Wisconsin REALTORS® Association - Legal Hotline Hottips
Legal Hottips - June 30,
2008 1.) General Real Estate - Miscellaneous Issues Wis. Stat. § 30.133 provides, "Prohibition
against conveyance of riparian rights. 2.) Listing Contracts - Termination/Withdrawal QUESTION: Re: Terminating a listing contract. The agent just found out there are judgments and liens against the property, a foreclosure action has been started and the sellers are not being responsive to the offers presented. There is an accepted offer and the seller will not have enough money to pay the lien holders and give clear title. The listing agent informed the buyer about the lien issues and the pending foreclosure. The buyer initiated a cancellation agreement and mutual release (CAMR), but the seller has not signed it. The listing expires in July. How can the listing agent terminate the listing before July? ANSWER: A "short sale" is the term most commonly used in the real estate industry to refer to a situation where the proceeds from the sale will not be enough to satisfy all of the liens on the property and to pay all of the closing expenses, possibly including the broker's commission. These transactions may involve scenarios where the seller is filing bankruptcy or where the mortgagee is foreclosing on the property. Other times the total of all of the liens on the property exceeds the value of the property or what the property can bring on the market. When there are many liens on the property, the different lien holders sometimes will negotiate with the owner and agree to take an amount less than the full amount owed rather than suffer the expense and delay of a foreclosure or other litigation. When there is no more room to negotiate with lien holders, either the seller must bring cash to the table or the transaction will fail. When the broker becomes aware that there are material adverse facts a timely written disclosure will be made. The listing broker will need to disclose to the buyers that the sellers may not be able to give clear title. A seller's statement that they are unwilling or unable to close can create a breach even before the closing date - this is called an "anticipatory breach." This is a material adverse fact that must be promptly disclosed in writing. The buyers can then decide whether they want to declare the offer null and void due to the unacceptable title (see WB-11 Residential Offer to Purchase, lines 207-212) or proceed with the transaction. The seller may discuss their position with legal counsel and his financial advisor. The listing is entered into by the agent on behalf of
the broker/firm. Whether the seller and broker elect to terminate the
listing early or stay in the listing will be a decision for the broker.
How the seller and broker document any termination or expiration of the
listing will be determined by the rights and interests the broker wants
to preserve relative to the listing contract. A CAMR may be used if
both parties want to release all rights. If not, an amendment may be
used to terminate early and retain protected buyers. 3.) Commissions - Incentives QUESTION: The seller is doing a buy down program whereby the seller is willing to offer to pay 3 points of the buyer's mortgage amount to the lender if the offer is accepted by 8-31-08. How should the agent write the amendment to the listing contract? 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. 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. The agent should review the terms of the incentive with
an attorney to ensure compliance with these provisions. 4.) Contract Issues & Forms - Personal Property and Fixtures QUESTION: The buyer closed on the property and when they arrived at their new home the basketball backboard that was attached to an in-ground pole was missing. It was there at time of final walk-through and was not noted as an exclusion. The seller states that the backboard was purchased by a family member as a gift and does not believe it should be returned to the buyer. The buyer is fine with a like replacement that fits the pole. ANSWER: The offer to purchase controls the agreement of the
parties. In the offer, the seller agrees to include in the purchase
price all fixtures as defined in the contract, unless specifically
excluded. Lines 124-125 define fixtures as items of property that are
physically attached to or so closely associated with land or
improvements so as to be treated as part of the real estate. Generally
an in-ground basketball pole along with the backboard and rim are
considered to be a fixture and therefore included in the sale, unless
the parties agree otherwise. The parties can agree that a replacement
backboard and rim that attaches properly to the pole in place at the
property and is substantially similar in quality to the backboard and
rim removed by the seller is an acceptable resolution. 5.) Landlord/Tenants - Showing Rental Properties QUESTION: The agent has a duplex listed. As an agent of the seller, can the agent request to show the property as the seller/landlord would, or must the landlord request it? ANSWER: The residential rental practice rules found in Wis. Admin. Code § ATCP 134.09(2) provide with respect to entry upon rented premises, "(a) Except as provided under par. (b) or (c), no landlord may do any of the following: 1. Enter a dwelling unit during tenancy except to inspect the premises, make repairs, or show the premises to prospective tenants or purchasers, as authorized under s. 704.05 (2), Stats. A landlord may enter for the amount of time reasonably required to inspect the premises, make repairs, or show the premises to prospective tenants or purchasers. 2. Enter a dwelling unit during tenancy except upon advance notice and at reasonable times. Advance notice means at least 12 hours advance notice unless the tenant, upon being notified of the proposed entry, consents to a shorter time period." Under § ATCP 134.02(5), "Landlord" means the owner or lessor of a dwelling unit under any rental agreement, and any agent acting on the owner's or lessor's behalf. The term includes sublessors, other than persons subleasing individual units occupied by them. Under these provisions, 12 hours notice by telephone (where the tenant answered the telephone) would appear to be adequate. The definition of "landlord" arguably would include a listing agent and other agents of the seller. In the City of Madison and City of Fitchburg, landlords must give notice of entry at least 24 hours in advance. In those communities without applicable ordinances, landlords must give notice of entry at least 12 hours in advance per Wis. Adm. Code § ATCP 134.09(2). The notice may be verbal or written, but it is preferable to give written notice to tenants and keep a copy of all entry notices for the file. State law, in Wis. Stat. § 704.05(2), establishes the tenant's "right to exclusive possession of the premises." This statute requires landlords to give advance notice of entry which may then be conducted at reasonable times to inspect the premises, make repairs, or show the property to prospective tenants or purchasers. These provisions apply to both residential as well as commercial properties in the absence of lease provisions to the contrary. Documentation of tenant consent would be a prudent practice to avoid complaints regarding inappropriate showings. The broker may also review local ordinances to determine if any additional requirements or limitations are applicable depending on the municipality. 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 |