Wisconsin REALTORS® Association - Legal Hotline Hottips
Legal Hottips - October 26, 2009 1.) Mortgage Banking/Finance - General Finance There is no specific definition or explanation of what is meant – at least not yet -- when the IRS says something must be “closed.” However, the information quoted below from the IRS Web site leads to the conclusion that the IRS intends that a closing means the exchange of the deed and the keys for the purchase price, which would mean that the money needs to be there but that the documents need not be recorded – in other words, what most typically envision as a traditional closing. “To qualify for the credit, the completed purchase must occur before Dec. 1, 2009.” IRS Form 5405: “Enter the date you acquired the home. This is the date you purchased it.” “Q. Can a taxpayer claim the first-time homebuyer credit after entering into a contract for the purchase of a residence but before closing on the purchase? READ MORE ABOUT IT:
ANSWER: Wis. Stats. § 452.23(2)(a) states that a licensee is not required to disclose, “that a property was the site of a specific act or occurrence, if the act or occurrence had no effect on the physical condition of the property or any structure located on the property.” This statute is intended to apply to “stigmatized properties” that have been or are the site of a murder, suicide, a haunting or other notorious events which do not physically damage the property. If the event resulted in physical damage, the seller would normally be required to disclose the defect on the Wis. Stat. Ch. 709 Real Estate Condition Report (RECR) unless the buyer had waived the report or the transaction was exempt from Chapter 709. Even if there is no physical damage, there may be a sort of psychological damage present. Most agents realize that the buyer will probably find out about the event or occurrence anyway, typically from the neighbor. For that reason, real estate agents may encourage sellers to let them disclose problems in the house's history in order to avoid potential disputes. The question of whether the seller must disclose a murder or a haunting is less clear. On the RECR, the seller is asked to disclose conditions that would have a significant adverse effect on the value of the property. Although it is not easily quantified, it is possible that a brutal murder or a haunting could significantly affect property values or an owner's ability to resell a property. In the California lawsuit of Reed v. King, neither the seller nor the real estate agents involved told the buyer that the property had been the site of a brutal murder of a woman and four children 10 years earlier. The buyer won the lawsuit seeking rescission of the sale and monetary damages. This was based upon the court's finding that the multiple murders reduced the market value of the house. In the New York Stambovsky v. Ackley case, the buyer sued for rescission of his purchase after he learned the house he had bought was reputably possessed by poltergeists. This fact had been the subject of a Reader's Digest article and local newspaper articles, but the buyer had not seen these publications. The court noted that a buyer doing the most thorough inspection of the property and the public records would normally not have discovered that the property was haunted. The court concluded where a condition materially impairs the value of a property and the matter is peculiarly within the knowledge of the seller or unlikely to be discovered by a buyer exercising due care, nondisclosure would be a basis for rescission. In the 1992 Green Springs Farms case, the Wisconsin Court of Appeals held that a seller had the duty to fully disclose to potential buyers the existence of conditions material to the buyer's decision to purchase which the buyer is in a poor position to discover. Although this duty to disclose holding has not yet been applied to a stigmatized property case, it is arguable that it could be. Therefore, if an event potentially affects a property’s value, a licensee is not required to but may disclose the murder to buyers. The seller arguably should disclose the event on the RECR, and he or she may also have a common law duty to disclose the murder or haunting to the buyer if it was something a diligent buyer would not typically be able to discover during normal property inspections. If the seller is not willing to disclose, the seller may wish to contact the seller's attorney regarding the possibility of an “as is” sale. 3.) Advertising - Listing Contract QUESTION: Another broker in the broker’s MLS has a foreclosure property that is not showing up in the MLS. The other broker said they, “did not have the final sign off from Fannie Mae,” so he filed a waiver with the MLS and is waiting for the “final sign off.” The broker suggested they therefore do not have a valid listing contract and should not be advertising the property for sale with their sign on the property. Don’t the state statutes prohibit having a for sale sign on a property when there is no listing contract? The other broker claimed there is no state law against having a sign on the property without a contract. Please advise. ANSWER: Wis. Stat. § 452.01(2)(h) defines a broker as someone who promotes the sale of real estate for another person, and § 452.01(3e) states that this is a form of brokerage service. Wis. Admin. Code § RL 24.04(3) requires permission from the owner before the owner's property can be advertised, § RL 24.04(4) requires an agreement with the owner with regard to the advertised price and § RL 24.04(1) prohibits advertising that is false deceptive or misleading. Any yard sign or advertisement in another advertising medium in the name of the broker regarding a property for sale arguably causes the public to assume that the broker has the property listed. All agreements regarding a real estate transaction shall be in writing (Wis. Admin. Code § RL 24.08) using approved forms (Wis. Admin. Code § RL 16.04). Thus, the broker generally is precluded from advertising a property without a proper listing contract between the seller and the broker. The exception in Wis. Stat. § 452.01(2)(h) for a person who only publishes or disseminates verbatim information provided by another person would not apply to a yard sign. In addition, under Article 12 and related Standards of Practice of the REALTOR® Code of Ethics states that a property may be advertised for sale or lease only with the permission of the owner, and such advertising cannot mislead the public and other licensees into thinking that a listing contract exists. 4.) Offer to Purchase - Delivery QUESTION: Re: Electronic delivery. On an offer, how does broker keep buyers and sellers from e-mailing each other when they have each other's e-mail addresses? ANSWER: Although frustrating for many brokers, there is no law forbidding a seller and buyer from contacting each other directly, prior to or after an offer has been accepted. However, the terms of the contract between the parties are intended to control the proper delivery means for notices under contingencies, amendments, etc. and not to facilitate personal communication. If the parties wish to include or limit formal notices to e-mail, then the proper procedures, including electronic consent, and contract language authorizing e-mail delivery must be incorporated (via Addendum D or in the new WB-11 e-mail provision, for example). The agent may wish to strongly caution the parties that direct communication may unintentionally affect the legal status of the deal and cause unwanted results. Direct communication between parties is one way to end up with a situation where a transaction may appear to be dead on paper– deadlines lapsed, no financing commitment, etc. – but the parties have between themselves made other agreements on e-mail that are enforceable or cause confusion!
Debbi Conrad |