The following questions about advertising have been asked recently of the WRA Legal Hotline.
Craigslist
A broker has noticed a number of property listings and other promotional advertisements on Craiglist that turn out to be from real estate licensees. Do these advertisers have to disclose their status as real estate brokers, licensees or REALTORS®?
The rules for advertising under Wisconsin law and the REALTOR® Code of Ethics apply to online advertising in very same manner as advertising in other media. Article 12 of the Code states: “REALTORS® shall be honest and truthful in their real estate communications and shall present a true picture in their advertising, marketing, and other representations. REALTORS® shall ensure that their status as real estate professionals is readily apparent in their advertising, marketing, and other representations, and that the recipients of all real estate communications are, or have been, notified that those communications are from a real estate professional.” A REALTORS®’ obligation to disclose his or her status as a real estate professional goes beyond just advertising and applies to all real estate communications with the public.
Wisconsin’s license law provides a similar duty of disclosure in advertising. The relevant portion of Wis. Admin. Code § RL 24.04 provides, “a broker shall in all advertising disclose the broker’s name exactly as printed on the broker’s license or disclose a trade name previously filed with the department, as required by s. RL 23.03, and in either case clearly indicate that the broker is a business concern and not a private party.” Brokers should not place blind ads in print or electronic forms of advertising.
Advertising another broker's listing
An agent is trying to find buyers. Can an agent use Craigslist to post her top property picks of the week, in other words, homes for sale that buyers may wish to see, even if they are not the company’s listings?
The Wisconsin Administrative Code rules provide that real estate licensees can only advertise with the seller’s authority. A listing broker has the authority to advertise based on the terms and conditions of the listing contract. Agents in the listing company have authority according to the listing and office policy. Advertising another broker/firm’s listings requires the consent of the listing broker and the seller unless the use is pursuant to IDX rules. IDX rules apply only to an MLS participant’s public website and not to postings of individual listings on Craigslist.
Rental scams
A broker discovered one of her listings for rent on Craigslist. Neither she nor the seller placed it there. What is going on?
Variations of this online scam have been widely reported. Information from sale and rental listings has been placed on Craigslist, but not by the broker or the property owner. For example, a property for rent is offered at a significantly lower price, with different contact information. Consumers inquiring about the rental are directed to wire money overseas. Recently a REALTOR® in Wisconsin reported that one of his listings showed up on Craigslist as a rental. Upon notification, Craigslist agreed to take the posting down immediately.
Consumers are urged to double check with whom they are dealing when conducting online real estate transactions, especially when funds are to be wired out of the country. The Wisconsin Department of Agriculture, Trade and Consumer Protection advises consumers to be cautious about how and where they send money when replying to online ads. REALTORS® may wish to check Craigslist regularly to see if their properties are being advertised without authority. Anyone who has been a victim of an online scam should contact the DATCP Consumer Protection Division at 1-800-422-7128.
Sold signs
An agent has a one-party listing on a property that is closing soon. The broker has permission to put the sale on the MLS for comp purposes. After the transaction closes, can the agent put up a sold sign?
After closing, the REALTOR® Code of Ethics, Standard of Practice 12-7, allows any REALTOR® involved in the transaction to advertise the property as “sold.” The permission of the buyer is necessary to have a sold sign on the property after closing.
Can a broker put up a sold sign before the closing? As a listing broker, the broker has done this before when all contingencies were removed from the offer to purchase and the seller gave permission. Is it okay?
If the information on the sign suggests to the public that the property is sold, the practice is arguably misleading advertising in violation of both state license law and the Code of Ethics. Wis. Admin. Code § RL 24.04(1) requires that advertising not be false, deceptive or misleading. Article 12 of the Code of Ethics requires REALTORS® to be careful to present a true picture in their advertising and representations to the public. Before the closing, it is more appropriate to use a sign or sign riders that say “contract pending,” “accepted offer” or other. language that is more reflective of the actual status of a transaction awaiting closing.
Incentives
A company is advertising that a buyer can receive up to 2 percent of the sales price of a house using the company’s new home buying incentive program. How can a licensed agent “give part of a commission” to unlicensed parties?
Wis. Stat § 452.19 prohibits real estate brokers from paying referral fees or finders’ fees to unlicensed individuals who are not prospective buyers or sellers for referring prospective buyers or sellers to the broker. However, a Wisconsin real estate broker is permitted to offer rebates or other incentives to unlicensed buyers or sellers in order to induce them to use the services of the real estate broker. These incentives can take the form of cash or other valuable consideration, including a portion of the commission received by the broker. This law has been in place for a number of years and is viewed by the U.S. Department of Justice as “pro-competitive” in nature. In other words, it allows consumers to have the broadest selection of real estate services from which to choose while assuring that minimum levels of commissions are not directly or indirectly established within the industry. See the October 2006 Broker Supervision Newsletter, online at www.wra.org/BSNoct06, for more information about incentives.
A broker attended a marketing seminar and the instructor suggested offering cash incentives to buyers to work with the broker. What should the broker consider when offering cash incentives?
When offering party incentives, brokers must be aware of potential pitfalls, such as possible impact on a buyer’s financing, claims the payment is an illegal referral fee for future business and incomplete advertising.
Buyers should consult with their lenders and disclose any cash incentives when applying for financing. The payment of a cash incentive may change the buyer’s ability to qualify for certain loans or the terms upon which they can obtain financing. Disclosing incentives prior to closing will also confirm it is a party incentive and not an illegal referral to a non-licensee for future referrals.
The broker must also comply with advertising rules found in Standard of Practice 12-3 of the REALTOR® Code of Ethics, which states, “The offering of premiums, prizes, merchandise, discounts or other inducements to list, sell, purchase, or lease is not, in itself, unethical even if receipt of the benefit is contingent on listing, selling, purchasing, or leasing through the REALTOR® making the offer. However, REALTORS® must exercise care and candor in any such advertising or other public or private representations so that any party interested in receiving or otherwise benefiting from the offer will have clear, thorough, advance understanding of all the terms and conditions of the offer. ...” This standard assumes the omission of details will cause the advertisement to present less than a true picture. This may be disputable should someone bring an ethics complaint concerning an ad for party incentives that does not contain every detail. The issue will be whether there is a true picture of the offered incentive in the ad.
For additional information, please see the February 2006 Legal Update, “Real Estate Advertising,” available online at www.wra.org/LU0602.
Tracy Rucka is a Staff Attorney for the WRA.