DISTANCE LEARNING ON DEMAND

Welcome to the Wisconsin REALTORS®Association’s Distance Learning On Demand! Distance Learning On Demand is the most convenient method available from the WRA to complete your continuing education requirement.

This course is broken into chapters and the conclusion of each chapter video, you will be required to complete a short quiz. If you do not pass the quiz, you must wait 1 hour before you can re-take the exam. Once all the chapters and corresponding quizzes are complete, you will be able to advance to the final exam. Once the exam is complete, the course is compete and you will be able to print your certificate.

Before you begin, here are a few suggestions:

1. Ensure you meet the system requirements at the location where you plan to view your videos. Requirements can be found at: www.wra.org/dlodreq.

2. If the video is stuttering, pausing, or stopping, lower the bandwidth in which you are viewing the video. Use the “Select Video Quality” drop down box located under “Help” in the upper-right corner of the Media Player to change bandwith. If you do not see an improvement, contact the WRA at 1-800-279-1972.

3. Close all other software applications.4. Make sure only 1 copy of the video player is open.5. To access your videos, go to myWRA at www.wra.org/mywra.

For other questions and concerns, see Frequently Asked Questions.

Thank you for choosing the WRA for your continuing education needs!

RW ADISTANCE LEARNINGW AON DEMAND

FREQUENTLY ASKED QUESTIONS

Can I watch chapters out of order?Yes. You can watch chapters out of order. You need to pass all of the chapter quizzes before proceeding to the final exam.

How do I switch to a new chapter?To switch chapters, simply click the chapter name in the chapter tab.

What are quizzes?Quizzes are a required part of Distance Learning On Demand. You must complete the quizzes before advancing to the final exam. To take a quiz, click the quiz icon. Once you take and pass the quiz, the icon will show a check mark to verify completion.

How do I take a quiz?After completing the chapter video, simply click the chapter quiz icon located in the far right column to proceed.

Can I watch a portion of a video at one time and watch the remainder at another time? Yes. If you are unable to watch a video completely, note the chapter and time when you stop viewing. To return to that portion of the video, use the playback slider to locate the time when you stopped the video.

When can I take the final exam?Once you pass the quizzes, you will be able to take your final exam. To access the final exam, click on the “Exam” tab located at the top of your media player.

What is the “Notes” tab for?

The “Notes” tab is for you to take your notes on screen while watching your video. Your notes are saved automatically for you and you can print your notes for review.

What is the “Outline” tab?

The “Outline” tab is an easy way to access a specific topic in a chapter. Simply click a link in the outline and you can instantly access the corresponding content in the video. It’s perfect for accessing a topic you would like to review. Exam Tab

I have no volume/sound.

To troubleshoot sound, perform the following steps:1. Can you hear sounds from other Windows applications?2. Make sure the volume slider in the player is turned up.3. Access your volume control panel in Windows (Accessories, Entertainment, Volume Control) and make

sure “mute” is turned off. 4. Check your speaker connection.

Notes Tab

Outline Tab

Chapters Tab

Troubleshooting

My video is stuttering, pausing and stopping. How can I fix this problem?

Lower the bandwidth in which you are viewing the video. Use the “Select Video Quality” drop down box located under “Help” in the upper-right corner of the Media Player to change bandwith. The default bandwidth is 1000kbps.

I dropped my bandwith and my video did not improve. What can I try next?1. Make sure your download speed is at least 512 Kbps. To test this, go to: www.wra.org/bandwidthcheck2. Try a different internet connection. Wireless connections may be unreliable at times and can prevent a

video from running smoothly. 3. Try a different computer.

Other Problems?

For other problems, please call the Wisconsin REALTORS® Association at 1-800-279-1972.

Course Information

Here’s a quick look at what you’ll see as you make your way through this course:

Each chapter includes a printable PDF. Code book reading assignments can be found at www.wra.org/codebook.

On the screen are your navigation buttons and tabs for the course and related topics.• You must follow the green prompt to proceed in the course.• The course will pick up where you last left off.• You may revisit any previously covered portion of a chapter.• The course content includes an introduction, 12 chapters with exercises, a story problem, and your final

exam.• Course materials for each chapter are presented as downloadable, printable documents.• Watch the video, read the course material, then select the “Review” tab which will take you to the course

exercises consisting of the true/false, vocabulary, and multiple choice quizzes as well as case studies corresponding to the chapter.

