Accessing your videos: 1. You will be able to re-access courses via mywra at:

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1 WR A DISTANCE LEARNING ON DEMAND Welcome to the Wisconsin REALTORS Association s Distance Learning On Demand! Distance Learning On Demand is the most convenient method available from the WRA to complete your continuing education requirement. The course is broken into chapters varying in length from 20 to 40 minutes. At the conclusion of each chapter video, you will be required to complete a short quiz. Each chapter video must play through from start to finish or you will not be able to advance to the next section. If you do not pass the quiz, you will need to wait 1 hour to re-take the quiz. Once all the chapters and corresponding quizzes are complete, you will be able to advance to the final exam. After you pass the exam, you can print your certificate of completion. If you do not pass the exam, you will need to wait 4 hours to re-take the exam. Here are a few suggestions for completing the courses as efficiently as possible: 1. Ensure you meet the system requirements at the location where you plan to view your videos. Requirements can be found at: 2. Close all other software applications. 3. Make sure only 1 copy of the video player is open. Accessing your videos: 1. You will be able to re-access courses via mywra at: We have addressed other questions and concerns on the Frequently Asked Questions below. Thank you for choosing the WRA for your continuing education needs! FREQUENTLY ASKED QUESTIONS Chapters Tab Can I watch chapters out of order? No, each chapter video will be locked until completed. However, you will have the ability to watch them in any order after completion. How do I switch to a new chapter? After you complete a chapter, the next available chapter will be highlighted in green. Simply click the highlighted chapter to begin. Please note that you must complete each chapter video and quiz to advance to the next chapter. What are quizzes? The quizzes are a required part of Distance Learning On Demand. You must complete the quizzes before advancing to the next chapter. Each chapter has a bank of two questions. To take a quiz, simply click the quiz icon. Once you ve taken and passed a quiz, the icon will show a check mark to verify completion.

2 What is the difference between a quiz and exam? Quizzes are mini-exams comprised of two questions. You must complete all quizzes before taking the final exam. The exam is your final test. You can take your final exam after you ve completed watching all chapters and have taken all quizzes. Once you ve passed the exam you will receive your certificate. How do I take a quiz? In the Chapters tab in the far right column, find a label for Quiz. After completing the chapter video simply click the chapter quiz icon to proceed. Each quiz includes two questions. How do I know if I passed all quizzes? In the Chapters tab, far right column, find a label for quiz. When you have completed a quiz, a checkmark will appear in the Quiz icon. If your icon is still locked or highlighted, you still need to complete that quiz before proceeding to the next video and/or final exam. Notes Tab What is the Notes tab for? The Notes tab is a place for you to take your notes on screen without leaving the video interface. If this functionality were not available you would need to take your notes manually. These WILL automatically save for you. You may want to print your notes and attach them to the outline for future reference. Outline Tab What is the outline tab for? The Outline tab is an easy way to access a specific topic in a chapter. Simply click a link in the outline and you can instantly access the corresponding content in the video. It s perfect for accessing a topic you would like to re-watch. Exam Tab

3 Troubleshooting I have no volume/sound. To troubleshoot sound, perform the following steps: 1. Can you hear sounds from other Windows applications? 2. Make sure the volume slider in the player is turned up. 3. Access your volume control panel in Windows (Accessories, Entertainment, Volume Control) and ensure your sound is not muted. 4. Double check your speaker connection in the back of the sound card, making sure it is plugged into the right port. 5. If all tests fail and you still do not have sound either from the player or other Windows-based applications, contact your local computer technician. My video is stuttering, pausing and stopping. How can I fix this problem? 1. It is likely you are short on bandwidth. Internet Service Providers (ISPs) can have times when traffic is at a maximum; thus slowing your connection. The WRA provides other feed options you can access that requires less bandwidth. To drop bandwidth, use the drop down box located under Help in the upper right-hand corner of the Media Player. The default bandwidth is 1000kbps. 2. Press the F5 key on your keyboard to refresh the player. 3. Log-out of the website, then log back in. If after dropping bandwidth you do not see an improvement in performance, what can I try next? 1. Re-test your bandwidth making sure your download speed is at least 512 Kbps by following this link: 2. Try connecting to a landline. Often wireless connections do not run smoothly which causes the video to continuously stop-and-start. 3. Try switching computers to see if you get the same result Other Problems? For other problems please call the Wisconsin REALTORS Association at

