AUGUST 2014, 14.07

Limiting Listing Broker Liability IN THIS ISSUE P1 Title Issues For many REALTORS®, the transaction process begins with the listing. Licensees are trained to competently complete the various listing forms that have been approved by the Real Confirming Real Sellers Estate Examining Board (REEB) and should be capable of creating an enforceable contract. The prudent listing agent, however, takes extra precautions to protect him or herself, the listing broker and his or her Property Condition Disclosures clients from unnecessary liability exposure. As the foundation of a broker’s relationship with a seller-client, the Excluded Buyers: Listing Protection and listing contract provides the broker with the opportunity to educate the client, maximize early seller disclosure of property condition information, Seller Exclusions and accurately assess protected buyers and seller exclusions. These measures help eliminate or minimize problems later, reduce liability for the seller and the broker, and increase the likelihood of a successful Execution of Listing transaction. This Legal Update discusses many listing practices and procedures Creating Different Agency Models in that may help a broker reduce liability exposure. The careful listing broker will immediately seek title information to determine the real Listing Contracts owners of record and the outstanding and on the listed property. This is also the time to educate the seller about the seller’s property condition disclosure duties and try to ensure that the Legal Hotline Q&A: Listing A Property seller executes the proper real estate condition report and lead-based paint addendum, as applicable. The wise listing agent makes a record of his or her visual inspection of the property to compare with the seller’s disclosures. Asking about protected buyer lists, offers to purchase short sale. In a potential short sale, it is critical to know what liens are and direct contacts helps the broker identify protected buyers if the outstanding and how much money will be needed to clear those liens property was listed before with another broker. Other issues arising from title. under the provisions of the listing contract are highlighted and tips for The seller’s warranty given in a warranty promises the buyer that modifying an exclusive right to sell listing contract to create other listing the title will be subject to and municipal ordinances, utility and relationships are provided. The Update concludes with a section of municipal , recorded building and use restrictions, Legal Hotline questions and answers. year property taxes, and any liens and encumbrances listed by the parties in the offer, but will be free and clear from all other liens and Title Issues encumbrances. Any title defect that will be an exception to this promise One of the first orders of business when listing a property is to that title is free and clear of all other liens and encumbrances should seek information about the property title. It is beneficial for the seller be listed in the offer, considered in the title commitment and listed in and listing broker to be familiar with whatever potential liens and any warranty deed unless resolved and removed prior to or at closing. encumbrances may be present with respect to the listed property as It is best to learn about such possible glitches early on because this early as possible. This information will help the seller and listing agent increases the likelihood that a solution may be found. complete any property condition report or disclose material adverse The seller may wrongfully assume that any title problems will be facts, respond to the questions asked in the standard owner’s affidavit covered by the title insurance policy, but the opposite may be true. A that the title insurance company will provide to the seller, and provide standard title insurance policy will have standard policy exceptions such documentation to remove standard exceptions from the title insurance as construction liens, occupants in possession, , policy. This may also reveal how much money is needed to remove easements not of record, boundary disputes, access rights and all liens and encumbrances and whether the transaction might be a submerged lands, to name a few.

Wisconsin REALTORS® Association Page 1 Legal Update, August 2014 P2 For a refresher regarding what is and is not addressed by a title the parties by trying to spot, disclose and possibly eliminate problems insurance commitment and policy, review pages 8-12 of the February early on instead of watching the transaction derail when a problem is 2011 Legal Update, “2011 WB-11 Residential Offer to Purchase,” at discovered later on after much time and money has been spent. www.wra.org/LU1102. It is better to try to get a full picture of what the broker is dealing  REALTOR® Practice Tip with up front and work with the seller to head off disaster down the The areas of concern regarding title issues and liens can line. There are different approaches and techniques for gathering that be disclosed to the buyer if early troubleshooting by the all-important title information. These include the seller's title policy seller’s attorney or the title company cannot clear up and deed, a search and hold from the title company, a title issues the problem. The buyer can then address issues that are questionnaire, and reports from the local municipality. important to him or her in the offer and hopefully resolve Historic information: title policy and deed the problems in a favorable manner before closing. Historic information can be gleaned from the seller’s title policy he or she received when the property was purchased. A copy of the deed Municipal report/code compliance is also helpful because it contains the owners’ full names and the legal It will be helpful if the seller obtains a written statement from the description. These will give the broker good insight as to the correct municipality, if available, confirming the real estate taxes, current legal description and the names of the owners of record. and planned special assessments, and any other municipal charges Search and hold: identifying liens and applicable to the property. This statement may need to be furnished to the buyer and the closing agent prior to closing, but it is also helpful to encumbrances have on hand early so that accurate disclosures can be made. But current information is also necessary because circumstances The seller may also be required to provide a Certificate of Code may have changed since the seller purchased the property. For this, the Compliance or an Occupancy Permit, if required by the local municipal listing agent can order a “search and hold” from the title company to code. This documentation typically is furnished at the seller’s expense. see what liens officially appear on record. If the broker has the owners’ title insurance policy or commitment, the effective date of that policy The listing broker and the seller should determine who would be or commitment can be used as the starting point for a search and hold. responsible for requesting this information: the seller, the listing What is desired is a snapshot of the liens and encumbrances that have broker, the seller’s attorney or the title company. The broker may wish since appeared of record. to become acquainted with the procedures and timeline for ordering needed documents. While it certainly is not within a real estate broker’s job description to determine what liens are of record, it is better to identify problems areas at the outset and try to head off disaster down the line. In particular, Confirming the Real Sellers sellers in financial straits may not reveal or remember all that is going on The real owners of the property may not be obvious. The people you and thus may overlook disclosing one or more liens. The seller also may meet with to discuss the potential listing may be the correct individuals be unaware of some items that may impact title like procedural glitches to work with, but they may need to act in the transaction in their official in court proceedings or information appearing on an official map. capacities as the trustees of a revocable trust or the manager of an LLC, details that are not necessarily apparent on the surface. Knowing the Listing Questionnaire Regarding Title Issues: actual title holders and the persons who have the authority to sign and anticipating title defects convey the property dictates who should sign transaction documents and in what capacity, and what kind of deed they will give at closing. Even though the title company report is the official word, there may be other potential liens and issues lurking about far from the courthouse Who signs the listing contract? steps. To capture these possible threats, the weapon of choice is the Listing Questionnaire Regarding Title Issues (WRA-QST). This will prompt The listing contract must be signed by someone agreeing to pay a the seller to identify potential title issues that would not be evident from commission. The does not require that all the owners sign a listing simply examining recorded documents. contract in order for the listing contract to be enforceable against the owner who does sign. For example, a husband signing a listing can be In order to identify potential liens and encumbrances not listed on a liable for a commission to a broker who successfully procures a buyer search and hold or not covered by title insurance, listing brokers may even if the wife is also on title. In the real world though, a listing contract wish to use a brief questionnaire when listing that will trigger without the signature of all owners may be a disaster waiting to happen. the seller to identify potential title issues that would not be evident from Prior to accepting a listing signed by fewer than all sellers, legal counsel simply examining recorded documents. The WRA has created a sample should be consulted regarding the myriad potential problems including Listing Questionnaire Regarding Title Issues that brokers may adapt to disclosure duties owed to prospective purchasers, homestead law, their needs and use. See the sample copy on page 16 of the June 2013 marital , agency law and commissions, to name a few. Legal Update, “Short Sales Streamlined,” at www.wra.org/LU1306. The questionnaire also inquires as to the type of deed that the seller will See “Best of the Legal Hotline — Contract : Who Signs What?” provide at closing. in the February 2004 Wisconsin Real Estate Magazine at www.wra.org/ WREM/Feb04/Hotline and pages 4-7 of the June 2007 Legal Update, The Listing Questionnaire Regarding Title Issues and the title search “Ownership and Title Pointers for Brokers” at www.wra.org/LU0706. generally will produce different lists of items. Property conditions in the questionnaire, for instance, unrecorded easements or burial grounds, are not likely to appear of record but are potential title issues. It is well worth the trouble for a listing broker to protect him or herself and

