Am I procuring cause?

The agent who is procuring cause has caused a successful real estate transaction to come about. A procuring cause analysis determines whether a cooperating broker is entitled to the compensation offered by the listing broker in the MLS. This analysis examines all of the facts and circumstances and the events occurring during the term of the listing contract, focusing on the time frame beginning with the buyer's introduction to the property and ending with an accepted offer to purchase. You are not automatically procuring cause just because you first showed the property, wrote the offer, or because you are a buyer's agent.

To read more about procuring cause, see Legal Update 02.04 and the Legal Hottips for Commissions/Procuring Cause.

When the home inspection shows that there are defects, should the buyer give the seller a notice or an amendment?

If the buyer is in a "fix it or no deal" mode, this ultimatum must be given to the seller on a WB-41 notice form. As the offer language cautions, "A proposed amendment will not satisfy this notice requirement." The notice of defects lists the defects to which the buyer objects and must be accompanied by a copy of the inspection report.

On the other hand, a buyer in an amendment merely proposes that the seller consider revising the offer to address certain defects found during the inspection. If the buyer wants to have a credit against the purchase price or wants the seller to use a specific contractor or method for repairs instead of the "good and workmanlike manner" standard stated in the inspection contingency, the buyer proposes an amendment to see if the seller will agree. The seller may accept or reject the buyer's request. If a notice of defects is not given and an amendment is not accepted by the specified deadline, the buyer will have accepted the property in its present condition.

To read more about using notices and amendments with the home inspection contingency, see Legal Update 99.10, the August 2003 edition of the Wisconsin REALTOR^® and the Legal Hottips for Offer to Purchase/Inspection Contingency.

Can a broker disburse earnest money at the request of one party or a party's attorney?

A broker may disburse earnest money only with proper authority, as outlined in the offer to purchase and in Wis. Admin. Code § RL 18.09. For example, a broker may disburse earnest money if there is a cancellation agreement and a mutual release signed by a ll of the parties. The request of one party or the party's attorney is not enough.

To read more about earnest money disbursements, see Legal Update 00.10, § RL 18.09 in the Code Book, and the Legal Hottips for Trust Accounts/Earnest Money.

Can a buyer or seller counter an expired or rejected offer?

A counter-offer may be used if the prior offer or counter-offer has expired or was rejected. A party who writes a counter-offer and does not have it accepted may write a new counter-offer. Each counter-offer is a new offer that incorporates the unchanged terms of the original offer and the new terms in the counter-offer. A counter-offer acts as a rejection of the prior offer or counter-offer.

To read more about counter-offers, seeLegal Update 01.11 and the Legal Hottips for Offer to Purchase/Counter-offers.

Is it mortgage fraud?

Mortgage fraud occurs anytime a participant in a real estate transaction misrepresents facts with the intent to defraud or mislead another participant. Often the secondary lending market is the defrauded party — they are left with mortgages that falsely portray the borrower's equity and financial capabilities, making the overextended borrower more likely to end up in foreclosure. Fraud may occur when there are two sets of offers drafted, one representing the "real deal" and the other a fraudulent transaction, or when the parties have inflated the sales price by using a "forgivable" second mortgage or phony work orders or credits.

Real estate licensees are not responsible to investigate and conclusively determine whether there is mortgage fraud in a transaction, but they must not risk their licenses by participating in mortgage fraud and should attempt to protect the parties by referring them to their attorneys.

To read more about mortgage fraud, see the WRA Mortgage Fraud Resource Page, Legal Update 02.12 and the Legal Hottips for Mortgage Banking & Finance/Fraud.

Which repairs does the seller have to disclose on the RECR?

The seller's disclosure responsibility on the Real Estate Condition Report (RECR) is to disclose defects: conditions that would have a significant adverse effect on the value of the property, significantly impair the health or safety of future occupants of the property, or if not repaired, removed or replaced, would significantly shorten or adversely affect the expected normal life of the premises. Whether the seller discloses information about a repaired property condition is decided by the seller or the seller's attorney, not the agent. While a seller may believe that an item that has been repaired is no longer a defect, the buyer's attorney may argue in court that all past and present defects should be revealed. Thus, sellers may benefit from more liability protection in the long run by disclosing corrected defects or by explaining the corrective measures taken in the RECR.

If a seller fails to disclose a defect, the licensee must promptly disclose it in writing if it constitutes a material adverse fact.

To read more about the RECR, see the WRA Resource Page for Disclosure, Legal Update 02.07 and the Legal Hottips for Disclosure/Real Estate Condition Report.

When should a licensee disclose a material adverse fact?

Licensees are required to promptly disclose all material adverse facts to all parties in the transaction. When a licensee is aware of facts, which are materially inconsistent with, or materially contradictory to the seller's statements, the licensee must promptly disclose this in writing to the parties. See §RL 24.07(6). A material adverse fact is information about a property condition that (1) has a significant adverse affect on the value of the property, (2) significantly reduces the structural integrity of the property, (3) presents a significant health risk to the occupants of the property, or (4) information that indicates that a party to the transaction is not able to or does not intend to meet their obligations under the contract.

A sample material adverse fact disclosure letter is available in Legal Update 02.12. Also see Legal Update 02.07 and the Legal Hottips for Disclosure/Material Adverse Facts.

Can a real estate licensee receive a commission when buying property?

A real estate licensee earns a commission by providing real estate brokerage services as an agent for another person. In an agency relationship, there must be a separate agent and a separate principal. A licensee who is a buyer is the principal in a transaction, not an agent for the principal, therefore a commission is not earned. However, a licensee acting as a buyer may negotiate a buyer's incentive to be paid by the listing broker or the seller.

To read more about personal purchases, see the March 2004 Wisconsin Real Estate Magazine and the Legal Hottips for Agency/Licence Principal.

When is a buyer eligible for listing protection?

According to the provisions in the listing contract, there are multiple ways for a buyer to be protected. Buyers are automatically protected if they have submitted a written offer to purchase or negotiated directly with the seller. If the buyer attended an individual showing or negotiated with a broker during the term of the listing, the buyer's name must be submitted to the seller within three days of the listing expiration. As defined in the listing, a buyer has negotiated if he or she discusses the potential terms for acquiring an interest in the property.

To read more about listing protection, see Legal Update 04.02 and the Legal Hottips for Listing Contracts/Listing Protection.

How does an agent leave a company and open an independent office?

The agent should review his or her independent contractor agreement with the current broker to determine the procedure for terminating the relationship with the present broker and how any compensation that becomes due after termination will be paid. The agent must also notify the DRL regarding his or her termination with the current company.

Ideally, the agent should create a business plan addressing issues such as choice of entity, business name, business entity licensing, business loans/lines of credit, office location, office equipment and supplies, support staff, licensed agents, errors and omissions insurance, office policy manual, independent contractor agreements, trust accounts, accounting/bookkeeping, advertising, telephones, computers, Internet access, REALTOR^® and MLS memberships, signs, real estate forms, business cards, income and payroll taxes, legal counsel, franchises, etc.

DRL transfer or termination of employment and business entity license application forms are available online at http://drl.wi.gov or by calling 608-266-5511.

  Editor’s note: The DRL became the DSPS in 2011. Information above may not be current.