Navigate by clicking the tabs:Chapter – PDF documents and video clips for each chapterNotes – allows you to take notes onlineIndex – provides an index of the video for quick selection of the chapter topicsReview – exercises to reiterate the chapter work

What happens when I have completed all the chapters?When you have finished the course and the story problem, you will take a final exam. You will have 2 hours to complete the 50 question exam. These questions simulate the questions on the license exam administered by the State of Wisconsin.

Once you have taken the final exam, you will receive a score. You may review your responses and compare them to the explanations provided in the answer key. You may take the exam multiple times. Each attempt will clear the record of your most recent attempt. Answers to the final exam you took most recently can be viewed until you choose to take the exam again.

If, after starting any exam, you find that you need additional review or are unable to complete the exam, you may exit the exam and begin it again at another time. Previous answers will not be saved and you will start the exam at the beginning.

Who do I contact to register for the license exam?

• Pearson VUEo Register online www.pearsonvue.como Register via phone 1.888.204.6284

• School Code: 1231• Current fee is $71• Test Centers:

o Elm Grove/Milwaukeeo Madisono Green Bayo Wausauo Edina, MNo Duluth, MNo Rochester, MNo Chicago, IL

Apply for your license with the Department of Safety and Professional Services (DSPS)Submit your application with a copy of your out-of-state license to the DSPS. You may engage inreal estate practice after the DSPS lists your name and license number on itswebsite.

Who do I contact if I have questions concerning the course content?Jennifer Lindsley is the Wisconsin Realtors Association’s Director of Training and Staff Attorney. She earned her J.D. from University of Wisconsin and her B.A. from Portland State University in Portland, Oregon. She is a licensed broker, attorney, and a member of the Real Estate Educators Association.

To contact Jennifer, simply send her an e-mail via the appropriate button located at the top right of your screen. Responses are generally sent during regular business hours Monday – Friday, 8:30 a.m.-5 p.m. Central Time.

Who do I contact if I have questions concerning technical support?

The help button at the top right of your screen will provide you a selection of frequently asked questions. If you are unable to solve your problem after consulting the frequently asked questions, you may contact the WRA at 1-800-279-1972 or [email protected].

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Published by Wisconsin REALTORS® Association4801 Forest Run Road, Madison, Wisconsin 53704Copyright of course book ©1998, 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2008, 2009,2010, 2011by Wisconsin REALTORS® AssociationEleventh Edition

Credits for Course BookJennifer Lindsley

Production Assistance by:Chris Dregne, Member Products Specialist WRANichole Mickelson, Business Services WRA

About the Course Book AuthorJennifer Lindsley is the Director of Training and Staff Attorney for the Wisconsin REALTORS® Association (WRA). Jennifer is a licensed broker and member of the Real Estate Educators Association. She earned her J.D. from the University of Wisconsin Law School and her B.A. from Portland State University in Portland, Oregon.

Real Estate SalesReciprocity Course Book

The information and materials contained in this product are provided exclusively for educational purposes and are solely intended to be statements of general legal principles. The information and materials are not to be construed, interpreted, relied upon or used as legal advice in any fashion, including but not limited to use in litigation, arbitration, ethics matters or other administrative proceedings. Individuals seeking legal advice should obtain private legal counsel and should not rely upon the information and materials contained herein.

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Contents-1-

Agency RelationshipsThe Nature of the Agency ...……...1Agency Terminology ………………1The Agent’s Duties ………….……..9Agency Disclosure Obligations …12Self-Dealing …………………….…14The Real Estate Office ……..……16True/False ………………………..18Case Studies ……....…………..…22Exam ………………………………25

-2- Agency Issues

The Creation of Agency ………....33Types of Agency Contracts ……..35Termination of Agency …………..37Remedies for Breach of an

Agency Agreement …………….38Commission …………………........38Calculating Commission …………40Payment of Listing Broker ………43Payment of Buyer’s Broker ……..43Procuring Cause Issues …………44True/False …………………………45Case Studies ……………………...47Exam ……………………………….50

-3- Agency Agreements

Agency Agreements ……………..59WB-1 Residential Listing

Contract …………………………60WB-4 Residential Condominium

Listing Contract ………………...70WB-36 Buyer Agency

Representation Agreement …...72True/False …………………………77Case Studies ……………………...79Exam ……………………………....81

