Meeting with a seller about listing property can be like a first date. Do you and the seller both want to commit to the listing? Asking good questions and doing your homework will lead to a more successful relationship if you and the seller choose to enter into the listing.

Getting to know each other

What can the REALTOR^® do to prepare for the listing presentation?

In advance of the listing, it is valuable to request a search and hold from the title company. This will give a helpful snapshot of the basic facts about the property. For example, the person calling for the listing may or may not be the title holder. By using a search and hold, the broker can identify in advance how many owners are on title or if there is an entity, a trust or life estate interest created on title. If the appointment is not with the title holder or all of them, the broker can discuss whether all parties are prepared or have authority to sell. 

At the listing presentation, the listing broker may ask the seller to complete the WRA Listing Questionnaire Regarding Title Issues. The questionnaire is designed to identify early in the relationship different title issues that could have an impact on closing. Coupled with the search and hold, the questionnaire can help avoid surprises such as liens and multiple mortgages just before closing. While doing a search and hold and using the questionnaire are not required, taking these steps will help the broker develop a better understanding up front and try to head off disaster down the line.

Ready to sell? 

A broker is on his way to a listing and knows the property was listed before but was not sold. Rumor is the seller has financial issues. How can the broker take the listing and help the seller sell the property?

If there is a potential short sale, the search and hold helps the broker remind the seller of forgotten liens or determine if the seller is concealing relevant information. Having this information from the beginning gives the seller more time to obtain the funds necessary to satisfy the liens and mortgages and have a successful closing. The broker may take advantage of time at the listing presentation to talk to the seller about the Provision of Merchantable Title subsection of the residential offer. The offer terms indicate the title commitment delivered to the buyer must show merchantable title “subject only to liens which will be paid out of the proceeds of closing and standard title insurance requirements and exceptions, as appropriate.” Thus, if at the time of the listing presentation, the seller has liens and the seller will not be able to pay them at or before closing, the seller may not be in a position to enter into a listing or may do so knowing the transaction may be a short sale. The broker may then use the WRA Addendum SSL to educate and inform the seller of potential options. More information about title issues is available in the February 2011 Legal Update, “2011 WB-11 Residential Offer to Purchase” at www.wra.org/LU1102.

Condo: It is a yes or no question

A broker was recently in a transaction. Just days before closing, the listed duplex property was determined to be a condominium. In this transaction, should the broker have written the listing and the offer using the WB-4 Residential Condominium Listing Contract and the WB-14 Residential Condominium Offer to Purchase, respectively? 

The DSPS wants licensees to use the forms that best reflect the nature of the transaction. By doing homework prior to listing, a potential listing broker will assure the use of the proper listing contract when the property is a condominium. Keep in mind, whether a property is a condominium is not about what the property looks like but how title is held. Per the statutes, a condominium is established when the condominium instruments are recorded with the registrar of deeds in the county where the property is located. This is another benefit of obtaining a search and hold, it will show that the property is a condominium. 

In addition, when the broker knows the property is a condominium at the time of listing, the licensee may educate the seller about what documents the seller will need to obtain for a successful transaction. To that end, it may be helpful to take a copy of the WB-14 offer to the listing presentation. The offer lists the statutorily required condominium disclosure materials in addition to documents the buyer may wish to review prior to purchasing the condominium. Providing the seller with a copy of the offer identifying the required and optional documents will assist the seller when communicating with the association. A broker may or may not be willing to enter into a listing if the seller or the association is unwilling or unable to gather at a minimum the statutorily required documents. 

Tenants

Prior to the listing, the broker conducted his property inspection and found tenants living in the property. The seller wants to list the property, but the tenants told the broker they want to renew their year lease. Will the sale of the property terminate the lease? 

The sale of a property does not terminate a lease. When a buyer writes an offer on a currently rented property, the buyer purchases the property subject to the lease terms. Wis. Stat. § 704.09 requires that a buyer or other transferee take ownership of the property subject to the tenant’s rights. The new owner will “step into the seller’s shoes” and must honor the current tenant’s lease. Moreover, according to the WB-11 Residential Offer to Purchase, the seller shall assign the seller’s rights under the existing leases and transfer all security deposits and prepaid rents to the buyer at the time of closing. Therefore, the terms of the leases should be stated when the offer is negotiated. To accomplish this, it is appropriate for the listing agent to request copies of leases at the time of the listing. The broker may discuss whether the seller wants to extend the tenant’s possession by a lease or possibly a month-to-month tenancy. In the event the buyer wishes to occupy the property, the tenant could be given notice to vacate with a month-to-month that would not be available with a lease.

Inspect and disclose

A seller’s property is in an area in which the broker knows experienced a hailstorm a few years ago. The seller completed the real estate condition report (RECR), stating the roof had no defects but verbally told broker that he received funds from the insurance company for the roof and didn’t make any repairs. What does the broker need to disclose with this conflicting information?

Wis. Admin. Code § REEB 24.07(1)(b) requires that a broker perform a reasonably competent and diligent property inspection and ask the owner about the condition of the structure, mechanical systems and other relevant aspects of the property — before executing the listing contract. The broker must also ask the seller for a written response to the broker’s property condition questions. The information the broker obtains from the inspection is compared to the seller’s property condition report to determine if the broker needs to disclose any material adverse facts. 

The broker is required to make timely written disclosure of material adverse facts if the broker is aware of information that is inconsistent with the seller’s property condition disclosures in the RECR. A seller asking the broker to conceal or hide information about property damage may not be a listing the broker wants to take. 

Seller or landlord?

During a listing interview, the seller said his preference is to list the property for sale but would be willing to enter into a lease if the broker could find a tenant. The seller would be open to an option. Can the broker include this detail in the listing for sale? 

The sale and the lease of a property involve two separate types of interests in real estate, and this transaction involves two types of brokerage services: the lease of the property and the sale of the property. The broker must have the authority to provide each type of service in order to earn any corresponding commission. 

If the seller wants leasing services, the WB-1 listing may be modified or the broker may enter into a WB-37 Exclusive Listing Contract for Lease of Real Property.
Information about lease listings is available in “The Best of the Legal Hotline: The Accidental Property Manager,” in the December 2010 Wisconsin Real Estate Magazine at www.wra.org/WREM/Dec10/Hotline, “There’s a Form for That,” in the December 2010 Wisconsin Real Estate Magazine at www.wra.org/WREM/Dec10/Form, the July 2008 Legal Update, “Using Land Contracts and Leases with Options,” at www.wra.org/LU0807, and the January 2013 Legal Update, “WB-37 Residential Listing Contract — Exclusive Right to Rent,” at www.wra.org/LU1301.

Tracy Rucka is Director of Professional Standards and Practices for the WRA.