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Determine owners required to sign offer and  REALTOR® Practice Tip deed It may be wise to confirm the identity of the trustee or Unlike the listing contract, however, all owners must sign the offer trustees and their authority to convey real estate. The title to purchase to create a valid real estate conveyance per Wis. Stat. company or the seller’s attorney may be of assistance with § 706.02(1)(d). Determination of who is the official owner of record this. and which individuals and in what capacity must sign the offer to purchase and the deed may be accomplished by obtaining a copy of Life estates the owner’s deed to the property or a copy of their title insurance policy A is an interest that is limited in duration to the life of the of title commitment. The title company search and hold and the listing person holding the life estate or to the life of some other designated questionnaire used to determine outstanding liens and encumbrances person. The person holding the life estate is called the life tenant. A life also help answer these questions. tenant has essentially the same interests as a owner except If there are several owners, it may be efficient to use a power of that the interests of a life tenant do not last forever — they end upon attorney so that one person could sign on behalf of the group. If the the death of the designated person (generally the life tenant). The life property is homestead, both spouses must sign any offer to purchase estate may be sold, leased or mortgaged. A remainderman of a life and the deed, per Wis. Stat. § 706.02(1)(f). A property is homestead estate, on the other hand, has a in the property. Upon the if one or both spouses live there. Even if only one spouse resides in death of the designated person, the remainderman automatically has a the property, both spouses must sign offers and for a property fee simple interest. classified as homestead.  REALTOR® Practice Tip  REALTOR® Practice Tip Both the life tenant and all remaindermen must sign any offer Knowing the true identity of the sellers and whether the seller or deed if the fee simple absolute to the property is being is an estate, trust or entity of some kind will help determine sold to a third-party buyer. what signatures are going to be needed for the offer and at closing and the type of deed that will be needed. This information might be noted in the MLS remarks so that a Estates buyer writing an offer can appropriately complete the title The personal representative has the power to sell, mortgage or section. any property within the estate of a deceased individual without court order per Wis. Stat. § 860.01. The personal representative is obligated Trusts to perform any offer to purchase or other contract for the sale or lease of real estate that the deceased entered into while he or she was still Trusts are written agreements that provide for alive. However, if the deceased was the seller in a listing contract prior to by someone with a special position of responsibility and duty to manage death, a new listing contract with the personal representative typically assets and act for the benefit of others. Property owners (known as the will be required because the death of the seller automatically terminates grantors or settlers) may transfer legal title to property to one or more the seller's listing contract. individuals, a trust company and/or a bank, who will act as “trustee.” Multiple and successor trustees are not uncommon. The trustee(s) is given fiduciary powers to hold, manage and convey the property for  REALTOR® Practice Tip the benefit of the original owners during their lifetime, and for other beneficiaries after the owners have passed away. Make sure you are working with the personal representative and not the heirs. The heirs may have been involved with A revocable or living trust agreement delineates how an owner or the decedent’s life and be very interested in the property, grantor wants property he or she puts into the trust to be managed but they will have no power to convey the property unless and distributed. A revocable trust may allow the grantor to serve as appointed as personal representative or special administrator a trustee and maintain control of the trust assets during his or her by the probate court. lifetime. A revocable trust also may be altered or terminated during the property owner’s lifetime as long as the owner is mentally competent. The property is passed on to the beneficiaries only after the owner’s Corporations death, at which time the revocable trust then becomes irrevocable. An irrevocable trust, on the other hand, cannot be changed once it is put Wis. Stat. § 706.03(2) and (3) provide that any one officer of a in place. corporation is authorized to sign conveyances in the corporate name, unless a different authorization appears in the corporation’s articles The title to a residence and other real estate may be put into a of incorporation or in a certified corporate resolution that has been revocable trust. As far as a purchaser in a is recorded with the register of deeds office in the county where the concerned, the trustee (or trustees) is the “owner” and has power to conveyance is occurring. With a corporation, the proper authority to sell sell property held by the trust unless the document creating the trust depends on whether the sale of the property is or is not in the regular restricts his or her power. Most trust documents give the trustee(s) the course of business. If it is part of the corporation’s normal business to express authority and power to sell without court order. sell , Wis. Stat. § 180.1201 provides that the sale must be on the terms and conditions and for the price determined by the corporation’s board of directors. If the sale is not in the regular course

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of business or the sale is of all or substantially all of the corporation’s assets, the sale again must be on the terms, conditions and for the  REALTOR® Practice Tip price determined by the corporation’s board of directors. In addition, When executing real estate documents under a POA, the Wis. Stat. § 180.1202 requires a resolution of the board of directors agent (attorney-in-fact) must comply with Wis. Stat. § approving the proposed transaction and approval by a majority vote of 706.03(1m), and state the name of the authorizing principal. the corporate shareholders. It is also recommended that the agent indicate his or her authority or capacity, as illustrated in the following examples:  REALTOR® Practice Tip Seller XYZ When a corporate seller signs documents, typically the By: (attorney-in-fact signs name) name of the corporation is given, and then the name and the (Print or type name), authorized attorney-in-fact capacity of the signing officer or officers are stated under the respective signature lines. For example: -OR- ABC Corporation (attorney-in-fact signs name) By: (Print or type name), as authorized agent on behalf of Buyer ABC Paul Parker, President