4 Real Estate Continuing Education Program Course 1 - Listing Contracts During the licensing biennium, Wisconsin real estate licensees must complete 18 hours of continuing education to be eligible for license renewal. To remain active, licenses must be renewed by December 14, Successful completion of the required continuing education may be accomplished by taking six Wisconsin approved courses worth three credit hours each. Licensees must take four mandatory and two elective courses and pass an examination for each course. The Wisconsin REALTORS Association offers a total of eight continuing education courses to choose from, all of which are Wisconsin approved for license renewal requirements for the biennium. Licensing Renewal A licensee, when submitting a license renewal application, must show completion of 18 hours of Wisconsin approved continuing education. Persons granted an original broker or salesperson license during the biennium are not required to complete continuing education during the licensing period. Only courses approved for may be applied for credit. This course and exam qualifies for three hours of the required continuing education. To apply for license renewal by December 14, 2012, a licensee must submit the course name, the course provider, and the date of successful completion of each continuing education course completed. At the time of renewal, licensees do not have to submit Certificates of Completion with the application. Wisconsin conducts audits of license renewals. Selected individuals will be asked to produce documentation in the form of a Certificate of Completion for each continuing education course. Duplicate Certificates Requests for a duplicate WRA course Certificate of Completion must be made within 60 days of completing a course. Requests for duplicate certificates made more than 60 days after completion must be in writing, accompanied by a $10 fee, and submitted to the Wisconsin REALTORS Association, 4801 Forest Run Rd., Suite 201, Madison, WI Individuals may print duplicate certificates free by logging into mywra at Additional Resource Answers for questions presented in this outline are available at Exam_Practice_Questions/. Select the biennium followed by the PDF document for the desired course. Special acknowledgement to the WRA Legal Department for the use of various Legal Updates, Hottips, and other WRA co-authored and sponsored publications. The information and materials contained in this product are provided exclusively for educational purposes and are solely intended to be statements of general legal principles. The information and materials are not to be construed, interpreted, relied upon or used as legal advice in any fashion, including but not limited to, use in litigation, arbitration, ethics matters or other administrative proceedings. Individuals seeking legal advice should obtain private legal counsel and should not rely upon the information and materials contained herein. Copyright 2011 by i

5 NOTES Course 1 - Listing Contracts I. Listing Contracts a. The relationship between a seller and a broker is governed by the listing contract. b. The listing contract provides the foundation and boundaries of the relationship between the seller (the principal) and the broker (the agent) under the contract. c. Listing contracts govern the length of the relationship, the rights and responsibilities, the contractual obligations of the broker and seller as parties to the contract and the method in which a broker will be compensated for services provided to the seller. d. A listing contract is an employment contract between a seller and a broker. e. Goals of the course: i. Review agency models including subagency and a seller s right to reject subagency. ii. Examine issues affecting commissions including how commissions are paid to listing brokers and cooperating brokers and how commissions may be affected by seller financed transactions. iii. Outline a seller s and a licensee s disclosure obligations including a seller s real estate condition report (RECR), a licensee s obligation to inspect, lead-based paint disclosures, and when a licensee is not obligated to disclose information. iv. Provide licensees with a comparison of transactions that may not result in a commission for a listing broker such as transactions involving protected buyers or buyers excluded by a seller in a listing contract. v. Review broker s legal and ethical obligations including when brokers can contact a seller represented by another broker and how brokers should work with a seller represented by another broker. II. Requirements for a Valid Agency Agreement a. Wis. Stat (1) Real estate agency contracts. Every contract to pay a commission to a real estate agent or broker or to any other person for selling or buying real estate shall be void unless the agreement: i. Describes that real estate; ii. Expresses the price; iii. The commission to be paid; iv. The period during which the agent or broker shall procure a buyer or seller; v. Is in writing; and vi. Is signed by the person agreeing to pay the commission. Can a licensee put value range pricing in a listing contract? 1 A valid listing contract must express the price. A seller may want to market a property in a price range as opposed to the traditional list price. A seller s consent to value range marketing should include the specific price range to be used for advertising. Line 5 of the WB 1 Residential Listing Contract allows for the entry of the list price. A broker can state the price range for marketing on Line 17 or in the additional provisions of the listing contract. III. Approved Listing Contracts a. WB 1 Residential Listing Contract Exclusive Right to Sell b. WB 2 Farm Listing Contract Exclusive Right to Sell c. WB 3 Vacant Land Listing Contract Exclusive Right to Sell d. WB 4 Residential Condominium Listing Contract Exclusive Right to Sell e. WB 5 Commercial Listing Contract Exclusive Right to Sell f. WB 6 Business Listing Contract Exclusive Right to Sell g. WB 8 Time Share Listing Contract h. WB 37 Exclusive Listing Contract for Lease of Real Property

6 IV. Seller Provided Listing Contracts a. Wisconsin law requires brokers to use state-approved forms. b. Brokers may sign, but may not draft or fill in the blanks of a seller-provided listing contract. c. Brokers should review seller provided listing contracts to make sure the contract will be enforceable under Wis. Stat i. Will the commission agreement be enforceable under Wisconsin law? ii. Does the contract have the required agency disclosure language? d. Bank owned (REO) listing contracts i. REO properties are held by lending institutions. ii. Lending institutions often have their own listing contracts used for listing REO property. e. Contract drafted by seller or seller s attorney i. Brokers may sign these agreements. ii. Brokers may not draft contracts for sellers. NOTES V. Client or Customer? a. Client: A client has signed a listing agreement with a broker. b. Customer: A customer is not represented in the transaction and has not signed an agency agreement. c. Duties owed to all parties in a transaction: d. Duties owed to clients: VI. Pre-agency a. Pre-agency i. Initial interactions between a licensee and a consumer when information and preliminary brokerage services are provided to a consumer who has not yet decided whether he or she will be a customer or a client. ii. An agent owes the duties owed to all persons and may not provide advice or opinions contrary to the interest of any other party. b. Permitted actions during pre-agency include: i. Meet with prospective clients and customers; ii. Neutrally provide information on a property; and iii. Set up showings. 2

