This month’s Legal Hotline looks at transactions where sellers cause a stir, changing their minds about selling and the implications to the offer and the listing. Questions are also included about overzealous sellers who engage in adverting and showings.

Seller’s remorse: three-day right to rescind?

A seller has accepted an offer to purchase on her condo but is having “seller’s remorse” and now wants to cancel the contract. The agent informed the seller that she would need to seek an attorney for legal advice. The seller sent a copy of the Wisconsin three-day right to cancel from the Bureau of Consumer Affairs online. The agent does not think this pertains to real estate transactions. What is the correct course of action? 

The agent is correct; there is no three three-day right to rescind a real estate contract. Wis. Stat. § 423.202 provides for a three-day right of rescission in consumer approval transactions. However, the definition of a “consumer approval transaction” specifically excludes transactions for both the sale and lease of real estate. 

Seller’s remorse: the offer

How does the seller go about terminating the offer after she changed her mind about selling? 

A party, at any time and for any or no reason, may ask to be released from the contract. The listing broker may draft a Cancellation Agreement and Mutual Release (CAMR) for the seller based on the seller’s request. It is, however, up to the discretion of the receiving party whether or not to agree. 

If the buyer will not agree to the CAMR, the seller may try to negotiate with the buyer to terminate the offer. If negotiations fail, the seller may be able to terminate the offer on an alternate basis. For example, if the buyer fails to timely deliver the loan commitment, the seller may terminate the offer, or if the buyer issues a notice of defects per the inspection contingency, the seller may allow the offer to terminate rather than cure defects. If, however, the buyer meets all the conditions of the offer, the seller may be obligated to sell the property. 

Legal counsel may advise the seller regarding whether there is another contractual basis for the seller to get out of the contract and evaluate the risk if the seller elects to breach the contract. The broker can point out the default provisions of the contract that may come into play if the parties cannot come to a mutually agreeable solution. See lines 365-378 of the WB-14 Residential Condominium Offer to Purchase. 

The seller and the buyer each have the legal duty to use good faith and due diligence in completing the terms and conditions of the offer. A material failure to perform any obligation under the offer is a default. A defaulting party may be subject to liability for damages or other legal remedies. For additional discussion of contract remedies and issues, see Legal Update 98.12, “Contract Interpretation and Remedies,” at www.wra.org/LU9812.

Seller’s remorse: the listing termination 

The same seller now wants to terminate the listing agreement. How does the listing agent go about that? 

First, the agent must consult with the broker. According to the agreement, the listing is between the seller and the broker/firm, therefore the listing agent does not have the authority to terminate the listing without the written consent of the broker. 

How the broker responds to the seller’s termination request is decided on a case-by-case basis. Depending on what rights the broker wishes to retain, the broker may use a notice, an amendment, or a CAMR to terminate the listing. The agent may give the broker information regarding possible protected buyers and the agent’s observations of the seller’s conduct, such as if the seller is trying to avoid commission. It is then up to the broker to decide what form to use for the termination. 

The WB-42 Amendment to Listing Contract may be used if the seller and listing broker have an agreement to amend (shorten in the case of early termination) the expiration date in the listing contract. If a listing broker does not agree to amend the listing and is merely acknowledging the seller’s termination, a notice is appropriate. The listing broker may wish to work with his or her attorney regarding the language of the notice to ensure that any remedies available as a result of a seller’s potential bad-faith termination are preserved, such as including language that the broker retains all legal rights under the contract and law. If the seller and the listing broker agree to waive all rights under the listing, including listing protection, damages for bad-faith termination, and the right to collect commission if earned, a WB-45 CAMR may be used if properly modified to meet the parties’ intent.

See the October 2007 Legal Update, “WB-1 Listing Contract — 2008 Revisions,” at www.wra.org/LU0710 for more information about seller termination of a listing contract. 

Seller advertising 

Can a seller put an advertisement on Craigslist for the property for the broker’s listing? 

The listing broker may refer the seller to the terms of the WB listing, which is an exclusive right-to-sell listing giving the broker the exclusive right to sell the property. If the seller intends to conduct his own advertising, the listing may be amended to allow this. It would be prudent for the advertisement to clearly state the property as listed. Ideally the Craigslist post would include contact information for the broker. 

If the seller engages in his own Internet advertising, he should review and comply with the terms of use of any website used. The broker may also remind the seller of the seller’s cooperation with marketing efforts provisions of the listing. The seller is required to notify the broker in writing of any potential buyers with whom the seller negotiates and refer all persons making inquiries concerning the property to the broker.

Seller showings 

A builder contacted the broker to list new construction. The builder also wants to be able to show the property if potential buyers should show up onsite since the broker is some distance away. The builder would still honor the same commission structure if he produced the buyer and would expect the broker to write the offer and handle his interests in closing. Does the broker need special language in the listing contract to authorize this arrangement?

Similar to the seller advertising, the seller and broker may modify the listing if the seller will conduct showings. The listing may set forth provisions that the seller clearly inform the buyer the property is listed and what the seller’s role will be. The broker may request that the seller promptly notify the broker of any discussions and the content thereof and remind the seller that the only price at which the broker may offer the property is that which is in the listing contract to avoid different messages to potential buyers. Given that the seller still wishes to have the broker provide brokerage services and pay commission, the listing retains the exclusive right to sell nature. Alternately, an exclusive agency listing may be crafted if the seller retains the right to sell the property without owing a commission, per the Wis. Admin Code § REEB 16.02(2) definition of exclusive agency. 

The investor seller

The broker knows of an individual who purchased REO properties and now is starting to sell them. How many properties can an individual sell without being licensed? 

A license is required under Wis. Stat. Chapter 452 when a person is engaged — wholly or in part — in the business of selling real estate, even if the real estate is personally owned. When selling personally owned real estate, the statute requires the establishment of a “pattern of sales” before licensing is necessary. Five sales in one year or 10 sales in five years is presumptive evidence of a pattern of sales. Developers, contractors and other sellers thus have explicit notice of when it becomes necessary to either list the properties being sold with a licensed real estate broker or obtain a real estate broker’s license. An unlicensed individual who proceeds with a pattern of sales without taking either of these measures may be subject to an administrative injunction by the Department of Safety and Professional Services or legal action by the local district attorney. Use of an attorney does not exempt a person from the requirements under the pattern of sales.

See Wis. Stat. § 452.01(2)(b) at www.legis.state.wi.us/statutes/Stat0452.pdf. To read more about licensing requirements, see the WRA Education Center at www.wra.org/SalesLicenseInfo.

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