Limited liability companies  REALTOR® Practice Tip When working with a seller who already has a POA, the best With a limited liability company (LLC), the authority to transfer its move is to have it reviewed by the title company to ensure property depends on whether the LLC is member-managed or centrally that it is legally sufficient for the contemplated transaction. managed. In a member-managed LLC, Wis. Stat. § 183.0301 provides that each member is an agent of the LLC. A member may sign documents and bind the LLC if the member is apparently carrying on the ordinary For further detail regarding different types of sellers, the required course of business for the LLC, unless the member has no authority to signatures and the authority to sell, review the June 2007 Legal Update, act, and the person he is dealing is aware of his lack of authority. Under “Ownership and Title Pointer for Brokers,” at www.wra.org/LU0706 § 183.0702, the property of the LLC that is held in the name of the LLC and the May 2004 Legal Update, “Avoiding Liability When Signing and may be transferred by a conveyance executed by any member in the Making Referrals,” at www.wra.org/LU0405. name of the LLC. If one or more managers centrally manage the LLC, a member is not an agent of the LLC and cannot bind the LLC. Rather, What kind of deed will the seller give? each manager is an agent of the LLC and can execute documents and The approved offer to purchase forms provide for the seller to give a bind the LLC per § 183.0301. warranty deed unless the seller is a trust or a personal representative, or unless some other type of conveyance is specified in the offer. A  REALTOR® Practice Tip trustee’s deed and a personal representative’s deed, as well as a When dealing with an LLC, it may be wise to ask for the guardian’s deed or a receiver’s deed, are all quitclaim conveyances and LLC’s operating agreement or some other documentation do not contain any warranties of title. Wis. Stat. § 706.10(4) states, confirming a member's or a manager’s authority to bind the “A shall pass all of the interest in or appurtenant to the LLC and sell LLC real estate. land described which the grantor could lawfully convey, but shall not warrant or imply the existence, quantity or quality of any such interest.” A quitclaim deed says in effect, “If I have any interest in the described Powers of attorney land, I convey it.” A power of attorney (POA) is a written document whereby the principal In a warranty deed, the seller guarantees that the seller’s title is free gives authority to an agent to act on the principal’s behalf. The authority and clear of all liens and encumbrances except any encumbrances may be general and give the agent broad power or it may be very expressly mentioned in the offer and in the deed. This warranty narrowly stated to give the agent only specific, limited powers. A POA, for guarantees the seller’s ownership rights. instance, may be prepared for the sole purpose of handling real estate matters. Most powers of attorney are durable powers of attorney that continue in effect after the principal becomes incompetent or disabled  REALTOR® Practice Tip and cannot act for him or herself. The POA will, however, terminate upon The listing agent should determine what type of deed the the death of the principal. seller will give and share that information with buyers and A POA addressing real estate matters may be drafted by an attorney cooperating agents — the remarks in the MLS is a good spot or may be created using a preprinted form. The Wisconsin Statutes for this information. contain a basic power of attorney for finances and property form in § 244.61. This form is available from the Wisconsin Department of Health Services (DHS) at www.dhs.wisconsin.gov/forms/AdvDirectives/ ADFormsPOA.htm.

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complete the required report according to their knowledge about Property Condition Disclosures defects. Line B. 1. of each report states that “am aware” means to It is disclosure time! The seller in a real estate transaction is asked to have notice or knowledge; “defect” means a condition that would have disclose property condition information and other information affecting a significant adverse effect on the value of the property, significantly the transaction. The listing broker may also have to disclose material impair the health or safety of future property occupants, or that if not adverse facts if the seller does not effectively disclose all pertinent repaired, removed or replaced would significantly shorten or adversely defects. affect the expected normal property life. Finding out about the condition of the property is not always easy. Sellers often are reluctant to disclose past defects that have Some brokers will swear that all sellers are hiding something while presumably been repaired. But buyers and buyer’s attorneys may be others are more understanding and chalk up the seller’s selective more comfortable if the past defect is disclosed, along with information memory and reluctance to be forthcoming to human nature. Whatever about the repairs made, so that they may investigate for themselves and the case, it generally will serve everyone in the long run if the seller confirm that the problem was eliminated. The language in Chapter 709 “spills the beans” and provides accurate and complete disclosures. A is not particularly clear in this regard and thus there are differing legal significant property defect that comes to light after opinions. The listing agent may explain to the an offer has been accepted or closed will surely seller that if the seller makes a full and complete come back to bite the seller and make the listing disclosure of the nature and extent of property agent miserable. conditions that may be seen by the buyer as a “Sellers are often defect, those conditions may not be listed as Seller’s property condition reluctant to disclose defects under the inspection contingency in report discloses defects the REEB-approved offers to purchase. If an past defects that inspector finds that a problem is much worse All residential sellers subject to Wis. Stat. than disclosed, the buyer can assert that the Chap. 709 must complete a § 709.03 Real Estate have presumably true nature and extent of the defect was not Condition Report (RECR). § 709.03 generally disclosed and deliver a notice of defects to the applies to all persons who sell or otherwise been repaired. But seller. transfer Wisconsin real estate containing one- to-four dwelling units. Dwelling units include buyers and buyers' units, timeshare property, living  REALTOR® Practice Tip quarters in a and summer attorneys may be The seller or the seller's attorney, not cottages. more comfortable the listing agent, decides whether Effective July 1, 2012, sellers of vacant land are the seller discloses information on required to complete a Vacant Land Disclosure if the past defect is the RECR or VLDR. The listing agent Report (VLDR). The Wis. Stat. § 709.033 disclosed, along with always must leave any legal questions disclosure provisions generally must be completed to the seller’s attorney. by all persons who transfer Wisconsin real estate information about the that does not include any buildings. All sellers who are subject to Wis. Stat. § repairs made, so that See the discussion of the various condition 709.03 or § 709.033, whether broker-assisted or they may investigate for and disclosure reports in the June 2014 Legal FSBO, must complete a disclosure report with the Update, “Property Condition Report Revisions necessary provisions or risk buyer rescission of the themselves and confirm 2014,” at www.wra.org/LU1406, the May 2012 offer to purchase or other contract for sale. Legal Update, "Vacant Land Disclosure Report" that the problem was at www.wra.org/LU1205, Legal Update 02.07, Wis. Stat. Chapter 709 does not apply to: “Duty to Disclose,” at www.wra.org/LU0207 1. Personal representatives, trustees, eliminated.” and the October 2009 Legal Update, “Diligent conservators and other fiduciaries Disclosure,” at www.wra.org/LU0910. appointed by or subject to supervision by Two additional resources for gathering the court, but only if those persons have property condition information include the listing agent’s visual never occupied the property. This exemption for fiduciaries, inspection report and the seller’s CLUE report. however, does not apply to persons holding powers-of-attorney because this relationship is created by contract, not by court Listing/selling visual inspection form appointment, and is not subject to direct court supervision. Wis. Admin. Code § REEB 24.07(1)(b) provides, “Listing broker. 2. Real estate that has not been inhabited, such as new construction When listing real estate and prior to execution of the listing contract, a and properties converted to residential from another use. licensee shall inspect the real estate as required by sub. (1), and shall make inquiries of the seller on the condition of the structure, mechanical 3. Transfers exempt from the Wisconsin real estate transfer fee, systems and other relevant aspects of the property as applicable. The such as between spouses, or probate transfers (this licensee shall request that the seller provide a written response to the exception does not include REO sales of foreclosed properties). licensee's inquiry.” Pursuant to the statutes, residential and vacant land sellers must The inquiries to the seller regarding the property condition and the

