During this past legislative session, the WRA has worked to pass
legislation that improves real estate practice. One of those bills,
SB 870/AB 918, addresses real estate practice changes, including
creating a safe harbor for licensees when using government
information if attribution to the source is provided, requiring
specific disclosures to consumers in contracts when contractual
rights are being assigned to another, and raising the fines and
forfeitures that the Real Estate Examining Board (REEB) may assess
from $1,000 to $5,000 for violations of license law. On March 22,
2024, Gov. Tony Evers signed SB 870/AB 918, now 2023 Wisconsin
Act 208. As the Schoolhouse Rock song put it, SB 870/AB 918 is no
longer “just a bill,” and is now Wisconsin law.
Increased fines
A licensee did not inspect the property before listing it. As a
result, the listing did not have accurate information. What are
the potential penalties for failing to inspect the property and
including inaccurate information on a listing?
The Real Estate Examining Board (REEB) found that the licensee
violated Wis. Admin. Code § REEB 24.07(1)(a) by failing to conduct
a reasonably competent and diligent inspection of the property.
Additionally, the board found that the licensee violated Wis. Stat.
§ 452.133(1)(b) by failing to provide brokerage services with
reasonable skill and care.
The licensee’s license was suspended for 30 days, and the
licensee was fined $1,000. Additionally, the licensee was
required to provide a statement to the REEB describing how the
licensee will comply with the duty to inspect, provide quarterly
reports to the Department of Safety and Professional Services
(DSPS) of each new listing for two years, and provide copies of
the pre-listing inspection report for listings selected at random by
the REEB.
As shown in this case, under the previous law, the REEB could
only assess a fine or forfeiture up to $1,000 for the most severe
violations of license law. 2023 Wisconsin Act 208 now allows the
REEB to assess fines or forfeitures up to $5,000 for violations of
Wis. Stat. Chapter 452.
Information attributable to the government
The property has a finished room that was recently added to the property. The room is not connected to the main heating and cooling system used by the rest of the house, and the room only has a fireplace. Can this room be counted as finished square footage?
Although potentially frustrating, there are different methods by
which square footage may be determined. There is not a single
standardized method to determine or measure a home for square
footage. Likewise, there is not a single statutory way to define
whether a space is finished, unfinished or a livable space.
It’s important to consider who is calculating the square footage
and for what purpose. For example, Wisconsin assessors have
standardized regulations that tell them how to count square
footage. Appraisers have their own standards for how and when
to address space. Local ordinances may also regulate what is
considered square footage. An insurance provider, however, may
include the total square footage, finished and unfinished, when
creating and pricing an insurance policy for the structure.
Therefore, the agent may suggest the seller consult with legal
counsel, the local assessor’s office or the building department of
the municipality to see if there are any applicable standards.
The important thing for an agent to remember is that advertising
cannot be false, deceptive or misleading, so whatever figures an agent
uses must not misrepresent the property, and an agent should always
attribute measurements to their source, such as “per seller” or “per
assessor.”
A Wisconsin licensee can be found liable to a buyer for inaccurate
statements made by the licensee that appear to the buyer to
have been made from the licensee’s own personal knowledge.
In Wisconsin, the law provides that an inexperienced buyer
should be entitled to rely on the factual statements made by a
professional. Accordingly, when a licensee receives data from
the seller, the city treasurer’s office or another third party and
restates the information in the MLS or in other advertising as if it
were fact, the licensee may be responsible for the accuracy of the
information.
As such, REALTORS® are recommended to specifically attribute
data used in advertisements, such as acreage, square footage
and assessed values, to its source and/or use general disclaimers.
Disclaimers may not, however, provide certain and absolute
protection in all cases.
2023 Wisconsin Act 208 removes liability from the licensee when
the licensee uses government information attributed to the source if
that information is subsequently determined to be inaccurate. In this
example, if the licensee relied on the assessor record to indicate the
home’s square footage but the assessor record is later discovered
to be inaccurate, the licensee would not be held responsible for
presenting incorrect information obtained from a government
source.
Disclosures by wholesalers
An investor has an accepted offer on a property. The investor
wants to sell and assign the offer to a new buyer. Is this
process considered wholesaling?
Wholesaling is a strategy often used by investors in which the
investor, also known as the wholesaler, enters into a purchase
agreement with a seller. The wholesaler then finds a buyer for the
property and assigns the wholesaler’s contractual rights to that
buyer for the seller’s property. The wholesaler makes a profit by
selling the contract to the buyer for a price higher than the price in
the purchase agreement with the seller.
The new law requires wholesalers to provide a written disclosure
explicitly stating their wholesaler status to both the seller and the
buyer at the time of entering the agreement. The wholesaler would
also need to notify the buyer in writing that the wholesaler holds
an equitable interest in the property as a buyer under a purchase
agreement and that the wholesaler is conveying to the buyer an
interest in the purchase agreement, not title to the property.
Payment to licensees
A firm has a listing. The listing agent earned the commission
but passed away unexpectedly before closing. The firm
understands the listing contract is owned by the firm, but the
firm would like to pay the listing agent’s commission to the
listing agent’s estate. Is this allowed?
Under previous law, REEB policy stipulated that an individual
must still be licensed when the agreement to receive commission or
referral fees is made as well as when the money is paid. As such,
the firm could not pay the agent’s estate the commission owed
because the deceased agent was no longer licensed at the time of
payment.
2023 Wisconsin Act 208 clarifies that the payment of commission or
referral fees can be made if the individual was licensed at the time
the commission was earned or the referral fee arrangement was
made. Under the new law, the firm is able to pay the commission
earned by the agent to the agent’s estate because the agent was
licensed at the time the commission was earned.
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