Reciprocity 

The broker has heard Wisconsin has licensing reciprocity agreements with other states; does that allow the broker to list and sell property in those states?

The Wisconsin Department of Regulation and Licensing has entered into reciprocity agreements with the states of Illinois and Indiana. 

What Reciprocity is NOT…

Reciprocity does not allow a person with a Wisconsin license to practice in Illinois or Indiana without an Illinois or Indiana license. Nor does reciprocity allow a non-Wisconsin licensee to practice in Wisconsin without a Wisconsin license.

What reciprocity IS…

Per the reciprocity agreements, it is easier for licensees to obtain a credential in the other states. Fewer licensing requirements must be met based on the fact that the individual already has a real estate license in another state. For example, Wisconsin licensees need only take the pre-license exam in order to obtain a sales license in these states. Wisconsin brokers need only take the brokers exam in order to qualify for a broker’s license (no pre-license education requirements). See an explanation of the Illinois requirements at www.idfpr.com/dpr/default.asp and for Indiana information, visit www.in.gov/pla/2788.htm. A Wisconsin broker considering obtaining an Illinois credential may review Cori Lamont’s article in this issue, "Looking South," regarding the upcoming changes to Illinois license law. 

Out-of-state licensees 

The Wisconsin listing broker received a call from an Illinois agent wanting to show a Wisconsin property. The Illinois licensee does not have a Wisconsin license. How does the listing broker proceed? 

Showings: Per the listing agreement, the broker has agreed to cooperate with other brokers and has agreed to give access to the property to buyers and persons assisting buyers for showing purposes. However, the Illinois licensee, once he or she crosses into Wisconsin, is, according to Wisconsin law, an unlicensed person and cannot legally engage in real estate brokerage services in Wisconsin. A licensee from another state may not conduct showings or negotiate face-to-face in Wisconsin without a Wisconsin license. Therefore, the listing broker should not allow the Illinois agent to show the property and may offer to conduct the showing for the Illinois prospect. 

Offers: Once the showing has occurred, the Illinois licensee may follow Illinois law regarding drafting offers on out-of-state properties. If an offer is produced, the listing agent should follow normal procedures and present the offer to the seller. If the offer is on any form other than the Wisconsin (WB) state approved forms, the listing broker may discuss in general terms the differences between the submitted offer and the WB form that would have been used in Wisconsin. If necessary, the listing agent may suggest that the seller talk with his or her legal counsel if they have any specific questions. The seller’s questions should obviously be resolved before they accept any such offer.

Commission: Wis. Stat. § 452.19 limits the payment of referral fees, finders fees and commission splits to persons licensed or registered in Wisconsin to practice real estate, or persons regularly and lawfully engaged in real estate brokerage in another state. Before entering into a commission agreement or referral agreement with an out–of-state broker, it is prudent practice to ask for a copy of the agent’s license and a statement confirming that the licensee is regularly and lawfully engage in real estate brokerage in his or her licensing state.

MLS offers of compensation: In some markets, the MLS offer of compensation extends to brokers who are licensed in other states. In such circumstances, the cooperating broker would earn the offered commission if he or she is the procuring cause of the sale, just like in other MLS transactions.

Out-of-state purchases 

The agent is a buyer’s agent for someone who lives in Wisconsin. The buyer has asked the agent if he can represent him in a large purchase of land in another state. Can the agent do this?  

It has been the understanding of the WRA that a Wisconsin real estate license permits an individual to negotiate with another for a commission, money or other thing of value, the sale, purchase, rental or exchange of an interest in real estate. According to the National Association of REALTORS^®, Wisconsin and 23 other states are classified as physical location states. This means that a licensee may work on a transaction involving property outside their state of licensure, Wisconsin, and receive commission as long as the licensee remains physically in Wisconsin. 

Authority to provide real estate brokerage services. First, per Wisconsin license law, a Wisconsin real estate licensee must have agency authority granted in an agency agreement to engage in real estate brokerage: either a listing contract with the seller or a buyer agency/tenant representation agreement with the buyer/tenant. A broker who negotiates without agency authority may be engaged in the unlicensed practice of law and in violation of Wisconsin license law.

Authority to practice in another state. Second, the agent needs to review the other state’s laws, perhaps with the assistance of the agent’s attorney. Each state’s laws specify the real estate activities that may lawfully occur within that state. NAR’s recent report regarding license portability provides at least a starting point for this review. If permitted, all of the Wisconsin licensee’s work in negotiating the sale typically would have to take place in Wisconsin. Out-of-state work (for example, showings) generally need to be conducted by a licensee from the state where the property is located if the broker is not also licensed there.

Commission. The terms and conditions of the broker’s agency agreement will indicate the commission earned for providing real estate brokerage services. The broker might always be able to receive a co-broke commission form the listing broker in the other state, depending upon that state’s laws. If this is available, it would be best to enter into a written compensation agreement with the listing broker before submitting any offer to purchase.

A recent unpublished Wisconsin Court of Appeals District IV decision has indicated that one would have to be licensed in the state where the property is located to engage in a transaction for the sale of the property (at least as it relates to Wisconsin and Iowa, the states that were involved in the case). The Court noted that the Iowa law that the parties presented to the Court did not relieve a broker working in a transaction for the purchase of an Iowa property from needing an Iowa real estate license, even if the Wisconsin broker’s actions might be allowed under Wisconsin law.

To read the case, see Restaino Bunbury & Associates, Inc. v. Assisted Living Concepts, Inc. (Ct. App. No. 2008AP2334, 2009) at www.wisbar.org/res/capp/2009/2008ap002334.htm. (Login required.)

Get Licensed/Reciprocity. Depending on the transaction and the probability that the buyer will want the broker to continue providing services in the other state, the broker may consider applying for a license in the other state. A broker may more readily obtain a license in Illinois and Indiana due to reciprocity. For each state, the broker may check with the local licensing authority to find out licensing requirements.

For further information, see the "NAR Field Guide to License Reciprocity" at www.realtor.org/field-guides/field-guide-to-license-reciprocity/license-recognition. 

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