Wisconsin REALTORS® Association - Legal Hotline Hottips
Legal Hottips - June 9, 2008 1.) Offer to Purchase - Inspection Contingency A heating inspector inspected the furnace last week and he said there is a gas leak. It was tagged, the gas was turned off and a work order was forwarded to the listing agent last Friday. The listing agent said the buyer's agent should have someone from MG&E come to verify this. The seller had an inspector say the furnace was safe.
There was an appointment set up and confirmed for the appraisal and the
buyers decided they wanted MG&E to come in at the same time to look
at the furnace to verify the gas leak, which they did. It was verified
the furnace was faulty so it was retagged by MG&E. The listing
agent told the buyer's agent that they entered illegally. Please advise. The home inspection contingency allows for a Wisconsin registered home inspector to inspect the property and for follow up inspections. Per lines 97-101 of the WB-11 residential offer, the seller agrees to allow buyer's inspectors reasonable access to the property upon reasonable notice if the inspection is reasonably necessary to satisfy the contingencies in the offer. Access to the property by workmen or inspectors should not be allowed without the proper authorization. It appears the access was given to MG& E personnel after the home inspection contingency deadline had passed and it is unclear if this was authorized by the seller. However, because it appears the furnace was faulty, the action of the MG& E workers may have been in the best interest of the safety of all concerned. The parties may amend the offer to add provisions
regarding the condition of the furnace. Any questions about legal
rights and obligations under the contract should be directed to the
parties' respective attorneys. 2.) Commissions - Incentives QUESTION: Is it legal to offer a rebate to a buyer upon closing? ANSWER: Incentives may be offered to sellers or buyers to induce them to sell or purchase real estate. Seller or buyer incentives can be offered in any amount as cash or as personal property such as a home warranty plan, a savings bond, a gift certificate, an appliance or some other item. Such incentives must be clearly documented in advance - prior to closing. The party must have a clear and thorough understanding of the incentive's terms and conditions. This advance documentation is necessary to establish that the incentive is not a fee-splitting arrangement with a non-licensee, which would be illegal under Wisconsin law. Standard of Practice 12-3 of the REALTOR® Code of
Ethics, provides that: "REALTORS® shall be careful at all times to
present a true picture in their advertising and representations to the
public. ..." Standard of Practice 12-3 states "The offering of
premiums, prizes, merchandise discounts or other inducements to list,
sell, purchase, or lease is not, in itself, unethical even if receipt
of the benefit is contingent on listing, selling, purchasing, or
leasing through the REALTOR® making the offer. However,
REALTORS® must exercise care and candor in any such advertising or
other public or private representations so that any party interested in
receiving or otherwise benefiting from the offer will have clear,
thorough, advance understanding of all the terms and conditions of the
offer. 3.) Commissions - Miscellaneous Commission Issues QUESTION: Re: Commercial leases. A prior client has requested an agent's services to obtain a commercial lease. The agent is showing them a property with the seller's agent, and the property is not listed on the MLS (the buyer found it on the listing broker's web site and asked the agent about it). The agent says that commercial rentals are typically not in the MLS. What is the traditional commission arrangement for a commercial lease and what does the agent do to protect herself to get some compensation in this transaction should the buyer wish to proceed after the showing? ANSWER: The agent may enter into a compensation agreement with
the listing broker for commission. There is no set fee or amount for
commissions or commission splits. To imply or infer there is a standard
would imply elements of antitrust violations. When entering into a
compensation agreement it is prudent to document the agreement between
the brokers in writing. 4.) Offer to Purchase - Contingencies QUESTION: If buyer does not provide loan commitment by the deadline in the offer, how does seller terminate per lines 164-172 of the WB-11 offer? Can a notice stating seller is terminating be submitted? Does it have to be mutual? If seller terminates via notice, is seller immediately free to accept another offer? ANSWER: If the primary buyer does not timely deliver a
commitment letter, per the terms of the offer at line 171-172, the
seller could elect to terminate the offer to purchase. The broker, at
seller's direction, may draft a notice to terminate that may be
delivered immediately after the loan commitment timeline has passed
(time is of the essence). The broker may also attach a cancellation
agreement and mutual release (CAMR) for the buyer to sign for the
disbursement of the earnest money. Until the seller receives the fully
executed CAMR or has legal counsel review the first transaction, any
other offer should be accepted in secondary position to avoid having
two primary offers. As an alternative to accepting the offer in
secondary position, the offer could be drafted with a contingency for
the seller's benefit making the offer contingent upon the seller
getting the CAMR or legal advice approving the acceptance of the second
offer as a primary offer. This drafting is difficult enough that the
broker may wish to work with seller's attorney to ensure the
contingency is properly drafted. 5.) Liability - Strict Responsibility QUESTION: The MLS sheet stated the home had central air, but it was found during inspection that it does not. When the selling agent called the listing agent, he said there is no central air, but it is still stated in the MLS that it does. What recourse does buyer have? ANSWER: A Wisconsin licensee can be found liable to a buyer for inaccurate statements made by the broker which appear to the buyer to have been made from the broker's own personal knowledge. In Wisconsin, the law provides that an inexperienced buyer should be entitled to rely on the factual statements made by a professional. Accordingly, when a broker receives data from the seller, the city treasurer's office, or another third party and restates the information in the MLS data sheet or in other advertising as if it were fact, the broker may be responsible for the accuracy of the information. Accordingly, REALTORS® are recommended to specifically attribute data used in advertisements, such as acreage, square footage, and assessed values, to its source, and/or use general disclaimers. Disclaimers may not, however, provide certain and absolute protection in all cases. The broker should refer the buyer to an attorney for legal advice if the parties are unable to come to an agreement. New Forms Mandatory July 1 The new WB-1, Residential Listing Contract, and WB-36, Buyer Agency/Tenant Representation Agreement, are mandatory July 1, 2008. Forms are available for purchase at http://www.wra.org/forms (WB01T and WB36T) or by calling 1-800-279-1972. Copies are available through ZipForm also. ZipForm users should note that the 1999 and 2000 versions of WB-1 and WB-36 will be removed from the program on June 25. Removal of the forms will be automatic for ZipFormOnline but requires a forms update for ZipForm Desktop users. An update notice will be sent by ZipForm to registered Desktop users. 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 |