Wisconsin REALTORS® Association Page 5 Legal Update, August 2014 P6 seller’s written response generally take the form of the property condition and the October 2009 Legal Update, "Diligent Disclosure," at www.wra. report. With respect to the listing broker’s inspection of the property, no org/LU0910 for further discussion of seller disclosure obligations. written record is required, but prudent listing brokers will require all listing agents to keep a written record of their observations, using a due Addendum S: lead-based paint (LBP) diligence tool like the WRA Listing/Selling Visual Inspection Form (WRA- To ensure compliance with the federal lead-based paint disclosure LAI). Detailed notes on the visual inspection form, for example, “boxes rules, an agent shall inform the seller of his or her obligations, ensure stacked against west basement wall,” will help licensees accurately that the seller has performed all activities required under the rules, or remember what they saw — and could not see. This ensures maximum personally ensure compliance with the rule requirements. The HUD and law compliance for the benefit of the broker and the associates, EPA’s commentary to the LPB disclosure rules indicates that this means and facilitates quality services for the clients. As an alternative, the that agents must inform sellers of their obligations, and make sure that agent can make notes on a copy of the seller’s disclosure report to see the required activities are completed either by the seller or by the agent if the agent’s observations match the seller’s disclosures. personally. The WRA Offer Addendum S — Lead-Based Paint Disclosures and  REALTOR® Practice Tip Acknowledgements was designed to both educate the parties and help Wis. Admin. Code § REEB 24.07(6) provides that if the listing assure compliance. The WRA Addendum S is used most effectively agent’s reasonably competent and diligent inspection reveals and offers the most liability protection for real estate agents when the facts materially inconsistent with or contradictory to the sellers complete the form when the residential listing is taken. seller's condition report, the inconsistency must be disclosed in writing and in a timely manner to the parties.  REALTOR® Practice Tip A wise listing agent will review the Addendum S information and explanations with the client and have the seller Insurance claims and the CLUE report complete and sign the seller section of the Addendum S at Assuming a seller’s memory of property defects is not perfect, the the same time the RECR is completed. seller can be asked to provide the listing broker with a copy of the Comprehensive Loss Underwriting Exchange (CLUE) report on the See the May 2010 Legal Update, “Lead-Based Paint in Target property. The CLUE report provides a five-year insurance claims history Housing” at www.wra.org/LU1005 for further discussion of the LBP law for the property that may reveal undisclosed defects or a history of and Addendum S. problems that may impact the buyer’s ability to get insurance. Sellers may request a copy of their CLUE report at www.choicetrust.com (may Excluded Buyers: Listing be referred to as Home Seller’s Disclosure Report). The CLUE report functions as a supplemental property condition Protection and Seller Exclusions report. Some sellers may not remember the details of property damage It is smart to ask the sellers about any prior listings, offers and events very well, such as dates, causes and amounts spent, so the showings, and whether the sellers have received any lists of protected CLUE report serves as a back-up measure to make sure that any recent buyers. Also, are there any persons the sellers wish to exclude from the property damage mishaps are documented and disclosed. listing? "As-is" sales Listing protection Some sellers may believe that an “as-is” sale is the way to go because Buyers may be protected for listing protection in one of four ways. If, they think it allows them to avoid making property condition disclosures during the term of the listing contract, (1) the buyer submitted a written and helps them reduce their liability exposure. offer to purchase or (2) negotiated directly with the seller, the listing When a property is sold “as-is,” it generally means that the seller protection is automatic and the listing broker would not be required to will not make property condition disclosures and will not cure defects. perform any additional steps to protect the buyer for the override period. However, it is not unusual to see the offer say “as-is” in transactions If, during the term of the listing, (3) the buyer attended an individual where the seller has already made disclosures, and some “as-is” sellers showing or (4) “negotiated” with a broker, the buyer will be protected end up making some repairs. only if the listing broker delivered the buyer's name to the seller no later than three days after the expiration of the first listing contract. An “as-is” clause alerts the buyer that he or she is responsible to “Negotiated,” for these purposes, means that the buyer discussed the determine the condition of the property being purchased, that is, potential terms upon which the buyer might acquire an interest in the have the property thoroughly inspected and tested. When the buyer is property. purchasing “as-is,” it is very important for the buyer to learn as much as possible about the condition of the property. “As-is” does mean that if When a buyer becomes a protected buyer, the listing broker has, in the buyer goes through to closing and defects are later found, the buyer essence, a one-party listing for the buyer during the one-year override cannot go back to the seller for any compensation. The buyer is on a period based on the Extension of Listing provisions. The listing broker take-it-or-leave-it basis. retains the authority to provide brokerage services on behalf of the seller during the one-year time frame and earn the listing commission if The seller may still need to make some disclosures if latent or the buyer's offer is accepted. dangerous defects or other special circumstances are present. Whether the seller should adopt this strategy is a question for the seller’s attorney. Protection of buyers generally must include two components: buyer negotiation and notice to the seller. Some buyers become protected See Legal Update 02.07, "Duty to Disclose," at www.wra.org/LU0207

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automatically, and for some the broker has to take action and provide the Protection" in the October 2011 Wisconsin Real Estate Magazine at buyer's name to the seller. A buyer automatically becomes a protected www.wra.org/WREM/Oct11/LegalHotline. buyer when there is a written offer or when the buyer and seller directly negotiate. The two components are present when the buyer has written Seller exclusions an offer to purchase: the buyer clearly negotiated by submitting the The Exclusions section of the listing contract indicates that the seller offer, and the seller knows the buyer's name because it is stated in the may name certain buyers to be excluded from the listing until a stated offer. When a buyer and seller discuss potential purchase terms, that date. This provision is intended to permit sellers to exclude their family discussion is negotiation and the buyer is known to the seller. These members, neighbors, and other potential buyers with whom the seller buyers are protected automatically for one year without any further has previously negotiated without broker participation. The listing action by the listing broker. contract provision encourages the naming of an expiration date for the If the negotiation is not directly with the seller, the listing broker seller’s exclusions so that the exclusions need not run for the duration must properly notify the seller of the buyer's identity. There still must of the listing contract term. be negotiation and notice. Negotiation can occur when a buyer attends If the seller accepts an offer to purchase from an excluded buyer, an individual showing of the property or when the buyer discusses or sells (deeds) the property to the excluded buyer by the stated potential purchase terms with the listing or a cooperating broker. The deadline, the listing broker does not earn his or her commission. On buyer in these situations becomes a protected buyer only if the listing the other hand, if the neighbor has submitted an offer to purchase and broker delivers written notice of the buyer's name to the seller within negotiations are under way but the seller has not accepted the offer the applicable time frame stated in the listing contract. The notice must when the stated deadline passes, the neighbor becomes subject to be in writing, delivered by an authorized delivery method and name the the listing and the seller will owe the commission if the seller ends up buyer unless the identity is confidential. accepting the neighbor’s offer.

 REALTOR® Practice Tip Execution of Listing Contracts Whenever a broker takes a listing, the practical broker will The seller has agreed to list her property with the broker, so it is time first ascertain whether the property was previously listed. execute an approved listing contract. When a careful broker executes If there was a prior listing, the listing agent should ask the a listing contract with the seller, the broker will have done as much seller for any list of protected buyers that the seller has background work as time allowed and is prepared to review and discuss received as well as any offers submitted to the seller. The the listing contract provisions with the seller. In addition, the broker is agent should also chat with the seller to find out if the seller ready to help the seller anticipate issues that might arise with potential negotiated directly with any prospective buyers. If the seller buyers and take steps to eliminate or reduce problems and disputes. has questions about his or her legal rights, however, these As the broker walks the seller through the listing, the following issues questions must be directed to the seller’s attorney. may pop to the forefront: Included and excluded and fixtures Any disputes about protected buyers are between the seller and the The listing contract addresses items that are included or not included prior listing broker. The new listing broker was not a party to the previous in the list price. Take the time to tour the property with the seller and try listing contract and cannot challenge its terms. to get a complete list of items that might be considered by a buyer to Sometimes the list of protected buyers is very long or the seller does be personal property and whether they are staying with the property or not think that all the listed people really saw the property. If the broker going with the seller. Also try to pinpoint items that are rented and insert or the seller questions some of the names on the list, one approach may them on the proper line in the listing. See “Mirror, Mirror on the Wall: be for the seller and the second listing broker to simply proceed with Does it Stay or does it Go?” in the September 2014 Wisconsin Real the listing and not analyze the eligibility of any buyer on the list unless Estate Magazine at www.wra.org/WREM/Sep14/Mirror. a named buyer attends a showing or writes an offer. The listing contract The listing of property inclusions and exclusions in the listing contract states that “All persons who may acquire an interest in the Property as only controls what property is available and has been included in the a Protected Buyer under a prior listing contract are excluded from this list price. Similarly, MLS or office data sheets only reflect what property Listing to the extent of the prior broker's legal rights, unless otherwise is available while the offer establishes the parties' agreement about agreed to in writing.” Another approach is for the first and second listing personal property. The terms of the offer to purchase will determine brokers to sit down with the seller and negotiate an agreement about what property is included or excluded in the transaction. what named buyers are properly qualified for listing protection. Brokers should always be on guard against giving the seller any legal Offering variable rate commissions advice about the legal status of any named buyer and the seller’s legal A prudent listing broker offering variable rate commissions must rights. The second listing broker certainly may, however, identify the specify the commission structure in the listing contract and disclose issue to the seller and see what direction the seller wants to take. this information pursuant to the REALTOR® Code of Ethics, Standard Brokers should also avoid taking any action that would subject the seller of Practice 3-4. A variable rate commission is where the amount of to a double commission or otherwise take advantage — the courts take commission due varies if the listing broker sells the property or a a dim view of brokers who take advantage of consumers for their own cooperating broker sells the property. For example, an agent might take financial benefit. a listing with a 3 percent commission on in-house sales and a 5 percent For more information about listing protection and delivery of the commission for a co-broke sale. protected buyer list, see "The Best of the Legal Hotline: Listing Standard of Practice 3-4 provides, “REALTORS®, acting as listing

