Wisconsin REALTORS® Association - Legal Hotline Hottips
Legal Hottips - August 18,
2008 1.) General Real Estate - Door Prizes The issue is whether such a drawing would be an illegal lottery under Wis. Stat. §§ 945.04(5) & 945.02. A contest is generally defined as a lottery if one must give consideration to enter, and the award is determined by chance. Consideration is anything which would be financial or commercial advantage to the promoter, with some exceptions (send in coupon, visit store, etc.). For example, a contest where every licensee who showed one of a broker's listings is eligible to enter a drawing for a vacation trip at the end of the year is arguably an illegal lottery. The fact that the agents are showing the broker's listings is consideration to the broker, and the drawing is by chance. On the other hand, the statutes provide that visiting a business location without being required to pay an admittance or buy anything is not consideration. Thus a drawing for a prize may be held at an open house provided everyone who attends is eligible to enter the drawing. 2.) Licensing Issues - Miscellaneous QUESTION: The agent does not hold a broker's license. If she leaves the company, can she practice real estate? Can she buy and sell homes for herself and her family without being affiliated with a broker? ANSWER: Unless an agent with salesperson's license is under a broker, the agent is limited to only making a referral and collecting a referral fee. Wis. Stat. § 452.19 permits a broker to pay referral fees and finders fees to other Wisconsin licensees as long as that person's license is active and regardless of the fact that the person holds a salesperson's license or an inactive license (rather than a broker's license). The fact that the person is not currently affiliated with a broker is not relevant. Pursuant to Wis. Stat. § 452.14(3)(f), any referral fee received by an employed salesperson (whether licensed as a broker or a salesperson) in connection with a real estate transaction may be received by the salesperson only from the salesperson's employing broker. A non-employed or inactive salesperson, however, can make a referral and directly receive a referral fee. The agent cannot represent a buyer or seller in a real estate transaction. The agent may still buy or sell a home herself. As a principal, she could draft the documents herself. However, the agent could not locate a property or a buyer, or draft real estate forms for anyone other than herself, including family members. If the agent does purchase or sell property, she should make sure that she discloses to the party in the offer that she holds a Wisconsin real estate license. 3.) Commissions - Procuring Cause QUESTION: The listing agent received a call from the prospective buyers. They scheduled a showing and listing agent showed them the property on June 11. They talked about price, etc. The buyers had a home to sell that was listed with another agent, but they said they were not working with any agent in finding a home. On July 24 the buyers wrote an offer on the property with another selling agent. Is the listing agent procuring cause? ANSWER: The issue in this question is procuring cause: who caused the buyer to make the offer that resulted in the sale of the property? There is no one act which determines procuring cause - it can only be answered by a full, knowledgeable consideration of all the facts of the case. If the brokers cannot negotiate an acceptable settlement, the dispute should be submitted to the local association for mediation or arbitration. Arbitration Panels will consider whether, under the
circumstances and in accord with local custom and practice, the broker
made reasonable efforts to develop and maintain an ongoing relationship
with the purchaser. Did the first cooperating broker actively maintain
ongoing contact with the purchaser or, did the broker's inactivity, or
perceived inactivity, cause the purchaser to reasonably conclude that
the broker had lost interest or disengaged from the transaction
(abandonment). In other instances, a purchaser, despite reasonable
efforts by the broker to maintain ongoing contact, may seek assistance
from another broker. The panel will want to consider why the purchaser
"abandoned" the first broker and whether the broker engaged in conduct
which caused the purchaser to terminate the relationship
(estrangement). This can be caused, among other things, by words or
actions. Panels will want to consider whether such conduct caused a
break in the series of events leading to the transaction and whether
the successful transaction was actually brought about through the
initiation of a separate, subsequent series of events by the second
cooperating broker. 4.) General Real Estate - Foreclosure QUESTION: The broker has a home listed. The sellers purchased the house last year; both lost their jobs and stopped making mortgage payments in February. They now have moved out of state. The lender has changed some of the locks on the property and told the sellers that they would accept a deed in lieu of foreclosure. The sellers have not yet done that. The home is still listed and is still attracting activity. If the sellers don't sign the deed in lieu of foreclosure, at what point does it become an unenforceable listing contract? What if an offer comes in? ANSWER: The foreclosure process has many steps beginning with the sellers' failure to make their mortgage payments. The broker should talk with the sellers to determine where they are in the process and how to best assist the sellers. Until such time as a sheriff's sale is confirmed by the court, the sellers may continue to market the property for sale, entertain offers and sell the property. The broker may wish to ask the title company for a search and hold to confirm that the sellers still hold title to the property and to see if and when the lender commenced a foreclosure action - this will allow the broker to determine how much time there is to complete a sales transaction if the seller elects not to provide the lender with a deed in lieu of foreclosure. The broker may refer the buyer, in writing, to legal counsel for information and advice concerning the impending or commenced foreclosure proceedings. Additional seller assistance may be obtained from Wisconsin Housing and Economic Development Authority and the Homeownership Preservation Foundation at http://www.wheda.com/update/sfs_108.asp or 888-995-HOPE. 5.) Offer to Purchase - Cancellation and Mutual Release QUESTION: The agent has been reading about the new housing rescue bill. Will it end all downpayment assistance programs, such as The City of Madison's American Dream Program, the Home-Buy program, etc.? What about the RASCW Home Start program? ANSWER: As with any new legislation, determining the applicability to any specific down payment assistance program must be done on a case-by-case basis. The legislation makes a distinction based on how the assistance program is funded. Seller-funded downpayment assisted FHA loans have a very high default rate. Accordingly, programs that are funded by the seller, another party involved in the transaction or those who have a financial interest in the sale will not be eligible for FHA insurance. If the program is funded by governmental or with independent funds, it will still be eligible; other assistance provided by nonprofits funded by other sources such as churches, employers or family members will continue to be permitted. The prohibition does not go into effect until October 1, 2008. Debbi Conrad |