Working with limited service listings 

Limited service brokers are licensed brokers who offer their seller-clients something different than the traditional full range of brokerage and related administrative services. These brokers may provide little or no property marketing or brokerage services other than submitting the property listing to the Multiple Listing Service (MLS). The listing typically requires the seller to pay the listing broker any fee owed the co-broke when a cooperating broker procures the buyer.

When cooperating brokers interact with a limited service listing, some of them may become frustrated because the listing broker may not participate in the transaction in the traditional manner and the cooperating broker may need to find a way to step in and help with forms, disclosures, showings, negotiation and offer implementation and closing coordination.

Although Wisconsin allows the parties to decide the scope of the broker-seller relationship, the broker needs to do more than just list the property on the MLS. Licensees have certain duties to clients and customers that cannot be waived.

Property inspections 

Re: Limited service listings. Does the broker listing the property have to actually view the property?  

Wis. Admin. Code § RL 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. License law does not provide any exception for limited service listings. 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.

Disclosure of material facts and material adverse facts 

What disclosures does a limited service broker need to make? Does the limited service broker need to disclose material adverse facts?  

The seller and the limited service listing broker are free to negotiate a listing contract which excludes all but the elements of brokerage services required by law. License law, however, does not allow a broker to avoid or circumvent disclosure duties. A broker cannot waive the duty to disclose material facts to his or her client. Nor can a broker waive the duty to provide timely written disclosure of material adverse facts to all parties in a transaction.

Negotiation 

Are Wisconsin brokers offering limited services required to negotiate on behalf of the seller?  

The Wisconsin license law changes that were adopted in 2006 give sellers the option to waive negotiation services in limited service listings. The legislature, concerned about consumer protection, requires the broker to explain to the client the ordinary services a client needs to successfully reach closing and to provide written notice to ensure that consumers understand the significance of waiving negotiation services.

Trust accounts and record retention 

When the broker has a limited service listing and the property is sold directly through the seller, what is the listing broker required to have in their files? And what about trust accounts?  

Wisconsin trust account rules require any real estate broker who receives client funds to establish an interest bearing common trust account. The standard WB offers provide that the earnest money will be paid to and held by the listing broker. Therefore, unless the offer is modified to have the earnest money held elsewhere, a limited service broker would establish a trust account and hold earnest money. A limited service listing may provide that the broker will not hold the funds and that the terms of any offer will be modified to make other arrangements for earnest money.

Likewise, the broker must retain copies of documents, correspondence and trust account records related to transactions for three years for licensing purposes per Wis. Admin. Code § RL 15.04. Brokers may consider longer holding periods for tax audit and possible litigation purposes.

In addition, § 15.03 requires that closing statements accounting for all funds paid and received by the broker be delivered to the parties by the listing broker or the broker’s designee. A flat fee or limited service broker who does not create or receive the closing statements may need to create a strategy for obtaining these materials.

Limited service and advertising 

The limited service broker has entered the client’s property in the MLS and provided a simple "For Sale" sign that includes the client’s phone number. Must the broker’s company name appear on the sign in addition to the words "For Sale" and the client’s phone number? If the answer is yes, can the broker avoid having his or her name appear on the sign by not providing the sign at all?  

Buyers and other brokers may be confused when they see a listing broker’s MLS listing and then see a yard sign with the owner’s telephone number in the front yard of the listed property. Whether a seller may advertise on his or her own beyond any advertising done by the listing broker will typically depend on the terms of the listing that the seller and listing broker have entered into. There is no way to tell for sure without seeing the listing contract. In an exclusive-agency listing, for example, the seller will typically have the right to do his or her own advertising, concurrent with the listing broker’s advertising. The seller might also have the ability to advertise in a flat-fee listing or in other limited service listings.

Although Wis. Admin. Code § RL 24.04(2) provides that the listing broker must be named in all advertising done by the broker or any of his or her sales associates, sellers are not subject to § RL 24.04 or other license law regulation. It may be that the seller is authorized to do this advertising even though the property is listed and is in the MLS.

Exclusive agency listings 

The seller wants to hire the broker to market the property but also wants the right to look for buyers on his or her own. Is there a listing contract for this purpose?  