Wisconsin REALTORS® Association Page 7 Legal Update, August 2014 P8 brokers, have an affirmative obligation to disclose the existence of Oxycodone or uppers. The sellers also must minimize safety hazards for dual or variable rate commission arrangements (i.e., listings where persons touring the property. one amount of commission is payable if the listing broker’s firm is the The seller also is responsible for Fido and Fifi. If possible, they should procuring cause of sale/lease and a different amount of commission is be removed during showings because not every buyer will love them payable if the sale/lease results through the efforts of the seller/ the way the seller does, and the seller does want the buyers to love or a cooperating broker). The listing broker shall, as soon as practical, the property. If Fido and Fifi do not love the buyers and bite them, disclose the existence of such arrangements to potential cooperating the seller will be liable. The listing provides that the seller will hold brokers and shall, in response to inquiries from cooperating brokers, the broker harmless for any losses or liability resulting from personal disclose the differential that would result in a cooperative transaction injury, property damage, or theft occurring during individual showings or in a sale/lease that results through the efforts of the seller/landlord. or open houses unless caused by the broker's negligence or intentional If the cooperating broker is a buyer/tenant representative, the buyer/ wrongdoing. tenant representative must disclose such information to their client before the client makes an offer to purchase or lease. (Amended 1/02)” Email delivery In order to email listing contract amendments or notices, such as a  REALTOR® Practice Tip protected buyers list, the seller must consent electronically to the use All decisions concerning commissions or fees must be of email, and the listing contract must be modified to provide for email unilateral, independent business decisions made solely delivery. The One-page Cheet Sheet: Electronic Consent and Delivery within the broker’s office, without consultation or discussion 101, at www.wra.org/ecommerce, includes sample language that may with anyone from other real estate brokerage firms. However, be inserted in a listing contract to authorize email delivery. a broker may make pricing decisions based upon the prices charged by competitors.  REALTOR® Practice Tip Leased property A frequent mistake is that the broker emails the list of protected buyers to the seller. Unless the listing was If the property is currently leased and the extend beyond modified to include email as a form of delivery, email is closing, the seller shall assign the seller's rights under the leases not an authorized delivery method even if the seller put an and transfer all security deposits and prepaid rents to the buyer at email address on the listing contract. closing. The listing agent should encourage the parties to use the WRA Addendum R with any offer to purchase and the WRA of Leases and Security Deposits form at closing. This assignment form includes an indemnification agreement from buyers for liabilities arising under the leases after closing. The seller must understand that the seller will remain liable under the leases unless released by the tenants, so the buyer’s agreement to indemnify is important for the seller’s protection. Addendum R is discussed in Legal Update 03.11, “Overcoming Residential Transactional Obstacles,” www.wra.org/LU0311. Broker disclosure to clients Real estate licensees in Wisconsin must provide clients a written Broker Disclosure to Clients. When using a state-approved listing contract, the agent does not need to use the separate Broker Disclosure to Clients form because that mandatory language is contained within the listing contracts. The broker must explain multiple representation, designated agency and confidential information so that the client selection of an Fair housing agency relationship and the confidential information section may be The listing contract states the agreement of the seller and broker appropriately completed in an informed manner. For further discussion to not discriminate against any prospective purchaser based on race, of agency law and multiple representation, see the October 2010 Legal color, sex, sexual orientation as defined in Wis. Stat. § 111.32 (13m), Update, “Agency Law Revisited” at www.wra.org/LU1010 and the June disability, religion, national origin, marital status, lawful source of income, 2006 Legal Update, “Revised Agency Law Implementation,” at www.wra. age, ancestry, familial status, or in any other unlawful manner. Note that org/LU0606. the federal Fair Housing Act prohibits discrimination on the basis of Open house and showing responsibilities race, color, family status, disability, sex, national origin, and religion, and that Wisconsin's Open Housing law now prohibits discrimination Make sure that the sellers understand that there is a potential risk based on marital status, ancestry, source of income, sexual orientation, of injury, damage and theft when they allow strangers into the property age, and status as a victim of domestic abuse, sexual abuse, or stalking. for individual showings or open houses. For security’s sake, tell them The prudent listing broker will make sure that the seller understands to remove keys, credit cards, mail and bills, laptops, iPods, jewelry, that the broker will not discriminate in advertising or in the treatment of crystal, furs and other treasures from the property, or lock them away potential buyers and will terminate the listing should the seller engage during showings. Also remove prescription drugs because seemingly in discriminatory conduct. honest people wouldn’t mind getting their hands on a bottle of Viagra,