7 NOTES c. Prohibited actions during pre-agency include: i. Negotiations; or ii. Advocating for any party. d. Disclosure of agency i. Licensees providing information to consumers are in the pre-agency stage with that consumer. 1. Prior to negotiations, the licensee must have the consumer decide if the relationship will be a client or a customer relationship. 2. If the consumer wants a client relationship, the licensee and the client will enter into an agency agreement. 3. If the consumer wants to remain a customer, the licensee then becomes a subagent of the principal broker and must disclose this agency relationship to the customer. ii. Disclosure of agency must be given to customers prior to negotiations. 1. When do negotiations begin? 2. The conversation shifts from market or property information to contract contingencies, deadlines, and included or excluded items. a. Market and property information: i. Length of time on the market; or ii. Age of roof. b. Negotiations: i. Discussion of price; ii. Strategy; iii. Offer terms; or iv. Preparing an offer. VII. Agency Disclosure a. Client i. Clients have signed listing agreements with brokers. ii. Licensees must provide written agency disclosure at the time of entering into the agency agreement. iii. Current approved listing contracts that include the statutory agency disclosure language: 1. WB 1 Residential Listing Contract Exclusive Right to Sell 2. WB 2 Farm Listing Contract Exclusive Right to Sell 3. WB 3 Vacant Land Listing Contract Exclusive Right to Sell 4. WB 4 Residential Condominium Listing Contract Exclusive Right to Sell 5. WB 5 Commercial Listing Contract Exclusive Right to Sell iv. Listing contracts that have not been revised to include statutory language disclosing agency models must be accompanied by a separate broker disclosure to client form. 1. WB 6 Business Listing Contract Exclusive Right to Sell 2. WB 8 Time Share Listing Contract 3. WB 37 Exclusive Listing Contract for Lease of Real Property b. Customer i. Licensees must provide agency disclosure in writing prior to negotiations. 1. Negotiation defined: a. Acting as intermediary; b. Drafting approved forms; or c. Presenting approved forms. 3

8 2. Acknowledgment (signature or initial) a. Licensees are required to ask for a customer s acknowledgment, signature or initial, in transactions involving 1 4 family dwellings. b. Customers are not required to sign or initial but licensees are required to ask for acknowledgment. c. If a customer refuses to sign or initial acknowledgment of the broker s disclosure of agency to the customer the licensee should: i. Document the date, time, and location on the form and provide a copy to the customer; and ii. Request that the customer sign another document indicating the refusal to sign the broker disclosure of agency to customer form. d. Licensees are not required to ask for the customer signature in a five or more unit transaction or a non-residential transaction. i. Licensees are still required to provide the disclosure in writing but do not need to ask for a customer s acknowledgment. ii. Disclosure can be achieved by providing the WRA s Nonresidential Broker Disclosure to Customer. NOTES VIII. Agency Models and Agency Relationships a. Sellers select one form of representation. i. A seller indicates the selection by initialing the chosen form of representation. 1. I consent to designated agency. (WB 1, Line 129) 2. I consent to multiple representation relationships, but I do not consent to designated agency. (WB 1, Line 130) 3. I reject multiple representation relationships. (WB 1, 131) b. Multiple representation with designated agency i. The seller and the buyer in the same transaction are clients of the same broker. ii. Parties must consent in writing to multiple representation with designated agency. iii. With designated agency means that the buyer and the seller each have an agent. iv. The seller receives negotiation services from the listing agent. v. The buyer receives negotiation services from the buyer s agent. vi. Each agent provides full negotiation services to the respective client, offering advice and opinions to assist that client even if that advice favors the interest of that client over the broker s other client. c. Multiple representation without designated agency i. The seller and the buyer in the same transaction are clients of the same broker. ii. Parties must consent in writing to multiple representation without designated agency. iii. The seller and the buyer may work with just one agent or there may be more than one agent involved. In either case, the agent(s) cannot advance one client s interests over the other. iv. Brokers and agents must take a neutral role. v. The clients direct agent(s) to prepare contract proposals but agent(s) may not provide either party with advice on how to gain advantage over the other party. vi. Multiple representation without designated agency may occur when: 1. A single agent has a buyer agency agreement with the buyer-client and the listing contract is with the seller-client. 2. The seller and the buyer are clients of the same broker in the same transaction and both decline designated agency. 4