-4- Disclosure Obligations

Disclosure Introduction ………...87Liability …………………………..88Advertising …..…………………..88Disclosure Obligations …..……..88Disclosure by Owners of

Residential Real Estate ……89“As Is” Sales …...………………..91Licensee Disclosure

Obligations ....………………..92Condominium Disclosure

Requirements ……………….93Environmental Concerns ……...96True/False ……………………..105Case Studies …………………..107Exam ……………………………110

-5-Fair Housing

Fair Housing Law ……………..115The Americans with Disabilities

Act (ADA) ……………………120Handling Complaints .…………122Establishing Office

Procedures …..………………122True/False ……….…………….124Case Studies …………………..126Exam ……………………………128

-6-Real Property

OwnershipReal Property Ownership …....135Real Versus Personal

Property …………………......136Estates in Land ……………..…137Forms of Ownership ………….141Wisconsin Marital Property …..142Management and Control ……143True/False ……………………..144Case Studies ………………….147Exam ……………………………149

-7-Title of Real Estate

Wisconsin Transfer Fee ……...155Calculating the Tax Bill .………156Use-Value Assessment ………156True/False ……………………..157Case Studies …..………………159Exam …..……………………… 161

-8-Land-Use

Wisconsin Zoning - Types of Zoning ………………………..165

Water Rights …………………..167Private Land-Use Controls …..168True/False ……………………..169Case Studies …………………..171Exam ……………………………173

-9-Offers to Purchase

Acceptance and Binding Acceptance …………………177

Equitable Title ……….………...177Working with Offers: Confidentiality

Issues ……………………….178Drafting and Submission of

Offers ………………………..178Cooperating with Other

Brokers ……………………...179Presentation of Offers ………..179Guaranteed Sales …………….179WB-11 Residential Offer to

Purchase ……………………179

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WB-14 Residential Condominium Offer to Purchase …………….192

WB-13 Vacant Land Offer to Purchase ………………………195

True/False ……………………….200Case Studies …………………….202Exam ……………………………..204

-10- Other Approved Forms

WB-44 Counter-Offer ………..…215WB-46 Multiple Counter-Proposal

………………………………...216WB-42 Amendment to Listing

Contract ……………………….217WB-40 Amendment to Offer to

Purchase …………………….218WB-41 Notice Relating to Offer

to Purchase ………………….219WB-45 Cancellation Agreement

and Mutual Release ………..220WB-24 Option to Purchase …....220WB-25 Bill of Sale …………...….222True/False …………………...…..224Case Studies ………………..…..226Exam ………………………..……228

-11-Contract Law

Brokers Obligation to Furnish Copies and Maintain

Records ……………………...231Approved Forms and Legal

Advice ………………………..231Conveyance of Real

Property ……………………...232True/False ……………………..234Case Studies ………………….236Exam ……………………………238

-12-Trust Accounts

Overview ……………………….241RL 18 Trust Accounts ………...241Trust Funds: Client Funds &

Real Estate Funds ………….242IBRETA ………………………...242Depositing Funds ……………..243True/False ……………………..244Case Studies …………………..246Exam ……………………………250

Forms Appendix ……251

Story Problem ……....317

Glossary ……………..349

Math Appendix ……..377

Contents

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1Chapter Overview This chapter introduces the concepts of agency law and how it is applied in a real estate transaction. The discussion also includes the real estate licensee’s legal obliga-

tions to parties in a real estate transaction.

THE NATURE OF THE AGENCY

Agency is the foundation upon which real estate brokerage is practiced. The term

“agency” is used to describe a legal and ethical relationship created between a real estate licensee and a party to a transaction which may include a buyer, seller, landlord, or tenant. The agency relationship governs the day-to-day actions of every real estate licensee. This agency relationship is complex and often creates confusion for the public because it is difficult to understand the role of the licensee. Due to this complexity there are strong agency disclosure laws in place to help explain to the public (buyers, sellers, landlords, and tenants) the relationship and legal obligations of the licensee.

In Wisconsin real estate agency laws require licensees to owe specific duties to all parties involved in a transaction and additional duties to a client the licensee is representing. Before discuss-ing these various duties, this introductory chapter begins by defining important agency terminology.

AGENCY TERMINOLOGYLicenseeLicensee is a term used by Wisconsin to refer to any person licensed or registered under state law to practice real estate. This term refers to anyone holding a broker license, salesperson license, or is registered as a time-share salesperson.

