Wisconsin REALTORS® Association - Legal Hotline Hottips
Legal Hottips - January 7,
2008 1.) Agency - License Law/Code of Ethics Re: Article 16 of the Code of Ethics. Standard of Practice 16-13 says that before providing substantive services to prospects, REALTORS® shall ask prospects whether they are a party to any exclusive representation agreement. Does this mean that when an agent shows property to a
buyer for the first time, the agent Does should be asking them if they
have a buyer agency agreement with another REALTOR®? ANSWER: Yes, an agent should inquire as to whether a party is under contract with any other real estate agent before showing properties to that party. If the party does have a buyer agency agreement, the agent should ask if the party wants to work with the buyer's agent or that agent. READ MORE ABOUT IT: 2.) General Real Estate - Foreclosure QUESTION: A customer called who realizes that a property is going into foreclosure and wants to write an offer as soon as it is available. It turns out that he had written an offer on the same property previously with another agent before it became a foreclosure property. Since the bank is now the seller, can the buyer write the offer with a different agent? ANSWER: The foreclosure voided the prior listing contract and since there is now a new owner, the buyer may work with any agent. READ MORE ABOUT IT: 3.) Listing Contracts - Termination/Withdrawal QUESTION: The broker has listed a property as of December 24, 2007. The seller e-mailed and phoned the previous listing broker three times to expire the previous listing. The previous broker has not responded to any of the messages. The previous listing was an unserviced listing. How to proceed? ANSWER: A licensee who coaches a seller about how to terminate a listing or a buyer about how to terminate a buyer agency contract may be accused of license law and ethical violations and sued in court for damages. Such conduct may be viewed as giving legal advice in violation of Wis. Admin. Code § RL 24.06(1) and Article 13 of the Code of Ethics. It also may be seen as interference with the other broker's agency contract in violation of Article 16 of the Code of Ethics. A person who interferes with a contract may also be sued in civil court if damages can be proved. The following information is provided for the broker's information only. The seller may be referred to legal counsel or to the previous broker to discuss the seller's rights and obligations per the previous listing contract. Regardless of the type of listing, sellers have the power to revoke a listing contract at any time. The listing is a personal services contract which establishes a fiduciary relationship of trust and confidence with the broker. Because the contract reflects the agency relationship, the seller possesses the power to revoke or terminate the listing contract at any time. The seller (the principal) cannot be compelled to remain in the agency relationship with the broker (the agent) with whom the seller no longer wishes to work. The power to revoke or cancel the listing contract, however, must be distinguished from the right to do so. The seller always has the power to cancel the listing contract but may not have the right to declare an early termination to the listing. Canceling the listing before its expiration date will typically constitute a breach of the contract terms and thus violate the broker's rights. The broker may then demand compensation for the damages sustained as a result of the early listing cancellation. The broker cannot, however, sue the seller for specific performance because of the agency relationship. These damages may include the costs of advertising, reimbursement for other expenses incurred by the broker in the process of listing and marketing the property, and the value of services rendered, assuming the broker can sufficiently prove this. Commission will be due only if the broker can prove that the broker had procured a buyer ready, willing and able to purchase the property upon the terms and conditions specified in the listing contract, or on terms otherwise acceptable to the seller. Note that some brokers are adding provisions to their listing contracts specifically describing a procedure for the early termination of the listing. If so, as long as the seller follows the contract provisions for termination, the seller may generally cancel the listing without fear of being charged for any damages. That is not the case, however, if the early termination provision calls for an early termination fee or other damages. Note also that the seller may cancel the listing without risk of damages if the termination is for cause. For example, if the listing broker fails to perform according to the terms of the listing contract or otherwise fails to act in good faith, then the seller will have the right, not just the power, to terminate the listing. Then the broker cannot claim any damages based upon the early termination because the broker was in breach of contract. Under the 1999 version of the WB-1 residential listing contract, the seller may terminate the listing by verbal notice, by written letter or notice, or by amendment of the listing contract (changing the expiration date to a current date). Upon receipt of such notice from the seller, the broker has no right to refuse the seller or exact any price or penalty for the cancellation unless originally stated in the listing contract (other than the action for damages discussed above). [Note that written notice of termination will be required under the 2008 listings.] Once the seller has notified the broker that the listing is terminated, preferably in writing, the seller is free to list the property with another broker. The first listing broker will have no further rights with respect to the listing, other than any listing protection or override rights it establishes with respect to properly qualified buyers. READ MORE ABOUT IT: 4.) Licensing Issues - Miscellaneous QUESTION: The agent has not paid his 2008 REALTOR® dues. Is there a conflict with the agent holding an open house this weekend? ANSWER: Provided the agent's license is current with the Department of Regulation and Licensing (DRL) and there is no conflict with his company policy, the agent may hold the open house. DRL licensing, not REALTOR® membership, determines an agent's ability to legally practice real estate, subject to broker policy. Because the agent's REALTOR® membership has not been renewed, however, the agent should avoid any representation that he is a REALTOR®. READ MORE ABOUT IT: 5.) Advertising - Miscellaneous Advertising Issues QUESTION: Re: Advertising. The broker is offering a discount business model. Can the broker put in an ad, "list your home on XXXX WI MLS for as low as $400, call for details?" ANSWER: All advertising must comply with Wis. Admin. Code § RL 24.04, Article 12 of the Code of Ethics and company advertising policy. Licensees may not advertise in a manner that is false, deceptive or misleading and advertising must portray a true picture. An advertisement should not imply that the seller personally has access to the MLS for $400. The MLS is, in part, a means by which authorized MLS participants make offers of cooperation and compensation to other participants. The broker's advertising content may be drafted and then reviewed by the company's supervising broker or legal counsel to assure compliance with company policy, § RL 24.04 and Article 12. READ MORE ABOUT IT:
NEW WB-1 and WB-36 Recently, the Residential Listing Contract (WB-1) and
Buyer Agency/Tenant Representation Agreement (WB-36) were finalized by
the Department of Regulation and Licensing. Optional and mandatory use
dates are January 1, 2008 and July 1, 2008, respectively. The forms are
currently being printed and will be available for shipping Wednesday.
The ZipForm library is also being updated and is expected out later
this week. For more information on the form revisions and a
line-by-line video presentation by Attorney Dave Sayas, visit www.wra.org/formsupdate. This Wisconsin REALTORS® Association Best of the Legal Hotline service is provided for you by the WRA's Legal Affairs Department. The service should be considered a general statement of applicable legal principles. Given this format, it is impossible to fully address all potential legal issues which might apply in any particular situation. A determination of any individual's legal rights in a transaction can only be obtained after complete analysis of the law and its applicability to the particular fact situation. Please contact the WRA Legal Hotline if additional information is needed, or private counsel, if legal advice is needed. Thank you for using the Wisconsin REALTORS® Association Best of the Legal Hotline service. Debbi Conrad |