By definition, in Wis. Admin. Code § 16.02(2), an exclusive agency listing is one where the property is listed with only one listing broker, and the seller retains the right to sell the property by him or herself without owing a commission to the broker. A broker may modify a WB listing contract to accomplish this result because there is no specific form created for exclusive agency.

To modify the 2008 WB-1 Residential Listing Contract-Exclusive Right to Sell to produce an exclusive agency listing, the following items should be modified or deleted: 1) delete the phrase "right to sell" from the title and line 1 of the Listing and insert in its place the word "agency;" 2) add a provision under Additional Provisions to the effect that "Broker’s commission is not earned based on lines 42-45 of the Commission section if the offer accepted, option granted or exchange agreement entered into by Seller is with a purchaser procured by Seller;" and 3) delete the words "by Seller" from line 46 in the Commission section.

Cooperating brokers working with limited service listings 

Offer presentation and cooperative MLS compensation 

The seller has a For-Sale-By-Owner (FSBO) sign in the front yard. The buyer’s agent knows the property is in the MLS with a limited service broker. Can the agent write the offer and submit it to the listing broker? What if the buyer goes to the seller directly?  

A buyer’s agent may draft and negotiate the offer for the buyer and may be able to submit it to the listing broker for presentation to the seller. Whether a buyer’s agent can negotiate directly with the seller depends on the terms and conditions of the listing. With the listing broker’s consent, a buyer’s agent may negotiate with the seller directly and enter into an agreement to provide non-brokerage services to the seller for a fee.

Any time a broker enters a property in the MLS, the broker should carefully consider the compensation provisions. Because the listing broker, not the seller, makes the MLS offer of compensation, the listing broker will be obligated to pay any cooperating broker who procures the buyer for the sale. The listing broker will want commission provisions in the limited service listing that clearly require the seller to compensate the listing broker in the amount of the MLS offer of compensation if it is earned by a cooperating broker.

Negotiation directly with the seller 

Can the cooperating broker contact the seller directly if the seller has a limited service listing?  

Wis. Admin. Code § RL 24.13(5) provides that licensees may not negotiate the sale of a property with the seller directly if the party has an unexpired written contract in connection with the real estate that grants another broker an exclusive right to sell. In certain circumstances, a broker may negotiate with the seller directly if he or she is reasonably compelled to do so or with the consent of the listing broker. Because each limited service business model is different, the cooperating broker should check with the listing broker before approaching a seller directly.

Getting the accepted offer to closing 

The offer has been accepted and the seller isn’t doing anything to get the transaction closed because they don’t understand what is required. What should the cooperating broker do?  

The agent can recommend the seller hire an attorney or other service providers to help them coordinate the closing. If the seller is unwilling, some cooperating brokers take on these responsibilities without compensation in order to get the deal done. Depending on whether the seller needs brokerage services, administrative services or other professional services, the broker may be able to assist the seller and charge a fee. The broker may not, however, charge a fee for the completion of real estate transaction documents because Wis. Admin. Code § RL 16.05 prohibits licensees from making a "separate charge for completing an approved form in connection with a transaction." The agent is also prohibited from engaging in the unlicensed practice of law.

What can the cooperating broker charge the seller for the extra work needed to close the transaction? 

A cooperating broker may develop a closing services package which provides the necessary services the seller needs to get to closing. A subagent could develop a service agreement listing the services the licensee is not legally required to provide but would be willing to provide to the seller for a fee. The agreement would ideally also list services the broker is prohibited from providing. The seller would be free to accept or reject the package. Note that this concept is not a recommendation but merely a reflection of one way to address potential issues that might arise. It is recommended that legal counsel review such an agreement to ensure that there are no legal problems.

Do buyer’s agents have any other options? 

Buyer’s agents may wish to consider modifying the buyer agency agreement so they may charge buyer clients buying a property subject to a limited service listing the same fees that would ordinarily be charged on a FSBO. Logically, the issue is the same: absent a listing broker providing services, the buyer’s agent may have to do more work and the compensation schedule should reflect that. If this is done, the buyer is free to pass this cost along to the seller by asking the seller to pay all or part of the buyer’s agent’s fee in the offer.

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