Agency Relationships

Important Terminologyagency agentbroker business salebuyer’s agentbuyer’s brokerclientcooperating brokercustomer exchangefiduciarylicensee listing agentlisting brokermaterial adverse fact multiple representation relationshipsmultiple representation

with designated agency multiple representation

without designated agencyoption to purchaseprincipal brokersalespersonselling agentselling brokersingle agencysubagent

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BrokerThe definition of broker is expansive and at first glance appears overwhelming and complex. The materials attempt to simplify the definition by providing the state statute definition of broker and then further explaining some of the terms used within the definition.

A broker is defined as a party that, for another person, and for commission, money or other thing of value, negotiates or offers or attempts to negotiate a sale, exchange, purchase or rental of, or the granting or acceptance of an option to sell, exchange, purchase or rent, an interest or estate in real estate, a time-share, or a business or its goodwill, inventory, or fixtures, whether or not the business includes real property.

Therefore, in this part of the definition a broker is someone on behalf of another offers or attempts to negotiate a sale, exchange, purchase or rental of real estate for a thing of value.

For example, a friend offering to help sell their friend’s home for a $100. A broker is also defined as a party that wholly or in part, is in the business of selling or exchang-ing interests or estates in real estate or business, including businesses’ goodwill, inventory or fixtures whether or not the business includes real property, to the extent that a pattern of sales or exchanges is established, whether or not the business includes real property. Five sales or exchanges in one year or ten sales or exchanges in five years is presumptive evidence of a pattern of sales or exchanges. An example of a pattern of sales is a builder who sells seven spec homes in one year. The sale of the first four homes is not considered licensed activity. However, in order to sell the additional three homes, the builder must either obtain a broker license or hire a broker to represent the builder in the sale of the properties.

The state defines negotiate as providing assistance to a party within the scope of the knowl-edge, skills and training required under Chapter 452 Real Estate Practice in developing a pro-posal or agreement relating to a transaction, including any of the following:

a) Acting as a intermediary by facilitating or participating in communications between parties related to the parties’ interests in a transaction (intermediary).

b) Completing, when requested by a party, appropriate department-approved forms or other writings to document the party’s proposal consistent with the party’s intent (drafting).

c) Presenting to a party the proposals of other parties to the transaction and giving the party a general explanation of the provisions of the proposal (presenting forms).

The above words in italics have been inserted for emphasis and are not part of the statute language. The state does clarify that the acts of providing advice or opinions material to a transaction or showing real estate to a party does not, in and of itself, constitute negotiation. Drafting and presenting offers is clearly part of a negotiation process but determining when a licensee begins to act as an intermediary is less obvious. The key to understanding this standard is determining when a licensee crosses the line from the providing-information stage to the negotiation stage. An intermediary essentially develops and discusses transaction proposals relating to the sale, exchange, purchase or rental of an interest in real estate or a business. In general, a licensee begins to act as an intermediary when the buyer wants to buy a property and begins discussing how the transaction might be structured.

Agency Relationships - 1

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The following is a discussion of the lesser-known transactions in which a broker may be involved. This is a basic introduction to help in the understanding of the definition of broker.

1. ExchangeAn exchange is a way to defer capital gains tax by exchanging like property for like property. The underlying philosophy behind an exchange is that income tax should not apply as long as an investment remains intact in the form of real estate. The term “like property” or “like kind” refers to the kind or class of property. A proper exchange most likely is exchanging real estate for real estate, for example, investment property for a business. An improper exchange is an investment property for a boat because it is not “like property” or “like kind.” The property exchanged must be held for productive use in a trade, a business, or for an investment.Jane sells her apartment building and realizes a $400,000 gain on the sale. Jane decides to defer payment of capital gains tax on the $400,000 by following the steps required for an exchange. She identifies a warehouse for the exchange and is then able to defer paying the taxes on the $400,000 until the warehouse is sold.

If a consumer has specific tax-related questions regarding exchanges, advise them to consult a tax expert. To have a transaction properly qualify for an exchange is a complex matter and should be handled by a tax expert. Licensees are not to provide legal advice or guidance beyond the scope of their real estate license.

