Wisconsin REALTORS® Association - Legal Hotline Hottips
Legal Hottips - August 31, 2009
1.) Licensing Issues - Out-Of-State Property Negotiations It has been the understanding of the WRA that a Wisconsin real estate license permits an individual to negotiate with another, for a commission, money or other thing of value, the sale, purchase, rental or exchange of an interest in real estate. Wisconsin, and 23 other states (including Minnesota) according to the National Association of REALTORS®, are classified as physical location states. That means that a licensee from another state may work on a transaction involving property in Wisconsin and receive commission as long as the licensee remains physically in the state where he or she is licensed. The licensee from another state may not visit the property in Wisconsin or negotiate face-to-face in Wisconsin. Each state's laws control the real estate license activities that occur within that state. To determine exactly what is permitted in a transaction involving a property located in another state requires an analysis of those laws. According to NAR's recent report regarding license portability (see www.realtor.org/rmomag.NSF/pages/lawjuly05?OpenDocument), Minnesota is also a physical location state. As such, the broker would be unable to participate in any activities in Minnesota that require a Minnesota broker's license. The licensee would be best served if his or her attorney reviewed Minnesota real estate license law and determined if the Wisconsin licensee’s participation in the contemplated transaction would be allowed under Minnesota law. If permitted under Minnesota law, all of the Wisconsin licensee's work in negotiating the sale must be conducted in Wisconsin. Out-of-state work (for example, showings) must be conducted by a Minnesota licensee if the broker is not also licensed in Minnesota. A recent unpublished Wisconsin Court of Appeals District IV decision has indicated that one would have to be licensed in the state where the property is located to engage in a transaction for the sale of the property (at least as it relates to Wisconsin and Iowa, the states that were involved in the case). The Court noted that the Iowa law that the parties presented to the Court did not relieve a broker working in a transaction for the purchase of an Iowa property from needing to have an Iowa real estate license, even if the Wisconsin broker’s actions might be allowed under Wisconsin law. It is not yet known if this decision will be appealed to the Wisconsin Supreme Court. READ MORE ABOUT IT: 2.) Listing Contracts - Signatures QUESTION: An agent has a potential client who is currently in the process of two-year long divorce. The client and her husband sold their marital property home in 2008 and split the proceeds. The client purchased a new home in 2008 with her share of the proceeds. Now, the divorce is moving forward and the husband and his attorney are trying to claim her new residence is marital property. The client is the only one on the deed and used her proceeds from the sale of the marital home as down payment on this home. The client wants to sell her new home. Does the agent need the estranged husband’s signature to sell if his name is not on the loan or deed? ANSWER: If the property can still be considered homestead of the parties, both the husband and the wife will need to sign the deed. In Wisconsin, Wis. Stat. § 706.02 provides that both spouses must sign all documents conveying an interest in any homestead property, including an offer to purchase and a deed. Generally speaking, a “homestead” is the home or dwelling of a married person. The definition is intended to be broad and covers a property as long as one or both of the spouses lives there. The agent can check with the title company for direction; however, a court order may be needed to allow the sale without the husband’s signature. The wife should consult her attorney for direction and assistance. 3.) Commissions - Miscellaneous Commission Issues QUESTION: The broker had a short sale listing where an offer was presented, accepted by the seller and submitted to the bank for approval. The bank was asking for more and more documentation. The property went to sheriff's sale even though the offer was submitted to the lender prior to that. The broker noticed three days later that same property was listed with a REO broker. The co-broke agent who wrote the original offer immediately submitted a new offer to the new broker. Is listing broker's commission protected? The listing broker’s claim for commission is from the original short sale seller. However, if the sheriff’s sale is confirmed, the seller’s interest will be terminated and no commission will be owed by the seller to the listing agent. On the other hand, if the listing agent can convince the bank to approve the short sale and close that sale before sheriff's sale is confirmed, a commission may be saved. 4.) Offer to Purchase - Counter-Offers QUESTION: An agent wrote an offer on a property as a buyer’s agent and the offer was countered by the sellers. The agent spoke to the buyers and they wanted to proceed with a different home. In the meantime, the listing agent and sellers rescinded the counter-offer and the sellers accepted the original offer. Can they do this? ANSWER: A counter offer can be understood as a new offer which is being issued by a party who has previously received an unacceptable offer. The legal effect of writing and delivering a counter offer is the same as the rejection of the previous offer and the presentation of a new offer to the party who had submitted the previous offer. The reason we don't reject the offer and write a whole new offer is simply to avoid the unnecessary drafting of an offer whose terms are 95% identical to an offer previously written. By using the counter offer form, only the terms that vary from the original offer are written out and all terms remaining the same from the original offer are incorporated by reference. This approach helps keep some sense of continuity in the negotiations and saves time. In the simplest situation, a seller counters the buyer’s offer. After the buyer’s receipt of the seller’s counter offer, the seller attempts to withdraw the counter offer so that the original offer can be accepted (with time remaining for acceptance). In this situation the seller clearly would be unable to accept the buyer's initial offer because the seller’s counter offer acted as a rejection. A rejected offer is null and void and cannot be accepted. 5.) Trust Accounts - Earnest Money QUESTION: The property owner has an accepted offer on a piece of land which dates back to 2006. The closing never occurred. $20,000 of earnest money has been sitting in the listing broker’s trust account since then and the buyer and seller cannot agree on disbursement. The broker wants to turn the money over to the courts and have them resolve this. What is the procedure for this? ANSWER: If no court action has been filed by either the buyer or the seller, the listing broker cannot just simply deposit the earnest money with the court. There has to be an active case pending in order for the broker to do that. However, the listing broker may choose to initiate a small claims action called an interpleader action where the parties are named as the defendants, the broker indicates they are not sure which party is entitled to the earnest money and the court decides the matter and gives an order directing to whom the money should be disbursed. The listing broker also can, since more than 60 days have passed since the contracted closing date, submit the matter to an attorney who can review the facts and issue an opinion letter as to how the earnest money should be disbursed. The broker may deduct up to $250 from the earnest money for the legal fees involved in either of these alternatives. The broker also may continue to do nothing and allow the parties to find a way to resolve the earnest money dispute themselves or through their attorneys. See lines 251-260 of WB-13 Vacant Land Offer to Purchase. Freddie Mac Confirms Short-Sale Commission Policy On August 20, 2009, Freddie Mac confirmed in writing that its servicers are not allowed to renegotiate short sales commissions. According to the policy, as a condition of the servicer's acceptance of a short sale offer, servicers cannot renegotiate the sales commission below the amount agreed to by the real estate broker and the seller/borrower. However, if the negotiated commission exceeds 6 percent, servicers are required to limit it to 6 percent. This Freddie Mac policy is consistent with Fannie Mae's policy. NAR has asked Freddie Mac to establish an appeals process for cases when servicers refuse to comply with Freddie Mac's policy similar to the policy created by Fannie Mae. Freddie Mac Single-Family/ Servicer Guide Bulletin 2009-22 (August 20, 2009): http://www.freddiemac.com/sell/guide/bulletins/pdf/bll0922.pdf Debbi Conrad |