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Legal Update ______ September 2005 Please Route to: __ ___________ __ ___________ __ ___________ Legal Update __ ___________ __ ___________ A WRA Publication Exclusively for the Designated REALTOR® __ ___________ __ ___________ Inside This Issue Buyer Agency Practice In this high-tech world of the 21st cen- ices to the seller as a client. The buyer tury, buyers are Internet-savvy and are agency agreement specifies the extent of 3 likely to come into a REALTOR®’s the buyer’s broker’s authority to act on office with a packet of printouts for behalf of the buyer/client and the per- Daily Buyer Practice properties that interest them. These new formance required to earn the broker’s Issues world buyers have been reading about compensation. No real estate licensee real estate and finance and want to work may provide client services to a buyer with a buyer’s agent who is responsive to unless they are working under a buyer 7 their needs. contract. Buyer’s Broker’s While it is important to look out for the The WB-36 Buyer Agency/Tenant Compensation interests of a buyer/client and optimize Representation Agreement, the DRL- their purchasing opportunities and the approved buyer agency contract that value that they receive, buyer’s agents must be used by Wisconsin licensees, 8 must not lose sight of the fact that the gives the buyer’s broker the authority to Collecting the Buyer’s ultimate goal is to assist the buyer in pur- act as an exclusive buyer’s agent, but Broker’s Fees chasing the property he or she wants, does not provide the authority for an not to go to war with the listing broker exclusive right to locate and negotiate. or the seller. While assertive negotiation The form is flexible, however, and may 12 strategies at times may be useful, overly be tailored to provide the desired agency Buyer Agency and aggressive tactics may lose the deal for authorization and to create consistency the buyer. with the desired business practice model. Procuring Cause This Legal Update examines the WB-36 Exclusive Buyer’s Agent Buyer Agency/Tenant Representation In line 1 of the WB-36, the buyer 14 Agreement and the authorization it pro- authorizes the broker to work as his or vides to act as a buyer’s agent. It also Conclusion her exclusive buyer’s agent to locate and reviews buyer agency practice issues and negotiate the procurement of an interest rules, buyer agency compensation and in property. No one else can be a buyer’s procuring cause, and buyer agency ques- agent for the buyer, but the language tions and answers from the Legal does not prohibit the buyer from per- Hotline. sonally working with sellers, seller’s Authorization to Act as agents, and attorneys as the buyer seeks a Buyer’s Agent and acquires the desired property. In other words, the WB-36 buyer agency The buyer agency agreement is the agreement is like an exclusive agency agency contract that authorizes the bro- agreement in the sense that the buyer ker to provide brokerage services to the does not have to work only with the buyer as a client. In general terms it is buyer’s agent and, in fact, can work on WISCONSIN the counterpart of the listing contract REALTORS® his or her own or with others to locate ASSOCIATION © 2005 that the seller executes to authorize the and negotiate for property. listing broker to provide brokerage serv- Lines 26-29 of the WB-36 caution the 16.05(3), a real estate broker is only Contacts buyer that: authorized to complete legal contracts on behalf of a party if the form completion is BUYER MAY WORK WITH OWNER incidental to the broker’s legitimate real OR AGENTS OF OWNER IN LOCAT- EDITORIAL STAFF estate practice. A licensee cannot just ING AND NEGOTIATING AN Author “play attorney” without providing other INTEREST IN PROPERTY. HOWEV- Debbi Conrad brokerage services such as inspecting the ER, BUYER MAY BE RESPONSIBLE property, making property condition dis- FOR BROKER'S FULL COMPENSA- Production closures and negotiating the offer. Terry O’Connor TION IF BUYER’S CONTACTS WITH OWNER OR OWNER’S Tracy Rucka Location Services Only AGENTS RESULT IN NO COMPEN- Rick Staff If the buyer only needs a buyer’s agent to SATION BEING RECEIVED BY BRO- locate a commercial property and the KER FROM OWNER OR OWNER’S ASSOCIATION buyer or the buyer’s attorney will conduct AGENT. MANAGEMENT the negotiations and draft the contracts, Chairman The upshot is that the buyer’s ability to the buyer’s agent may line out “and nego- Kitty Jedwabny, CRB, CRS work with others comes with a price: the tiate the procurement of” in lines 1-2. buyer may have to pay a higher purchase President price or additional broker compensation if Exclusive Right-to-Locate-and- William E. Malkasian, CAE the buyer works with an agent of