Forms use rules
An in-depth knowledge of forms use rules is extremely important for real estate professionals in Wisconsin. In 1961, the Wisconsin Supreme Court created a narrow rule permitting real estate brokers to fill in the blank spaces on standard conveyance forms for clients without violating the prohibition against laypersons practicing law. In State ex rel. Reynolds v. Dinger, 14 Wis. 2d 193, 109 N.W. 2d 685 (1961), the court observed that completing contracts is the practice of law but granted a limited authorization for real estate licensees. While this privilege may be taken for granted by many licensees, they should realize the idea of licensees drafting real estate contracts is not always universally embraced. Licensees must be ever vigilant and continuously demonstrate they deserve this privilege by showing competence in their use of the state-approved forms and avoiding behavior that may be interpreted as the giving of legal advice.
A crucial part of this demonstration of competency is following the Wis. Admin. Code chapter REEB 16 forms use rules.
Use the current version of the form
The seller just received an offer on a property, and it is written on the old WB-11. Must the listing agent have the cooperating agent re-draft it?
According to license law in Wis. Admin. Code § REEB 24.13(2)(b), licensees must promptly present all offers. Presentation of the document by the listing agent, despite their misgivings, is not a rule violation.
The cooperating agent could face possible disciplinary action from the Real Estate Examining Board (REEB) for failure to use the required offer form — all licensees must use the latest approved versions of an REEB-approved form like the WB-11 beginning on the mandatory use date (September 1, 2020) per Wis. Admin. Code § REEB 16.06(7).
Because the parties do not yet have binding acceptance, the buyer could choose to withdraw the offer on the old form and prepare his offer using the current form. A buyer withdrawing an offer to resubmit another offer risks the seller accepting an offer from a different buyer in the interim.
If the offer is presented, the listing agent is to discuss the advantages and disadvantages of the offer with the seller as required by Wis. Admin. Code § REEB 24.13(3). During the presentation, it may be helpful to compare the terms of the old offer with the current offer for the seller. The document, if agreed upon, creates a contract between the parties, regardless of any outdated content. It is up to the seller to decide to reject the offer, counter the offer or issue an offer to sell on a current form to continue the negotiations.
Choosing the correct form
An agent has a potential listing in an area that is 99% single-family homes. This property is a side-by-side condominium, and the agent is listing just one unit. Can the agent use the WB-1 Residential Listing Contract and enter it into the MLS as a single family/single family zero lot line? The agent would disclose in the comments that it truly is a condominium. Someone else had it listed first as a condominium, and most people and agents in the area don’t even think to check condominium listings for their buyers.
If there is not a form that exactly fits the agent’s transaction, the agent is to use the form that requires the least amount of modification. This property is a condominium, so the WB-4 Residential Condominium Listing Contract generally would be the appropriate form to use to list a condominium unit.
If using that form, however, is limiting the marketability of the property, the agent may consult with her supervising broker regarding the risks and benefits of using the WB-1 Residential Listing Contract, modifying it appropriately to include any condominium-specific provisions, and disclosing, as necessary, to other agents that the property is a condominium. Any offers should probably be on the WB-14 Residential Condominium Offer to Purchase.
There are potential risks to using a WB-1 Residential Listing Contract. Those risks include a buyer or an agent making a claim that the agent misrepresented the property or advertised it in a way that was false, deceptive or misleading. Adequate disclosure of the nature of the property as a condominium may help to limit those risks.
There is also a potential risk that a person could claim that the agent violated Wis. Admin. Code Chapter REEB 16 regarding “Approved Forms and Legal Advice” by incorrectly using forms. The counter argument to that claim, however, is Wis. Admin. Code § REEB 16.06(8), which states, “A licensee shall use approved forms and prepare addenda in such a manner as to adequately accomplish the contractual instruction of the person for whom the licensee uses the forms and prepares the addenda.” If the seller instructed the licensee to use a WB-1 Residential Listing Contract rather than a WB-4 Residential Condominium Listing Contract, the licensee is arguably complying with the forms use rules by using a residential listing.
The agent should contact the MLS regarding any rules governing the acceptable categories for listing this property.
See the text of Wis. Admin. Code Chapter REEB 16 regarding the rules for “Approved Forms and Legal Advice” at
https://docs.legis.wisconsin.gov/code/admin_code/reeb/16.pdf.
Using warranty deeds
Is a licensee allowed to fill in the blanks on the warranty deed form?
A licensed broker is allowed to use state bar forms for deeds, but a salesperson may not. Wis. Admin. Code § REEB 16.03 provides as follows regarding licensees’ use of approved forms:
(1) In addition to forms prepared and approved by the board pursuant to s. 452.05(1)(b), Stats., the board approves the following forms for use by brokers:
(a) Forms prepared and approved by the state bar of Wisconsin for deeds, mortgages, mortgage notes, truth-in-lending disclosures, land contracts, release of mortgage, satisfaction of mortgage, assignment of mortgage, and assignment of land contract.