9 NOTES 3. The seller and the buyer are clients of the same broker in the same transaction and only one client consents to multiple representation with designated agency and the other consents to multiple representation without designated agency. d. Single agency i. The seller is the only client of the broker. ii. If a broker has a seller-client and a buyer-client in the same transaction and one client consents to designated agency and the other consents to single agency, the broker must ask the party who chose single agency for consent to participate in multiple representation. 1. If the party consents, the broker may be able to facilitate the transaction. 2. The broker must then determine whether the parties have consented to multiple representation with designated agency or without designated agency. a. If the parties both choose multiple representation with designated agency, the broker can assign an agent to each client and negotiations can begin. b. If only one party has consented to multiple representation with designated agency and the other party has consented to multiple representation without designated agency, the broker must remain neutral in the transaction. c. The parties and the broker should amend their respective agency contracts to reflect the new choice of agency. 3. If the party does not consent to multiple representation, the broker cannot participate in the transaction with both parties as clients of the broker. a. To remedy this, the broker could ask the buyer to become a customer for that one listing. b. The broker could refer one of the parties to another broker for representation. 5 IX. Subagency a. Subagency exists when a broker is engaged by another broker to provide brokerage services in a transaction but is not the other broker s employee. b. Subagents of the listing broker 1. A licensee working with a buyer-customer in a transaction is the agent of the listing broker. 2. For example, cooperating or selling brokers working with buyer-customers are subagents of the listing broker, not subagents of the seller. c. Duties of subagents i. Duties to all parties in a transaction 1. Safeguard trust accounts 2. Honest representation of the parties 3. Objective and unbiased 4. Confidentiality 5. Accurate market information upon request 6. Reasonable skill and care 7. Disclosure of material adverse facts ii. Loyalty: additional duty owed to the client of the principal broker 1. A subagent cannot give advice or opinions to the parties in a transaction that are contrary to the interests of the client of the principal broker, unless otherwise required by law. 2. A subagent cannot put his or her interests ahead of the client of the principal broker.

10 iii. Refusal of subagency 1. Clients must give consent to subagency in the agency contract. a. WB 1 Residential Listing Contract NOTES 2. Clients can prohibit brokers from working with subagents. 3. Licensees are generally required to cooperate with other licensees but if subagency has not been authorized by a client, a licensee will be acting legally and ethically by refusing to work with other licensees if it would create subagency. 4. If a seller refuses subagency, the listing broker should document this at lines of the WB 1 Residential Listing Contract. X. Incentives a. Seller incentives i. Sellers can include incentives in the listing contract at Lines ii. Seller incentives might include money back to a buyer at closing, a home warranty, gift certificates, or seller financing in the form of a land contract. iii. Incentives should be clearly documented in writing in the listing contract and should be at the suggestion of the seller, not the licensee. Can a seller offer an incentive of $500 to any person (including a person with a real estate license) who procures a buyer for the seller s house? Wisconsin law prohibits real estate brokers from paying referral fees or finders fees to unlicensed individuals. According to Wis. Stat , a real estate broker cannot compensate non-licensees for referring prospective buyers or sellers to the broker. This law applies to real estate licensees so a non-licensed seller would be exempt from this prohibition. The terms of a seller s incentive should be precisely stated in the listing contract and advertisements for the property. Additionally, the parties agreement for payment of the incentive should be stated in an offer to purchase. When advertising a property where a seller is offering an incentive, the listing broker should specify that the seller is offering the incentive to avoid liability if the seller does not honor the advertised incentive. b. Broker incentives i. Wis. Stat prohibits a real estate broker from compensating an unlicensed individual. ii. Brokers are permitted to offer incentives to unlicensed individuals to induce them to use the services of that broker. iii. Incentives can take the form of cash or other valuable consideration such as a donation to a charity designated by the seller. iv. Incentives should be clearly documented in writing in advance of closing. 6

11 NOTES Can a listing agent make a donation to a seller s charity of choice after the home is sold? Wisconsin law prohibits brokers from paying referral fees to unlicensed individuals. A broker is permitted to offer rebates or other incentives to unlicensed sellers to induce them to use the services of the real estate agent. Incentives can take the form of cash or other valuable consideration, including a donation to a charity designated by the seller. Incentives should be documented in advance prior to closing. It is permissible for a listing agent to make a donation directly to the charity designated by the seller. It is not necessary that the donation be made by the agent s broker. Example: A listing broker makes a donation to the seller s local animal shelter after the home is sold. This is a permissible incentive as long as it was clearly documented in writing in the listing contract. c. Incentives when the licensee is a principal in the transaction i. A licensee acting as a principal in a real estate transaction cannot receive a commission for that sale because the licensee is not providing brokerage services to another. ii. The licensee can receive an incentive by including that request in the offer to purchase. iii. Licensees acting as principals in real estate transactions should check with their brokers for office policies on such transactions. XI. Commission Issues a. Seller exclusions i. Who may a seller exclude? 1. A seller can limit showings by certain agents or certain companies. 2. A seller can exclude certain buyers unless the exclusion is for the purpose of discriminating against a protected class (Lines 34-39). 7 ii. How does a seller exclude? 1. Agents or companies A seller who wanted to prohibit specific agents or companies from viewing the property would provide instructions in writing to the listing broker in the listing contract. 2. Buyers A seller can exclude buyers from the contract by listing them as exclusions in the listing contract. iii. What are the effects of a seller s exclusions? 1. Agents or companies Sellers are permitted to instruct the listing broker not to show the property to listed agents or companies. a. Listing brokers are not required to disclose a seller s exclusion of agents or companies but as a professional courtesy, the listing broker may want to notify the excluded agent or company of the exclusion.