Wisconsin REALTORS® Association Page 8 Legal Update, August 2014 P9 Limited service or limited representation listings Creating Different Agency Limited service brokers are licensed brokers who offer their seller- clients few or no property marketing services other than submitting Models in Listing Contracts the property listing into the MLS, often for a flat fee. The listing also The WB-1 Residential Listing Contract — Exclusive Right to Sell, and commonly provides that the seller will pay a fee to any cooperating broker the other approved listing contracts, are used to establish an exclusive involved in the sale of the property. Consequently, a limited service right to sell agency relationship. As the title of these forms indicates, listing contract may contain numerous modifications to the approved the listing broker is given the exclusive right to listing contract, often including compliance with sell the listed property. These same approved the Wis. Stat. § 452.133(6) requirements that forms, however, may be modified to create other must be met if the broker’s duty to negotiate on listing relationships. behalf of the seller-client will be waived. “The board has The board has clarified in Wis. Admin. Code § NAR policy requires an MLS to accept legal clarified in Wis. Admin. REEB 16.06(6) and (9) that licensees may alter exclusive right-to-sell or exclusive agency listings agency agreements such as a listing contract that offer compensation to cooperating brokers. Code § REEB 16.06(6) or a buyer agency/tenant representation An MLS may adopt a “disclosure rule” whereby the agreement to create different agency models. listings of limited service brokers are identified in and (9) that licensees For instance, Wis. Admin. Code § REEB 16.06(6) the MLS so that cooperating brokers know at the was modified effective July 1, 2014, and now outset that they may have to provide more services may alter agency provides that, “A licensee may alter an approved than is typically experienced in a traditional listing. agreements such as exclusive right to sell listing contract to create See the January 2012 Legal Update, “Limited an exclusive agency listing, an open listing or a Service Update,” at www.wra.org/LU1201 and the listing contract one-party listing.” Thus a licensee may modify a “Best of the Legal Hotline: Limited-Service or a buyer agency/ WB-1 Residential Listing Contract to create an Brokers,” in the January 2005 Wisconsin Real exclusive agency listing or a one-party listing. Estate Magazine at www.wra.org/WREM/Jan05/ tenant representation See the Wis. Admin. Code chapter REEB 16 Hotline. forms use rules at docs.legis.wisconsin.gov/ agreement to create code/admin_code/reeb/16.pdf. Seller signatures and client relationships different agency The following examples give directions for Whenever possible, the listing broker will have modifying the listing contracts based upon all owners sign the listing contract. The owners will models. ” the particular form, but can be followed as a have been determined during the course of the blueprint for altering other listing contracts as broker’s initial title investigations through a copy well. of the deed or a search and hold, for example. How does a broker use the WB-5 Commercial Listing Contract to If only one of a group of multiple owners signs a listing contract, that make an open commercial listing contract? owner is the broker’s client. All other owners will become the broker’s customers if the broker provides brokerage services to them per the Wis. Admin. Code § REEB 16.02(4) defines an open listing as “a Wis. Stat. § 452.01(3m) & (3s) definitions of client and customer. For written listing agreement, which may be given to any number of brokers, example, if a non-signing owner participates in negotiations with buyers, with the first broker to secure a buyer under the terms of the listing that non-signing owner is treated as a customer and must be given the agreement earning the commission.” In an open listing, the seller retains Broker Disclosure to Customers indicating that the owner is a customer. two or more brokers to act simultaneously in marketing the property, If the broker never has any direct dealings with a non-signing owner but the seller is obligated to pay a commission only to the broker who (e.g., an attorney handles all elements of the transaction for that party) produces a ready, willing and able buyer. If the seller personally sells the and never provides brokerage services to that party, then the broker has property without the assistance of any of the brokers, the seller owes no agency relationship with the non-signing owner and would have no no commission. agency disclosure obligation. To modify the WB-5 Commercial Listing Contract-Exclusive Right to If the listing contract is not signed by all of the owners, the cautious Sell to produce an open listing, the following items should be modified listing broker might disclose this fact to potential buyers, depending or deleted: 1) delete the word “exclusive” from the title and line 1 of upon the circumstances. If the seller-client is a spouse in the middle of a the Listing; 2) add a provision in the Additional Provisions section to contentious divorce and is feuding with the other uncooperative spouse the effect that “Broker's commission is not earned as described in the who is on title but who has not signed the listing contract, disclosure to Commission section on lines 56-59 unless the offer accepted, option the parties may be wise. granted or exchange agreement entered into by Seller is with a buyer procured by Broker;” and 3) delete the words “by Seller, or by any See the October 2007 Legal Update, “WB-1 Listing Contract — 2008 other person,” from item 5 in the Commission section (on lines 60-63) Revisions,” at www.wra.org/LU0710 for further discussion of listing beginning “A buyer is procured for the Property …” contract provisions and features. It may also be helpful to indicate in the title or in the Additional Provisions section that the listing is an “open listing.” The seller may also wish to delete the Extension of Listing (listing protection) section in an open listing situation. The broker should read through the contract to see if there are other changes that would be appropriate for the transaction.

Wisconsin REALTORS® Association Page 9 Legal Update, June 2014 P10 How does a broker use a WB-1 Residential Listing Contract to create an exclusive agency listing contract? Legal Hotline Questions and Wis. Admin. Code § REEB 16.02(2) defines an exclusive agency Answers – Listing a Property listing as “a written listing agreement containing all of the elements of an exclusive right to sell listing, except that the owner retains the RECR right to sell the property himself or herself without owing the listing The seller arrived at the end of the home inspection and disclosed broker a commission.” In an exclusive agency listing, the property is that he has had basement flooding three times in the past. This was listed with only one listing broker, but the seller retains the right to sell not disclosed on the RECR. The seller also remarked that he never the property on his own without owing any commission to the broker. installed any valuable flooring in the basement because he thought The exact characteristics of this relationship will depend upon how the it may happen again. The agent working with the buyer spoke with listing is drafted. the listing agent who was unaware of the basement flooding. The To modify the WB-1 Residential Listing Contract-Exclusive Right to listing agent spoke with the seller about this, and the seller was Sell to produce an exclusive agency listing, the following items should insistent there was no need to disclose this on the RECR. Isn't the be modified or deleted: 1) delete the phrase “right to sell” from the title seller required to disclose the past basement flooding? of the Listing and insert in its place the word “agency;” 2) on line 1, Pursuant to Wis. Stat. § 709.03, sellers are required to complete replace the word “the” with “an” and insert the word “agency” between the RECR according to their knowledge about defects. Line B. 1. of the the words “exclusive” and “right;” 3) add a provision under Additional RECR states: “In this form, ‘am aware’ means have notice or knowledge. Provisions to the effect that “Broker's commission is not earned In this form, ‘defect’ means a condition that would have a significant as described in the Commission section on lines 42-45 if the offer adverse effect on the value of the property; that would significantly accepted, option granted or exchange agreement entered into by Seller impair the health or safety of future occupants of the property; or that is with a buyer procured by Seller;” and 4) delete the words “by Seller,” if not repaired, removed or replaced would significantly shorten or from item 5 in the Commission section (on lines 46-49) beginning “A adversely affect the expected normal life of the premises.” The seller buyer is procured for the Property …” determines whether he will disclose the water in the basement incidents If only these modifications are made, the broker apparently remains on the RECR. He certainly should be encouraged to discuss this with an obliged to draft the offer and other necessary paperwork and provide attorney. The seller or the seller's attorney — not the agent — decides other brokerage services in the transaction. The only difference is that whether the seller discloses information on the RECR. the broker is providing these services for free because the seller found Some sellers believe they do not have to disclose an item that has the buyer. been fixed. There is no clear statement in the law as to how far back To avoid this outcome, the listing broker may wish to draft an exclusive events that have occurred might need to be disclosed, if the seller agency listing contract as before, but add that any buyers found by the should disclose what the seller did to repair them, or what qualifies as seller are exclusions, thus releasing the broker from the obligation to being repaired. The seller in this situation may believe that the flooding provide brokerage services for free. The buyer then could work with his in the basement need not be disclosed because it is not a current defect or her attorney or a buyer’s agent to draft the offer. because it has been repaired. Alternatively, the broker may wish to draft the listing to provide that he Different attorneys who may be consulted as to whether an item or she be paid a reduced commission instead of no commission if the needs to be disclosed on an RECR may provide differing legal opinions seller finds a buyer. This would be an exclusive right-to-sell variable rate to a seller. Some attorneys believe that sellers should provide a full listing contract. The listing broker would have to disclose the existence disclosure — what happened, what was done to repair the issues, and of this variable rate feature to all potential cooperating brokers as soon so on; other attorneys believe the seller should be very precise in what as practical, per Standard of Practice 3-4 in the REALTOR® Code of they disclose and assist the seller in drafting a minimal disclosure; Ethics. while other attorneys believe if the item is not a defect at the time of completing the report, then it is not a defect at all and disclosure is not How does a broker create a one-party listing for a vacant lot? required. Wis. Admin. Code § REEB 16.02(4) defines a one-party listing as “a The listing agent should not encourage or discourage a seller from written listing contract containing all of the elements of an exclusive making a specific disclosure. Arguably, if an agent tells the seller right to sell listing except that listing broker is entitled to a commission whether to disclose a defect or not or how to draft the explanation for only if the property is sold by the owner, by the broker, or by anyone else said disclosure, then the agent is providing legal advice to the seller. The to a specific party or parties identified in the written listing contract.” reason it could be deemed legal advice is because the RECR provides The WB-3 Vacant Land Listing Contract — Exclusive Right to Sell a definition of defect, and if the agent says not to disclose an issue should be modified to meet the intent of the seller and the listing broker on the form or that it does not require disclosure, then the agent is in the transaction. If the listing is to be a one-party as described in Wis. effectively providing a legal interpretation as to when the definition of Admin. Code § REEB 16.02(4) and thus limited to particular specified defect applies. buyers, the title of the listing contract should be modified to indicate If the seller chooses not to disclose an issue, or if the broker believes it is a “One-Party” or “Limited” Exclusive Right-to-Sell. A provision can the RECR is inaccurate or incomplete, the broker may have to disclose be inserted in the Additional Provisions lines to the effect that “the any items not properly reported on the RECR that are material adverse provisions of this contract apply only to the following purchaser(s): facts or information suggesting the possibility of material adverse facts. ___” and then the seller and broker can list the names of the potential Wis. Stat. § 452.133(1)(c) provides: “Broker's duties to all persons buyer(s) to whom the listing will apply. Other modifications can be in a transaction. A broker who is providing brokerage services to a made as needed. Consider whether listing protection is appropriate and person in a transaction owes all of the following duties to the person: determine if the commission provisions need to be altered.