2. Option to PurchaseAn option to purchase is an agreement to keep open, for a period of time, an offer to sell or lease real property. An option is commonly used to give the buyer time to resolve questions of financing, title, zoning and feasibility before committing the buyer to purchase. An option is often used in the collection of land. Tom wishes to collect thousands of acres to create a community-type subdivision. To collect the land, Tom would get as many options as needed on several parcels of land and once enough are collected to create the desired development, then Tom would exercise the options.

Only the seller, optionor, is bound by the option agreement. The buyer, the optionee, is never obligated to exercise the option. Generally a buyer pays an option fee to the seller to keep the option open. If the buyer does not exercise the option during that time frame, the state-approved option contract states that the fee is not refundable to the buyer. The optionor may sell a property bound by an option if the sale is permitted under the terms of the option con-tract, and the person purchasing the property has been informed about the existing option. If this occurs, then new owner of the optioned land must honor the terms of the option contract with the buyer. The option agreement should address issues such as assignments, purchase price, recording the documents, etc. The state-approved Option to Purchase form (WB-24) is discussed in a later chapter.Buyer submits to seller a $225,000 option to purchase agreement for the seller’s property. Buyer wants the ability to exercise the option within the next six months and seller accepts. If the buyer chooses to exercise the option within that six months the seller is obligated to sell, even if the seller does not want to or receives a better offer. If the buyer does not exercise the option and the six month period expires, the seller is free of the option.

3. Business SaleA business sale is any type of business that is for sale including the goodwill of an existing business and all the assets. A business sale does not necessarily include the building in which the business is located.Broker Ann owns a building and a restaurant within that building. Ann sells the restaurant. The sale includes the name of the restaurant (its goodwill) and the entire inventory but does not include the building. The new restau-rant owner purchased the inventory and goodwill and is renting the space from the building owner, Ann. A lease agreement would also need to be negotiated and executed.

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Exceptions: Who Does Not Need a Broker License?There are specific exceptions under state law to the broker license requirement. The following are allowed to be involved in transactions without a valid broker license:

1. Receivers, trustees, personal representatives, guardians, or other persons appointed by or acting under the judgment or order of the court. For example, a personal representative sells eight properties in one year to settle an estate. Although a pattern of sales is established, as the personal representative the individual is not required to have a broker license.

2. Public officers while performing official duties. A common activity for a sheriff is to sell properties at foreclosure sales. The sheriff is not required to be a licensed broker under these circumstances.

3. Any custodian, janitor, employee or agent of the owner or manager of a residential building who exhibits a residential unit therein to prospective tenants, accepts applications for leases and furnishes such prospective tenants with information relative to the rental of such unit, terms and conditions of leases required by the owner or manager, and similar information. Generally, this exemption relates to property management situations. The act of showing a unit to a prospective tenant does not require a real estate license. A license is required if the landlord wants the property manager to sign the lease on behalf of the landlord or negotiate the terms on behalf of the landlord.

4. Attorneys licensed to practice in the state of Wisconsin while acting within the scope of an attorney’s license. This exemption tends to cause confusion. An attorney drafting a contract for a party or protecting the interests of a party to a real estate transaction is acting within the scope of his attorney’s license and does not need a broker license. However, if the attorney wants to refer a buyer/seller to a real estate broker and then be paid a commission, the attorney would also need to be a real estate licensee. The attorney also needs a broker license if the attorney wants to list a property for a seller or enter into a buyer agency agreement with a buyer. These activities are brokerage services and require a broker license.

SalespersonA salesperson is defined as any person other than a broker or time-share salesperson who is employed by a broker to perform any act authorized by the state to be performed by a broker. In other words, a salesperson is one who holds a real estate license that is allowed to practice real estate under the supervision of a broker. A salesperson is a legal extension of the broker-employer (firm/company).

Since the salesperson must be employed by a broker to practice real estate, his employing broker has the legal ability to define the type of real estate the salesperson may practice. For example, a broker may limit the salesperson to only representing buyers in a real estate trans-action. A salesperson is not allowed to practice real estate unless he is employed by a broker. Lastly, a salesperson may be employed only by one broker-employer at a time.

AgentAn agent represents the interests of a principal in working with third persons. A client hires a firm as an agent and the firm hires the sales associate as the agent of the firm. The following are agents:ClientA client is a party to a transaction who has an agency agreement (a listing contract or buyer agency agreement) with a broker for brokerage services. The client is the party who hires the


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agent to represent their interests. Thus in a listing contract the seller is a client to the listing broker. A buyer who signs a buyer agency agreement is a client to the broker (buyer’s broker).