12 b. To avoid antitrust concerns, listing brokers should be careful to avoid suggesting that a seller exclude certain agents or companies. 2. Buyers When a seller excludes a buyer from a listing contract, the seller is eliminating the obligation to pay a commission to the listing broker if an excluded buyer purchases the property. a. A seller might exclude a potential buyer from a listing contract if the seller has previously had contact with that potential buyer. b. A seller might exclude friends and family from the listing contract. b. Protected buyers/ extension of listing NOTES i. Who is a protected buyer for whom a listing could be extended? 1. Protected buyers are potential purchasers of a listing broker s listed property. 2. They are protected in the sense that if they purchase a seller s property after the expiration of a listing contract, the listing broker may still be entitled to a commission even though the listing contract with that broker on the property has ended. a. Protected buyers do not protect a cooperating broker s commission. b. The parties to a listing contract are the listing broker and the seller so the extension of the listing contract protects the listing broker s commission and not a cooperating broker s commission. 3. For protected buyers, the listing contract is literally extended as to those buyers for a period of one year from the termination or expiration of the listing. 4. The listing contract can be modified to provide for a shorter extension of the listing if the seller and listing broker agree to this modification. ii. How are buyers protected? 1. Automatically protected buyers a. Buyers who: i. Submitted a written offer to purchase to the seller or listing broker; ii. Negotiated directly with the seller; or iii. Are named in a one-party listing. 2. Other protected buyers a. The following buyers are protected if the listing broker provides a list of the buyer s names to the seller within three days of the expiration or termination of the listing: i. Attended an individual showing either with the listing broker or another broker; ii. Negotiated directly with the broker; or iii. Other buyers if agreed to by the seller and listing broker. 1. For example, a listing contract could be modified to include all open house attendees as protected buyers. 2. Absent modification to the listing contract, open house attendees are not considered protected buyers. b. There is no state approved form for compiling a list of protected buyers. 8

13 NOTES iii. Seller s role 1. If a listing broker provides the seller with a list of protected buyers within three days of the expiration or termination of the listing contract, those buyers are protected. 2. The seller provides that list to any subsequent listing brokers within seven days of the listing with a new listing broker. 3. If a seller does not provide the list of protected buyers to the new broker, the buyers are still protected if the listing broker followed the proper procedures to protect the buyers. iv. Best practices 1. Listing brokers who would like to protect buyers should provide the seller with a complete list of protected buyers including those that are automatically protected. 2. Listing brokers who are listing a property that was previously listed with another broker should ask the seller for the previous listing broker s list of protected buyers and contact the previous broker directly if seller cannot or will not produce the list. v. Disputes 1. If a new listing broker does not agree with the previous broker s protected buyer list, the seller must be the one to dispute the list because the new listing broker is not a party to the original contract. 2. The new listing broker should refrain from commenting on a previous listing contract. 3. A seller with questions or problems with a previous listing contract should be referred to the previous listing broker and the seller s attorney. 4. Licensees may not provide legal advice about another broker s contractual rights. 5. Resolution of commission disputes arising from protected buyers may require litigation or an alternative dispute resolution method such as mediation or arbitration. During a broker s listing contract, a buyer submitted an offer on the listed property. Despite negotiations between the seller and the buyer, the submitted offer was not accepted and the seller cancelled the listing with the broker. The seller and the initial listing broker signed a WB 45 Cancellation Agreement & Mutual Release after the seller cancelled the listing contract. The seller then listed the property with another broker. The buyer who submitted the offer during the term of the original listing has submitted another offer. Is this buyer a protected buyer for the original broker? The buyer submitted a written offer to the seller during the term of the listing and may be a protected buyer for the original broker even though the broker and the seller executed a WB 45 Cancellation Agreement & Mutual Release when the seller cancelled the contract. A buyer can be protected for an extension of a broker s listing in one of four ways. Buyers who submitted written offers to purchase directly to a seller or who negotiated directly with the seller are automatically protected buyers for the extension of a broker s listing. Buyers who attended individual showings of the property or who negotiated with a broker are protected for the extension of a broker s listing if the broker provides a list of those buyers to the seller in writing within three days of the expiration of the listing contract. 9 Whether the buyer in question will be a protected buyer for an extension of the broker s listing will depend on the terms included in the WB 45 Cancellation Agreement and Mutual Release and whether the broker included a release of rights arising from an extension of the listing.

14 c. Listing brokers and co-brokers i. Earning a commission NOTES 1. Sale of property and procurement of buyer a. A listing broker earns a commission if the seller enters into an enforceable contract for the sale of all or any part of the seller s property. b. A listing broker may also earn a commission if a buyer is procured for the property and the buyer makes an offer that substantially mirrors the terms and price of the seller s listing contract. i. In this case, a listing broker may earn a commission even if the property is never actually transferred. ii. Sellers are never obligated to accept offers but a listing broker who procures a buyer who submits an offer on the same terms and price as the listing contract has performed according to the contract and potentially earned the stated commission. 2. Land contract a. A broker earns a commission if the seller accepts an offer to purchase and the seller is financing the sale through a land contract. b. A seller retains legal title until a buyer fulfills the terms of the land contract. c. The buyer receives equitable title upon binding acceptance of the buyer s offer. d. This creates an enforceable contract and the listing broker earns a commission. e. If a buyer s down payment under the land contract is not enough to pay the entire listing broker s commission, the seller and the listing broker can negotiate other solutions. i. A seller can offer to pay the unfulfilled commission after a buyer obtains conventional financing. ii. If a listing broker agrees to this, the listing contract should be amended to document this arrangement. iii. A seller and a broker can negotiate other terms for fulfillment of the commission owed to the broker. f. MLS co-broker i. A buyer s broker or subagent of the listing broker who procured the buyer in a land contract is entitled to any cooperative commission offered in the MLS. ii. A listing broker who has agreed to a payment arrangement with the seller must ensure that the cooperating broker is paid the commission due. 3. Option to purchase or lease with an option to purchase a. Execution of an option does not earn a listing broker a commission. 10

