Wisconsin REALTORS® Association - Legal Hotline Hottips
Legal Hottips - September 8, 2009
The Wisconsin Administrative Code and the REALTOR® Code of Ethics regulate the sharing of information about pending offers on a property. Wis. Admin. Code § RL 24.12(1) states, in relevant part, “A licensee may, but is not required to, disclose information known by the licensee regarding the existence of other offers on the property, the fact that a seller has accepted an other offer, that the offer is subject to contingencies and that the offer is subject to a clause requiring removal of certain contingencies upon the occurrence of an event such as receipt, acceptance or conditional acceptance of another offer.” Therefore, unless the seller has required the broker to keep any information about offers on the property confidential, the agent may disclose the existence of other offers. Standard of Practice 1-15 provides, “REALTORS®, in response to inquiries from buyers or cooperating brokers shall, with the sellers’ approval, divulge the existence of offers on the property. Where disclosure is authorized, REALTORS® shall also disclose, if asked, whether offers were obtained by the listing licensee, another licensee in the listing firm, or by a cooperating broker. (Adopted 1/03, Amended 1/09)” Therefore, with the seller’s approval and prior to the acceptance of an offer to purchase, the agent shall disclose information about other offers. If, however, the seller directs the agent not to disclose, the broker may document this fact and follow the instructions of the seller. 2.) Listing Contracts - Exclusions QUESTION: A party is dealing with a seller and the property is not listed. The seller then lists the home and lists the buyer as an exception. The buyer has written an offer and is expecting a counter-offer today. The seller is telling the buyer that he has to respond today as this is the last day the buyer is excluded from the listing contract. Does the exclusion continue because the parties are in negotiations? ANSWER: The exclusion language in the WB-1 Residential Listing Contract states at lines 38-39 that, “These other buyers are no longer excluded from this listing after the specified date unless, on or before the specified date, Seller has either accepted an offer from the buyer or sold the Property to the buyer.” Thus, the seller must have an accepted offer in place by midnight of the last day for exclusion in order to avoid paying commission to the listing broker. If that buyer buys at a later date a commission would be owed. 3.) Disclosure - Real Estate Condition Report QUESTION: Is a Real Estate Condition Report (RECR) required with the sale of vacant land? The broker is working with a buyer who is interested in a vacant lot in a subdivision. The agent/developer says he has never (in 20 years) had a seller provide a RECR on land and that he does not have one. Please advise. ANSWER: The WRA has developed a Seller Disclosure Report – Vacant Land (VLR). The VLR is not required under Wis. Stat. § 709.02. This statute requires a RECR for real property including one to four dwelling units. Instead, the VLR addresses disclosure items pertinent to the purchase of vacant land with an eye toward improvement and development. The VLR is not a DRL-approved form. However, it is a helpful and useful optional form that facilitates a listing broker’s fulfillment of his or her vacant land inspection and seller inquiry obligations under Wis. Admin. Code § RL 24.07(1), and fulfills the seller’s promise made in the Seller’s Disclosure Report section of the WB-3 Vacant Land Listing Contract-Exclusive Right to Sell to complete a seller’s disclosure report. 4.) Listing Contracts - Listing Protection QUESTION: The broker had a property listed for over a year. During that time the listing broker initiated talks with a party interested in purchasing the property (they had acquired a property next to the listed property). The buyer made a verbal offer which was presented to the seller. The seller knew who the buyer was and was fully aware that they had purchased the property next door. The offer was not acceptable to the seller due to a lease-back provision, but the seller gave a price that would be acceptable without the provision. This offer was presented to the buyer but was not accepted. Several months passed and contact was periodically maintained with the buyer but the buyer continually maintained that they did not have any interest. Several weeks before the listing expired the broker was contacted by another agent who said that the seller (who is a friend of that agent) asked him to contact the buyer for him to see if he could get them to act on the property. The seller made it clear this would not affect the broker’s listing agreement or payment of broker’s listing commission if he was able to get a deal worked out. From that point forward the broker could not get messages returned from the seller or the buyer. The listing expired but the broker did not give written notice of the buyer to the seller since the broker believed it was not necessary since it was clear the seller knew the buyer, exchanged verbal offers with the buyer and even hired a friend to negotiate with the buyer during the term of the listing. The broker has since found out that a couple of weeks after the expiration of the listing the seller entered into a contract to purchase the building with the buyer. The seller has told the broker he has no intention of paying a commission to the broker. Lines 74-79 of the WB-5 Commercial Listing Contract set forth the one-year extension of the listing period for any Protected Buyer. “Protected Buyer” is defined in the contract at lines 214-223. If a buyer personally, or through any person acting for the buyer, negotiated directly with the seller by discussing the potential terms upon which the buyer might acquire an interest in the listed property, that buyer is a Protected Buyer, without any requirement of written notice thereof to the seller. In such a case, the seller would owe the broker the commission agreed upon in the listing contract if any of the acts specified in lines 56-63 take place within the one-year extension period. 5.) Commissions - Entitlement QUESTION: The seller has a standard WB-1 Residential Listing Contract with a broker for the sale of a home listed at $800,000. No offers were received. The price was reduced to $ 395,000. Still no offers were made. Now the seller is considering donating the property to a § 501(c) non-profit charitable organization for a tax donation. Is there a commission due to the broker? How much is the commission if there is a $0 purchase price? What if non-profit tries to sell the property? ANSWER: The standard commission language in the WB listing contracts allows for commission in multiple circumstances. One circumstance is if the seller sells or enters into an enforceable contract for the sale of the property. Additionally, a broker can earn a commission if there is an effective change of ownership or control during the term of the listing, for example, the seller deeds the property to a non-profit. That commission claim would be based on the transfer between the seller and the non-profit, not the non-profit and future potential buyers. If the commission is triggered by an effective change of ownership or control of the property, the commission would be based on the list price. See lines 50-53 of the WB-1.
FHA Roster Appraisers Debbi Conrad |