In an effort to dispel real estate untruths, we have instituted a series of periodic articles written throughout the year exposing the truth of real estate practices that many believe are true but are not; also known as “urban legends.”

While the exact origin of these untruths is unclear, hopefully this new series of articles will demystify the matter and stop the perpetuation of the myths. Each article will focus on a specific realm of the transaction or practice of real estate.

Today, we highlight protected buyers.

Let’s first begin with a basic overview of protected buyers.

Who are protected buyers? They are buyers, who, during the term of the listing: (1) submitted a written offer to purchase the protected property; (2) negotiated directly with the seller; (3) attended an individual showing; or (4) “negotiated” with a broker.

Buyers who fall under categories (1) and (2) are automatic and the listing broker would not be required to perform any additional steps to protect the buyer. Buyers who fall under categories (3) and (4) will be protected only if the listing broker delivered the buyer’s name to the seller no later than three days after the expiration of the listing contract.  “Negotiated” for these purposes means that the buyer discussed the potential terms upon which the buyer might acquire an interest in the property.

Timeframe basics: 1) buyers are protected for one year; 2) the broker’s list must be filed with the seller no later than three days of expiration of the listing; and 3) the seller’s list must be provided to the new broker within seven days of the date of the new listing contract.

URBAN LEGEND #1: Protected buyers protect the cooperating broker’s commission.

THE TRUTH: The parties to a listing contract are the listing broker and seller. The listing contract includes the protected buyer language and therefore protects the listing broker’s commission. If after the expiration of the listing contract a protected buyer purchases the property within one year of the expiration or termination of the listing contract, then the listing broker’s commission is protected, not the cooperating broker’s.

URBAN LEGEND #2: If the seller does not provide the list of protected buyers to the new listing broker, the buyers are not protected.

THE TRUTH: If the buyers were properly protected, either automatically or by delivering the broker’s list to the seller within the three days, the buyers are still protected regardless of whether the seller provides a list of protected buyers to the new listing broker. Additionally, nothing prevents the previous listing broker from providing another copy of the list copy to the new listing broker.

URBAN LEGEND #3: The new listing broker should contest the previous listing broker’s protected buyer list.

THE TRUTH: Since the listing contract was between the seller and previous listing broker, it is the seller’s responsibility to contest the list of protected buyers. The new listing broker should refrain from making any comment to the seller about their previous contract and should tell the seller to discuss the issue with the previous listing broker and the seller’s attorney. A licensee who gives a seller legal advice about another broker’s contractual rights may be accused of violating Wis. Admin. Code § RL 24.06(1) and Code of Ethics Article 13.

URBAN LEGEND #4: Only buyers shown the property by the listing company can be placed on the protected buyer list.

THE TRUTH: The listing broker may include on the list of protected buyers any buyer that attended an individual showing, including those shown the property by agents from other companies.

URBAN LEGEND #5: Cooperating agents who showed the property are required to provide the listing agent with the buyer’s names.

THE TRUTH: Although Wisconsin’s licensing laws do not specifically address this type of policy, the Code of Ethics in Standard of Practice 3-5 states that subagents must provide listing agents with all pertinent facts relating to the transaction. Because the name of a prospective buyer is arguably a pertinent fact, a subagent should provide this name if requested by the listing agent. If the buyer wished to be confidential, then identifying the broker with whom the buyer negotiated and the date(s) of any showings or other negotiations would fulfill the delivery of the buyer’s name requirement.

URBAN LEGEND #6: Protected buyers include open house attendees.

THE TRUTH: The listing contract definition of protected buyers does not include open house attendees. The sole act of attending an open house would not rise to the level of negotiation as defined in the listing contact. However, the listing contract may be modified to include open house attendees as protected buyers.

 Cori Lamont is Director of Brokerage Regulation and Licensing for the WRA.