(b) Uniform commercial code forms: 1, 2, 3, 4, 11, 410, 411, 430, 445, 450, and 451.
(c) Contractual forms for the sale, purchase or rental of real estate or a business opportunity located in another state, if the contractual forms are those which licensees may legally and customarily use for such transactions in the state where the real estate or business opportunity is located.
(d) Forms prepared by governmental, quasi-governmental, and tribal agencies for use in programs administered by them under authority provided by law.
(e) Forms to be used for a property management agreement between a firm and a landlord, prepared by the broker entering into the agreement, an attorney, or the landlord, that contain provisions relating to leasing, managing, marketing, and overall management of the landlord’s property.
(2) In addition to forms prepared and approved by the board pursuant to s. 452.05(1)(b), Stats., the board grants approval of the forms in sub. (1)(c), (d), and (e) for use by salespersons. Board-approved contractual forms for use in real estate practice may be used by licensees and shall be available on the department’s webpage.
Open listing
What is an open end listing?
“Open end listing” is not a defined term in Wisconsin law. In Wisconsin, the listing contract determines the listing broker’s authority to provide services and the right to commission. Wis. Stat. § 240.10(1) provides that a contract to pay a commission for selling real estate is void unless there is a contract or other writing describing the real estate, setting a list price and the applicable commission, and stating the term of the listing. In addition, the listing contract must be signed by someone agreeing to pay a commission.
The provisions of Wis. Admin. Code Chapter REEB 16 do, however, include a definition of an “open listing.”
Wis. Admin. Code § REEB 16.02 Definitions provides:
(4) “Open listing” means a written listing agreement, which may be given to any number of firms, with the first firm to secure a buyer under the terms of the listing agreement earning the commission.
Wis. Admin. Code § REEB 16.06(6) states: “A licensee may alter an approved exclusive right to sell listing contract to create an exclusive agency listing, an open listing, or a one-party listing.”
In an open listing, the seller engages two or more firms to act simultaneously in marketing the property, but the seller is obligated to pay a commission only to the firm that brings a ready, willing and able buyer. If the seller personally sells the property without the assistance of any of the firms, the seller owes no commission.
See the information regarding creating different types of listings on pages 9-10 in the August 2014 Legal Update, “Limiting Listing Broker Liability,” at www.wra.org/LU1408.
Using non-approved contracts
The developer is selling a new construction condominium. The agent is working with the buyer. The developer’s attorney has their own purchase contract they use. Can the agent use that instead of a WB-14?
Wis. Admin. Code § REEB 16.04 provides:
When to utilize approved forms.
(1) Except as provided in subs. (2) and (3), a licensee shall use approved forms when acting as an agent or a party in a real estate or business opportunity transaction.
(2) For those kinds of real estate or business opportunity transactions for which the board has not approved contractual forms, a licensee, when acting as an agent or a party, may use contractual forms drafted by a party or an attorney, if the name of the drafter is imprinted on the form before use by a licensee. For the purpose of this subsection, a listing firm is a party to the listing contract transaction.
(3) A licensee may in any transaction where the licensee is acting as an agent, negotiate an agreement and permit the parties or an attorney for one or other of the parties to draft or prepare a contractual agreement which embodies all of the negotiated terms and conditions.
Wis. Admin. Code § REEB 16.02(5) provides:
“Use a form” means to complete a contractual or conveyance form by filling in the blanks or modifying printed provisions on a form for the purpose of accomplishing the instruction of a party in a specific real estate transaction.
The agent would be in conformance with license law as stated in § REEB 16.04(1) if they used the approved WB-14 Residential Condominium Offer to Purchase.
If the agent wants to rely on § REEB 16.04(2), the case will first need to be made that the sale of a new construction condominium is a different kind of transaction when compared to sales of other condominium homes and residential properties. If that were true, then the name of the party or attorney who drafted the contract must be imprinted on the form before the licensee could use it.
If the agent was to rely on § REEB 16.04(3), the licensee may negotiate, but the parties or an attorney for one of the parties must draft the contract including all terms and conditions.
Using a local government form
A broker is asked to write an offer on a city of Milwaukee property. The city has its own offer form, which includes boxes and blanks to fill out. Can the broker complete the form?
Wis. Admin. Code § REEB 16.03(1)(d) provides:
Approved forms.
(1) In addition to forms prepared and approved by the board pursuant to s. 452.05 (1) (b), Stats., the board approves the following for use by brokers: …
(d) Forms prepared by governmental agencies for use in programs administered by them under authority provided by law.
The broker should also assess whether they are competent to fill out the form. Comparing an unfamiliar form with a WB-form can help identify differences.
See the text of Wis. Admin. Code Chapter REEB 16 regarding the rules for “Approved Forms and Legal Advice” at https://docs.legis.wisconsin.gov/code/admin_code/reeb/16.pdf.