15 NOTES b. If a buyer subsequently exercises the option, the listing broker earns a commission. c. If a seller chooses to enter into a lease with an option to purchase for the buyer, the listing broker does not earn a commission unless the listing broker and the seller have also entered into an agreement to pay commission upon the seller s entry into a lease with the tenant. d. Executing a WB 37 Exclusive Listing Contract for Lease of Real Property providing for a payment of commission under a lease along with the listing contract may allow the broker to receive some commission in the event that the buyer does not exercise the option or while waiting for a buyer to decide whether to exercise the option. e. MLS co-broke i. A buyer s broker or subagent of the listing broker who procured a buyer in an option to purchase or a lease with an option to purchase will be entitled to any cooperative commission offered in the MLS if the option is exercised. ii. Entering into an option or a lease is not a sale so the compensation offered in the MLS as a certain percentage of the selling price is not earned until the option is exercised. ii. Payment of commission: sale, land contract, or option to purchase 1. Commission is paid at closing or a time otherwise agreed to by the seller and the listing broker. 2. From whom is commission received a. All compensation and commissions will be paid directly to the listing broker. b. The listing broker will then pay others involved in the transaction. i. Listing agents will receive compensation from their broker employer. ii. Subagents or selling agents will receive compensation from their broker employers. iii. Cooperating brokers will be paid commissions earned according to the terms of the listing agreement and any other agreements between the listing broker and the cooperating broker. iv. Agreements may include MLS commission policies, policy letters between brokers, or other compensation agreements. iii. Out-of-state broker 1. Wis. Stat limits the payment of referral fees, finders fees, and commission splits to persons licensed or registered in Wisconsin to practice real estate, or persons regularly and lawfully engaged in real estate brokerage in another state. 2. Before entering into a commission agreement or referral agreement with an out-of-state broker, it is prudent practice to ask for a copy of the agent s licenses and a statement confirming that the licensee is regularly and lawfully engaged in real estate brokerage in another state. XII. Termination of Listing a. WB 1 Residential Listing Contract 11 b. Who can terminate a listing? i. Either party can terminate the contract before the end of the term of the listing.

16 ii. Early termination may be a breach of contract creating potential liability for the breaching party. iii. Agents may not terminate the listing without written consent of the agent s supervising broker. c. How can a party terminate a listing contract? i. Termination by either party before the end of the contract must be done in writing. ii. WB 42 Amendment to Listing Contract: Use when both seller and broker agree to shorten the term of the listing by changing the expiration date. iii. WB 45 Cancellation Agreement & Mutual Release: Use when seller and listing broker waive all rights under the listing including listing protection, damages for bad faith termination, the right to collect a commission if earned, and all other rights and remedies created by the contract. NOTES Can a seller terminate a listing contract? A seller can terminate a listing contract at any time. A listing contract is a personal services contract which establishes a fiduciary relationship of trust and confidence with the broker. A seller is the principal in the agency contract and cannot be compelled to remain in the agency relationship with the broker. The power to revoke or cancel a listing contract is not the same as a right to cancel the contract. A seller who cancels a listing contract prior to its expiration has breached the contract and the broker may then demand compensation for the damages sustained as a result of the breach of the listing contract. Damages may include advertising costs, reimbursements for incurred expenses, and the value of services rendered. Damages usually will not include a broker s commission unless the broker had procured a ready, willing, and able buyer prior to the seller terminating the contract. A seller can terminate a listing contract without a risk of liability for damages if the termination is for cause such as a broker s failure to perform according to the terms of the listing. Once the seller has notified the broker in writing that the listing is terminated, the seller is free to list the property with another broker. What happens if a seller dies during the term of a listing contract? The death of a principal in an agency agreement terminates the agreement. In the unfortunate event that a seller dies during the term of a listing contract, the death terminates the contract and the agency relationship. A seller s estate is not bound by the terms of the contract. XIII. Seller Contacted by Other Broker a. Brokers contacting represented sellers i. Impermissible 1. Licensees may not negotiate the sale or lease of real estate directly with a party if the licensee knows that the party has an unexpired written contract in connection with the real estate which grants to another licensee an exclusive right to sell, lease or negotiate. 2. Licensees should make a good faith effort to determine if a seller is represented by another broker. ii. Permissible 1. All negotiations shall be conducted with the broker holding the exclusive right to sell, and not with the party, except with the consent of the broker or where the absence of the broker or other similar circumstance reasonably compels direct negotiation with the party. 12