Wisconsin REALTORS® Association Page 10 Legal Update, August 2014 P11 … (c) The duty to timely disclose in writing all material adverse facts Signatures for a seller trust that the broker knows and that the person does not know or cannot discover through reasonably vigilant observation, unless the disclosure Are all signatures required on the counter-offer for an offer to of a material adverse fact is prohibited by law.” Thus the duty to purchase if the home is in a trust and seven siblings are scattered disclose material adverse facts applies per Wis. Stat. § 452.133(1) throughout the country, or can the person with a power of attorney (c) to material adverse facts the party does not know about and cannot sign for all to guarantee binding acceptance? Or are all signatures discover through reasonably vigilant observation. A sample material only needed at closing? adverse fact (WRA-DMAF) disclosure letter is available in zipForm®. All required signatures are needed for all conveyances, including the This scenario also illustrates why a listing broker may wish to discuss offer (and any counter-offers or amendments thereto) and the deed with the seller whether it is wise to have the seller per Wis. Stat. § 706.02. If the home is held present during an inspection. by a trust, the trust documents designate the trustee(s) who are authorized to bind the trust The buyer may be encouraged to speak with legal to contracts and buy and sell real estate. There counsel if the seller is not open to negotiations due “The listing contract may be one trustee or there may be two or more to the newly discovered information. co-trustees. If all seven siblings are named as See Wis. Stat. § 452.133(2)(b) at www.legis. must be signed by co-trustees, it may be prudent to consider a state.wi.us/statutes/Stat0452.pdf and the someone agreeing to power of attorney. However, an attorney or the discussion on pages 9-12 of the October 2009 title insurance company should first review the Legal Update, “Diligent Disclosure,” at www.wra. pay a commission. The trust instrument and applicable law to make org/LU0910 and Legal Update 02.07, “Duty to sure that the trustees have the legal ability to Disclose,” at www.wra.org/LU0207. law does not require grant a power of attorney in this situation. Estates and personal that all the owners sign See pages 7-8 of the June 2007 Legal Update, “Ownership and Title Pointers for Brokers,” at representative's deed a listing contract in www.wra.org/LU0706. A property is being sold by a personal representative. The accepted offer states that order for the contract Divorced spouses as sellers a warranty deed will be provided. The buyer to be enforceable When listing a home with two sellers who just received an amendment asking to change are divorced, but both names still are on the the deed from a warranty deed to a personal against the owner who title, when does the spouse who is not present representative's deed. Should the buyer accept have to sign documents? On the listing or reject the amendment? The broker could not does sign.” contract and Real Estate Condition Report, find reference in real estate textbooks to this only the wife has signed. Also on the current type of deed. Is this type of deed the proper accepted offer to purchase, only the wife has instrument to transfer the property, and does it signed. When, and what documents is the provide the buyer with the same or adequate warranty or covenants former husband required to sign? that the warranty deed would? The listing contract must be signed by someone agreeing to pay a Pursuant to the offer to purchase, the seller has agreed to transfer commission. The law does not require that all the owners sign a listing the property by warranty deed. If the parties choose, they may amend contract in order for the listing contract to be enforceable against the the offer to provide that the seller may convey the property by a owner who does sign. Therefore, technically a husband signing a listing personal representative's deed. The State Bar Form SB-5 is a Personal can be liable for commission to a broker who successfully procures a Representative's Deed, and the broker may find a copy of the SB-5 buyer even if the wife is also on title. In the real world though, a listing in zipForm®. It is not the role of the real estate licensee to give a contract without the signature of all owners is a disaster waiting to buyer legal advice regarding the type of deed used in the transaction. happen. Prior to accepting a listing signed by fewer than all sellers, The broker should recommend that the buyers and sellers have their counsel should be obtained regarding the myriad potential problems attorneys review the contract and advise them regarding what type of including disclosure duties owed to prospective purchasers, homestead deed is appropriate. law, or marital property law,. Generally personal representatives will convey real estate with a Unlike the listing contract, all owners on title must sign the offer to personal representative's deed, which is similar to a quitclaim deed purchase to create a valid real estate conveyance, per Wis. Stat. § and does not warrant title. When listing property with trustees, personal 706.02. The agent may suggest that the parties review the offer and representatives or other persons who do not provide a warranty deed, speak to legal counsel regarding their legal rights and obligations. There care should be taken to identify how property will be conveyed. The are multiple ways to address the issue. One possibility may be to have listing agent should advise cooperating agents if a warranty deed will the husband convey his interest to the wife, thereby allowing her to not be given, and assure that any offer to purchase correctly identifies perform on the contract with the buyer. Alternately, the husband could, the intended type of conveyance before the offer is signed by the seller- but would not be required to, attend closing and convey the property. client. There also may be court orders from the divorce that dictate how the See pages 8-9 of Legal Update 03.09, “Warranties in the Offer sellers should proceed. to Purchase,” at www.wra.org/LU0309 for discussion of personal See “Best of the Legal Hotline — Contract Laws: Who Signs What?” in representative’s deeds. the February 2004 edition of Wisconsin Real Estate Magazine at www. wra.org/WREM/Feb04/Hotline and pages 4-7 of the June 2007 Legal