the sell- Negotiate er. It is very important that the buyer fully The WB-36 does not create an exclusive ADDRESS/PHONE appreciate this fact. right-to-locate-and-negotiate agency rela- The Wisconsin tionship, which would be the counterpart REALTORS® Association Agency Authorization of an exclusive right-to-sell listing con- 4801 Forest Run Road Modifications tract. An exclusive right-to-locate-and- Suite 201 The parties to the WB-36 may modify the negotiate buyer agency relationship Madison, WI 53704-7337 extent of the broker’s authorization and would require a buyer’s agent to essential- ly be available 24 hours a day to assist the (608) 241-2047 the range of the broker’s services to fit the buyer. The buyer’s agent would have to (800) 279-1972 circumstances and the needs of the buyer/client. This flexibility enables a be the buyer’s constant companion, scouring the market for suitable proper- LEGAL HOTLINE: broker to offer different business models ties, available at the drop of a hat to write Ph: (608) 242-2296 and different levels of services to buyers. This is an important capability when an offer if the buyer falls in love with a hot Fax: (608) 242-2279 property at an open house. Buyers would Web: www.wra.org working with computer-savvy buyers who may not need the full range of services. even be unable to ask their attorneys to They may have completed some of the write the offer for them because the The information contained herein is traditional tasks on their own, most likely buyer’s broker would have the exclusive believed accurate as of 09/15/05 The right to negotiate on behalf of the buyers. information is of a general nature online. and should not be considered by any If a REALTOR® wants to offer this busi- member or subscriber as advice on a Negotiation Services ness model to consumers, the REAL- particular fact situation. Members should contact the WRA Legal If the buyer spots a property on the TOR® may modify the WB-36 and estab- Hotline with specific questions or for Internet, has taken a virtual tour, and only lish a true “exclusive right-to-locate-and- current developments. wants the buyer’s agent to help negotiate negotiate” buyer agency agreement by Reproduction of this material may be and implement a contract, the phrase “to striking the words “act as buyer’s agent” done without further permission if it locate an interest in property and” may be on line 1 of the WB-36 (creating a provi- is reproduced in its entirety. Partial crossed out on lines 1-2 of the WB-36. sion that says, “Buyer gives Broker the reproduction may be done with writ- This sort of modification must be done ten permission of the Wisconsin exclusive right to locate and negotiate the REALTORS® Association Legal very carefully because a licensee cannot procurement of an interest in real Department. lawfully be put in the position of just step- estate”), or by adding language to that ping in to draw up the papers and do the effect in an addendum. closing. Under Wis. Admin. Code § RL WISCONSIN REALTORS® ASSOCIATION © 2005 2 Legal Update, September 2005 Property Description a consent to multiple representation, Daily Buyer Practice waiver of confidentiality, and blank lines The buyer’s broker’s authorization to Issues locate property for the buyer begs the for listing confidential and non-confi- Much confusion often surrounds buyer question: what property? That question dential information. The explanation of agency practice. Misunderstood issues is answered on lines 3-10 of the WB-36 multiple representation makes it clear include the disclosure of buyer agency with the buyer’s designation of his or that a broker in a multiple representa- status to others, the ability of other her target as far as general property tion situation has been authorized by agents to approach and work with buy- types, types of property interest, price each party in the transaction to provide ers under a buyer agency agreement, range and other property characteristics client services to each party, and is not and concerns relating to the buyer’s and transaction terms such as property allowed to place the interests of either broker’s performance. size, location, seller financing availability party ahead of the other in negotiations. and schools. These descriptive items In other words, the range of services delineate the parameters that the buyer’s provided to each party is limited. Disclosure of Buyer Agency agent should search when attempting to An area where the rules are often not locate a property, but do not restrict the Legal Hotline Questions & followed involves the disclosure of buyer type of property that the buyer may pur- Answers – Buyer Agency agency status to listing agents and sell- ers.
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