17 NOTES 2. What circumstances would reasonably compel direct negotiation with a party? a. Licensees should consult office policy manuals and their employer brokers for direction on this question. b. Professional courtesy dictates that licensees should make a good faith effort to work with a party s broker during a transaction. b. Sellers working directly with other brokers i. Sellers who negotiate a transaction directly with another broker and exclude the listing broker may owe the listing broker s commission if the property is sold according to the terms of the listing contract. ii. Brokers who are contacted directly by sellers cannot coach a seller about how to terminate a listing. To do so may be considered providing legal advice. A homeowner s listing with a competitor will expire soon. The homeowner asked a new agent to provide the homeowner with a market analysis prior to expiration of the homeowner s current listing contract. Can the new agent go to the seller s house and provide the market analysis? The agent may meet with the seller. The seller initiated the contact to discuss terms of a future listing. Licensees should not initiate contact with sellers or buyers represented by other licensees but if the seller or the buyer initiates the contact, there is no prohibition on a licensee responding to the seller or the buyer. Licensees should not provide advice about how to terminate a listing. Providing advice on how to terminate a listing contract may qualify as the unauthorized practice of law and violate ethical standards required of Wisconsin real estate professionals. Additionally, a person who interferes with a contract can be sued in court for damages. A seller has a listing. A buyer was shown the property by another broker. The broker wrote an offer for the buyer on the seller s property and presented it directly to the seller without contacting the seller s listing agent. The seller accepted the offer and informed the listing agent that the other broker would handle the closing. How can the listing agent receive the commission? What are the listing agent s obligations to the seller? A listing broker earns a commission if, during the term of the listing, the seller accepts an offer that creates an enforceable contract. The seller accepted an offer during the term of the listing that created an enforceable contract. The listing broker has earned a commission despite the seller s wishes that the other broker handle the closing. To limit future liability, the listing broker should request that the seller put in writing the listing broker s responsibility, if any, to assist at closing. The listing broker should also request that the seller indicate in writing the seller s intent to have the other broker complete the transaction s closing. Wisconsin licensees must negotiate through a listing broker unless the listing broker is absent or there are other similar circumstances which reasonably compel direct negotiation with the owner. 13 May a broker contact the listings of a broker whose license has been suspended? When the Wisconsin licensing entity suspends a real estate license, it has completely and absolutely withdrawn all authority of the license holder. The listings terminated upon incapacity of a party to the contract. The now unlicensed broker no longer has the legal capacity to service the listings and the listings are terminated. Any broker may attempt to relist them.

18 XIV. Disclosure a. Lead-based paint disclosure i. Licensee s responsibilities 1. Inform sellers and landlords of their obligations under the federal lead-based paint law. 2. Ensure that sellers and landlords have performed all required activities or personally ensure compliance with the applicable requirements. 3. Ensure that sellers give buyers an opportunity to inspect the property. 4. Ensure that leases, rental agreements, offers to purchase, and other sales contracts contain the appropriate warning statement, disclosure language, certifications, and signatures. ii. Target housing 1. All private and public housing built before Exempt properties: a. Zero-bedroom dwellings, such as lofts, efficiencies, dormitories, military barracks, studios, and individual room rentals. b. Designated housing for the elderly and persons with disabilities unless children reside or are expected to reside there. c. Rental housing that has been inspected by a certified inspector and is found to be free of lead-based paint. iii. Penalties 1. Civil penalties for each violation by an agent or owner shall be no more than $11, Misdemeanor criminal sanctions for knowingly and willfully violating the federal lead-based paint disclosure law. a. Sanctions may include imprisonment of not more than 1 year. b. Knowingly and willingly violating the federal lead-based paint disclosure law can result in a fine of up to $25,000 for each day of violation. b. Licensee inspection i. All licensees have an obligation to inspect the real estate, including vacant land, involved in their transactions. 1. For transactions involving structures, licensees are obligated to inspect accessible areas of the structure as well as the surrounding land. 2. For transactions involving vacant land, licensees are not required to inspect the entire property but must observe the property from at least one point on or adjacent to the property. ii. The obligation extends to listing brokers, selling brokers, and buyer s agents. iii. Licensees are not required to retain inspectors and are not expected to operate mechanical equipment, move furniture, open doors to mechanical systems, or inspect areas that are not accessible. iv. Licensees are not required to observe areas of the property that cannot be accessed or areas where entry would present an unreasonable risk of injury. v. Listing broker 1. A listing broker s inspection must occur prior to executing the listing contract. 2. A listing broker must also make inquiries of the seller on the condition of the structure, mechanical systems, and other relevant aspects of the property and request that the seller respond to this request in writing. 3. A seller will generally respond to a listing broker s inquiries on the structural condition, mechanical systems, and other aspects of the property with a real estate condition report. vi. Other licensees 1. Licensees, other than listing brokers, must also inspect the real estate. 2. This includes buyer s agents and subagents of the listing broker. NOTES 14

