra.org

The information contained herein is believed accurate

as of September 1, 2020. 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.

This Legal Update and other Updates beginning

with 94.01 are available to members online at

www.wra.org/LegalUpdates.

A Legal Update subscription is included with

member dues. Members are alerted via email

when a new issue is available online.

The nonmember 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

608-241-2047

800-279-1972

www.wra.org

Wisconsin REALTORS® Association Page 5 Legal Update, September 2020

Multiple Offer

Transaction Pointers

When working with multiple offers it is important

to maintain clear and open communications

with the parties and between the real estate

agents. Real estate professionals can educate

the parties about the issues they may encounter,

various strategy options and possible liability

pitfalls, but must remember the parties are the

decision-makers. They are the ones who must

decide how they wish to proceed.

i MORE INFO

See the Window to the Law video on

multiple offers at www.nar.realtor/

videos/window-to-the-law/how-to-

handle-multiple-offers and the NAR

Multiple Offer resources at www.nar.

realtor/multiple-offers.

 REALTOR® Practice Tip

Cooperating broker:

• Educate buyers about the current

market and their options for making

an offer.

• Remind buyers that you may not

know if there are other offers on the

table.

• If a buyer insists on including a

“love letter,” explain the fair housing

concerns.

 REALTOR® Practice Tip

Listing broker:

• Discuss the possibility of multiple

offers, explain the choices available

to the seller and get the seller’s

instructions for handling multiple

offers.

• Explain the fair housing implications

of a buyer “love letter,” obtain

written instructions for how such

communications should be handled

in the listing contract.

• If the seller wishes to receive “love

letters,” advise that they consult

legal counsel and document their

decision-making process.

• Get the seller’s direction whether to

disclose the existence of multiple

offers to prospective buyers.

• Make reasonable efforts to keep

buyers’ representatives up to date

on the status of offers.

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