Wisconsin REALTORS® Association Page 11 Legal Update, August 2014 P12 Update, “Ownership and Title Pointers for Brokers,” at www.wra.org/ disclose the presence of known LBP; 2) provide buyers and tenants LU0706. with any available records or reports about any LBP present in the housing; and 3) provide buyers and tenants with a federally approved CLUE reports lead hazard information pamphlet. Offers to purchase and leases must The broker represents the seller on an accepted offer with all contain certain disclosures and acknowledgments. Sellers must also contingencies satisfied. The buyer is now in the process of obtaining provide buyers with an opportunity to inspect for LBP. homeowner’s insurance. The buyer was notified that the cost of his The federal LBP disclosure rules provide that each agent shall homeowner’s insurance will be higher due to an outstanding claim ensure compliance with all rule requirements. As stated on the WRA submitted by the seller. Is this something that is required to be Addendum S for LBP Disclosures and Acknowledgements, “agent” is disclosed by the seller or the broker? Is it legal for the price of a new defined as any party who enters into a contract with a seller for the homeowner’s insurance to be impacted by the actions and insurance purpose of selling target housing. This includes persons who enter into claims of the previous owner? If so, how long is that history looked a contract with a representative of the seller, and excludes buyers and at? The seller has a claim with the insurance company regarding the buyer representatives who receive all compensation from the buyer. This basement plumbing and snaking to the street. means all listing, selling, cooperative and buyer's agents (unless paid Comprehensive Loss Underwriting Exchange (CLUE) is a loss history only by the buyer) must abide by the federal LBP rules. The HUD and information database developed by and used by insurance companies EPA commentary to the final LBP disclosure rules indicates that agents to share information about insurance claims, reported losses and must inform sellers of their obligations, and make sure that the required damage, and even insurance policy inquiries with respect to properties activities are completed either by the seller or by the agent personally. and individuals. The CLUE Home Sellers’ Disclosure Report provides a five-year history of claims and losses associated with an individual and his or her home. The date of loss, loss type and amount paid along with general information such as the policy number, claim number and insurance company name are provided for each identified loss. The report also lists all companies that have inquired about the person’s loss history in the last two years. Some sellers may not remember the details of property damage events, such as water intrusions, so having the seller order his or her CLUE report serves as a back-up measure to double check that nothing is missed. Real estate agents and prospective buyers cannot order or obtain CLUE reports. Should a prospective purchaser want a CLUE report for a property, he or she should make it a condition of his or her offer that the seller request and provide such a report. Sellers may request a copy of their CLUE report at www.choicetrust. com. For more information on CLUE reports and insurance issues, see Legal Update 03.04, “Addressing Transactional Property Insurance The penalties for noncompliance with the LBP law are federal Issues in Wisconsin,” at www.wra.org/LU0304. Other resources include ($11,000 fee per violation, triple damages plus attorney fees in private the Consumer’s Guide to Homeowners Insurance at www.oci.wi.gov/ enforcement actions and potential jail time) and apply not only to the pub_list/pi-015.htm and the National Association of REALTORS® Field seller, but also to the real estate agents. Guide to Homeowner’s Insurance at www.realtor.org/field-guides/field- guide-to-homeowners-insurance. See Legal Update 99.08, “Addendum O, Addendum S, & LBP Issues,” at www.wra.org/LU9908, Legal Update 96.07, “Lead-Based Paint LBP disclosures Disclosure Implementation,” at www.wra.org/LU9607, and Legal Update An agent listed a pre-1978 target property and obtained a signed 96.04, “Lead-Based Paint Disclosures,” at www.wra.org/LU9604, LBP disclosure (Addendum S) from the seller. The buyer's agent for further discussion of the federal LBP disclosure law and the WRA wrote an offer on this property and did not include the Addendum S Addendum S. with the offer. The offer was presented to the seller, countered twice and amended twice after acceptance. No one caught the missing LBP Protected buyers addendum, and the transaction closed. The buyer’s agent was paid by The listing expired on January 29, and on February 7, the previous the seller. The buyer started painting and was told by city officials that listing broker delivered a list of protected buyers to the seller. The the buyer must be lead-certified. The estimate for certified personnel list refers the broker who showed the property without specifying the to paint the house is $6,200. The buyer is asking compensation from name of the buyer — it just has the broker's name. This seems to be both agents and has offered to split the bill three ways. The listing happening more often. Some listing agents are not taking time to agent is willing to pay one-third, however, the buyer's agent refuses even call cooperating agents to ask for the prospects' names, and to pay a penny. How to proceed? they instead simply copy the showing history and paste it into a list and then expect the seller and the second listing broker to believe Both agents may find it prudent to contact their errors and omissions that somewhere between 95 percent and 100 percent of the parties insurance provider. who viewed the property requested anonymity. Did this broker miss The federal LBP disclosure rules specifically require that sellers his time limit for delivery of the list of protected buyers to the seller? and of most residential housing built before 1978 must: 1) He have listed the actual names of the buyers, correct? The Extension of Listing section (lines 61- Watch the Legal Update Video Online: EDITORIAL STAFF 65 of the WB-1 Residential Listing Contract) Author coupled with the definition of a protected Debbi Conrad buyer (lines 220-229 of the WB-1) describes the listing protection process. Buyers may be Production protected for listing protection in one of four Lauren Bizorik Hubbard ways. If, during the term of the listing, (1) the buyer submitted a written offer to purchase or Association Management (2) negotiated directly with the seller, the listing Chairman protection is automatic and the first listing Steve Lane broker would not have been required to perform any additional steps to protect the buyer for the President & CEO override period. If, during the term of the listing, Michael Theo, CAE (3) the buyer attended an individual showing or (4) “negotiated” with a broker, the buyer will Contact information be protected only if the listing broker delivered Wisconsin REALTORS® Association the buyer's name to the seller no later than 4801 Forest Run Road, Suite 201 three days after the expiration of the first listing Madison, WI 53704 contract. “Negotiated,” for these purposes, 608-241-2047 means that the buyer discussed the potential 800-279-1972 terms upon which the buyer might acquire an interest in the property. Legal Hotline By delivering the list of protected buyers nine days after the listing contract expired, the Ph: 608-242-2296 Fax: 608-242-2279 previous listing broker missed the notification Web: www.wra.org date so there is no listing protection for buyers who attended showings or negotiated with a The information contained herein is believed accurate broker. as of September 15, 2014. The information is of a general nature and should not be considered A selling agent could not legally provide the by any member or subscriber as advice on a name of the buyer if the buyer has indicated particular fact situation. Members should contact his name is confidential information on the the WRA Legal Hotline with specific questions or for current developments. broker disclosure form or in some other manner, Reproduction, use or inclusion of this material in other preferably in writing. If a buyer has requested publications, products, services or websites is not that his or her identity remain confidential, permitted without prior written permission from the delivery of a notice identifying the broker with WRA or its Legal Department. whom the buyer negotiated and the date(s) of any showings or other negotiations can fulfill the Subscribe “delivery of the buyer's name” requirement per This Legal Update and other Updates beginning with 94.01 are available to members in the lines 226-229 of the WB-1. If the listing agent legal section of www.wra.org. provided the cooperating agent's or broker's name and other identifying information with A Legal Update subscription is included with regard to the showing, then listing protection member dues. Members are alerted via e-mail may have been established if this was done when a new issue is available online. because that buyer requested confidentiality. The non-member subscription rate for the If this information was provided for some other Legal Update is $75. A subscription includes reason, then the establishment of listing 12 monthly issues. protection would be unlikely. Contact the Wisconsin REALTORS® Association to subscribe: See pages 5-6 and 8-9 of the October 2007 4801 Forest Run Road, Legal Update, “WB-1 Listing Contract — 2008 Madison, WI 53704-7337 Revisions,” at www.wra.org/LU0710 and pages 8-10 of the February 2004 Legal Update, 608-241-2047 “Listing Procedures for the Prudent Broker,” at 800-279-1972 www.wra.org www.wra.org/LU0402.

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