19 NOTES 3. The inspection shall occur prior to or during the showing of the property. c. Licensee disclosure i. Material adverse facts 1. Disclosure must be in writing to each party and in a timely fashion. 2. This disclosure obligation is not limited to the condition of the property but may include required disclosure of other facts affecting the transaction. ii. Information suggesting material adverse facts 1. Licensees who become aware of information that suggests material adverse facts must disclose that information. 2. Disclosure is to the parties in writing in a timely manner. 3. Licensees do not have to make a conclusion that information suggesting a material adverse fact means that the material adverse fact exists but should refer parties to qualified third parties for that determination. iii. Licensee obligation if a seller refuses to disclose 1. Licensees are obligated to disclose material adverse facts even if a seller has provided instruction prohibiting disclosure of those facts. 2. Sellers are alerted to a licensee s obligation to disclose material adverse facts in the WB 1 at lines Seller acknowledges that Broker has a duty to disclose all material adverse facts as required by law. A seller accepted an offer on property listed with a broker. The buyer had a home inspection that revealed possible basement issues. The home inspector s report was vague but the inspector recommended consulting a basement specialist. The listing broker provided the seller with the home inspector s report and suggested that the seller consult a basement specialist. The seller does not want to consult a basement specialist. What are the listing broker s disclosure obligations? A broker s disclosure duty is independent of a seller s duty to disclose known problems on a seller s RECR. A licensee must inspect the property and disclose material adverse facts and information suggesting material adverse facts. Information suggesting material adverse facts can come from sources other than the licensee s observation of the property such as information contained in a home inspection report. A licensee s obligation to clients and customers requires disclosure of material adverse facts, regardless of the directive of the client or customer. 15 A buyer submitted an offer subject to an inspection contingency that gave the seller the right to cure. The seller accepted the offer. The inspection report revealed defects and included a recommendation to replace the roof. The buyer s broker sent a Notice of Defects to the seller. The seller wants to cure the defects. In the meantime, the buyer visited the property and met a neighbor who made some racist comments in the buyer s presence. Because of the condition problems with the house and the neighbor, the buyer no longer wants the property. What are a licensee s disclosure obligations when working with a party who expresses intent to not complete the transaction? A licensee working with a party who expresses intent not to complete a transaction should recommend that the party consult legal counsel to discuss consequences of defaulting under a contract to purchase. The licensee should also inform the buyer that the licensee has an obligation to disclose the buyer s intention to back out of the contract because it is information that suggests a material adverse fact. The licensee has a duty to make this information known to all parties in a timely manner.

20 iv. Licensees are not obligated to disclose. Wis. Stat , Wis. Stat Written reports prepared by qualified third parties a. Licensees are not obligated to disclose information relating to the property if a written report prepared by a qualified third party has been provided to the parties. i. Licensees are obligated to disclose inconsistencies. ii. If a licensee s own inspection of a property reveals inconsistencies with information provided by a seller in a RECR or found in a third party s report, the licensee must disclose the inconsistencies in writing to the parties. 2. Sex offenders a. Licensees do not have to disclose information about sex offenders as long as they provide the Wisconsin Department of Corrections telephone number and website to the parties. b. The Department of Corrections telephone number and website are provided in the WB 1 Listing Contract at lines NOTES 3. Locations of adult family homes, community based residential facilities, or nursing homes. 4. Stigmatized property a. Stigmatized property usually refers to property that was the site of a specific act or occurrence. b. For example, a murder, suicide, or reports of haunting might stigmatize a property. c. Licensees do not have to disclose this information unless the act or occurrence had an effect on the physical condition of the property or any structures located on the property. A seller tells the listing agent that the property for sale is haunted by friendly ghosts. What are a licensee s disclosure obligations when listing a property described by the seller as haunted? Does the hostility or friendliness of the alleged ghosts affect a licensee s disclosure obligations? Wis. Stats (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 applies to stigmatized properties that have been site of a murder, suicide, a haunting or other notorious event that does not physically damage the property. If the event resulted in physical damage, the seller must disclose the defect on a RECR. The nature of the alleged ghosts does not affect a licensee s disclosure obligations. If there is no physical damage, a licensee does not have to disclose information about an event or occurrence that may have stigmatized a particular property. A buyer of a stigmatized property may learn of the stigmatizing factor eventually, perhaps from a neighbor or through local history. For that reason, licensees may encourage a seller of a stigmatized property to disclose the history to avoid potential disputes with an unhappy buyer. A seller seeking advice from a licensee on whether property conditions, stigmatizing or otherwise, should be disclosed as defects should be referred to an attorney. Licensees should not advise sellers 16

21 NOTES about whether a property s characteristics are defects that must be disclosed on a RECR. d. Seller disclosure i. Real estate condition report (RECR) Wis. Stat. 709 ii. Sellers must complete a RECR when selling structures with 1-4 dwelling units located in Wisconsin even if the seller has never lived in the structure. iii. All sellers must complete a RECR. iv. Exemptions: 1. The seller is a court appointed representative who has never lived in the property; 2. The property has never been inhabited; 3. The property is exempt from the Wisconsin transfer tax. v. A RECR must be provided to a buyer no later than 10 days after acceptance of an offer. 1. Failing to provide a RECR by the deadline will give a buyer the right to rescind an offer. a. A buyer who does not receive a RECR within 10 days after an accepted offer has two business days to rescind the offer. b. A buyer who receives a RECR after the submission of an offer may rescind that offer if the condition report reveals defects unless the buyer already knew about the defects. c. A buyer who receives a RECR report that is incomplete or inaccurate may rescind the offer within two business days of receipt of the inaccurate or incomplete report. d. Buyer s can waive a right to rescind and proceed to closing. e. Rescission of offers or waivers of rights to rescind must be done in writing. f. A buyer with questions regarding rights to rescind contracts should be referred to an attorney. vi. Licensees should never fill out a RECR. 1. Sellers who have questions about what should or should not be included in the report should be referred to an attorney. 2. Licensees cannot provide advice on whether conditions must be listed on an RECR. Such advice is legal advice and licensees are not permitted to provide legal advice. 17

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