Principal BrokerA principal broker is a broker who engages a subagent to provide brokerage services in a transaction. In a typical transaction the principal broker is the listing broker. A subagent is the agent of the principal broker.

SubagentIn general terms a subagent is an agent who works under another agent. A subagent is a broker engaged by another broker to provide brokerage services in a transaction, but is not the other broker’s employee. Typically, a subagent is working with a buyer-customer and is not from the same company as the listing company. A broker may not engage another bro-ker to provide brokerage services as a subagent unless authorized in the agency agreement between the broker and client. This authorization is most often achieved in the listing contract. Subagents are simply assisting another broker in the transaction. Traditionally, the listing bro-ker is the principal broker and the subagent is a co-broker working with a buyer-customer.

Customer A customer is a party to a transaction who is provided brokerage services by a broker but who is not a client. A customer does not enter into an agency agreement (a listing contract or buyer agency agreement). The customer receives services given on behalf of and for the benefit of another. When a buyer is a customer that real estate company becomes a subagent of the listing firm and the listing firm is the principal broker. Customers represent themselves. The terms client and customer CANNOT be used inter-changeably. Understanding the difference between the two is paramount to competent prac-tice.

Agency ModelsConsumers have a choice of selecting the agency model that they wish the company be involved in during the real estate transaction. The client has three choices. The first is single agency. The second is multiple representation without designated agency, which involves lim-ited negotiations by the broker on the client’s behalf. The last choice is multiple representation with designated agency, also referred to as designated agency. Under designated agency the consumer receives full negotiation by the broker on the client’s behalf. Below is a discussion of the three agency models.

Single Agency Single agency is the practice of representing either the buyer or the seller, but never both as clients in the same transaction.

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Multiple Representation Multiple representation is a relationship between a broker and two or more of the broker’s clients in which the clients are in the same transaction. Multiple representation occurs when the buyer and seller are both clients of the same firm in the same transaction. All agency originates with the broker-employer. If, in the same transaction, one salesperson from a firm is representing a seller and another salesperson from the same firm is representing a buyer, the broker (firm) would have a multiple representation relationship with both buyer and seller.

Because of the potential conflicts, multiple representation relationships are only allowed with full written disclosure and consent from both parties. The consent must contain a statement of the broker’s duties owed to clients and to non-client parties, and that the client understands the broker’s duties and consents to the broker providing brokerage services to more than one client in the transaction. This language is incorporated into the listing and buyer agency agree-ments. A consumer selecting multiple representation may withdraw that choice at any time. Under Wisconsin agency law there are two forms of multiple representation: 1) Multiple representation without designated agency2) Multiple representation with designated agency

Multiple Representation without Designated Agency In this relationship, the broker continues to provide the services agreed upon in the agency agreements entered into with each client. However, the broker (firm) must take a neutral position in the negotiations of the transaction. Under multiple representation a broker and its employees (agents) may NOT place the interests of any client ahead of interests of any other in the negotiations.

If one client consents to multiple representation and the other consents only to single agen-cy, then for the company to participate: either 1)the single agency client must consent in writing to a form of multiple representation, or 2) the broker and client terminate that agency relationship or 3) the broker explains the firm cannot legally participate in the transaction.

Multiple Representation with Designated Agency Designated agency is a multiple representation relationship. However, in designated agency the employees of the broker (agents) are permitted to negotiate, provide informa-tion, opinions and advice on behalf of their clients. This can be done even if the information, opinions and advice place the interests of one of the broker’s clients ahead of the interests of the other. Because the agent’s may place their client’s interest ahead of the other, the same individual sales agent cannot represent both the buyer and the seller under desig-nated agency. There must be two agents of the broker involved, one for each client.

If a broker’s client in a multiple representation relationship does not consent to designated agency or withdraws consent to designated agency, the broker and the broker’s employees (agents) may not place the interests of any client ahead of the interests of any other in the negotiations.

Fiduciary A fiduciary is one in a position of confidence and is normally responsible for the money and property of another.

Cooperating BrokerCooperating brokers are firms, in addition to the listing firm, who participate in the transac-tion.


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The following terms are the labels assigned to brokers and agents during the course of a real estate transaction. Three scenarios are provided to aid in the learning process.

Listing BrokerThe firm that the seller employed under a listing contract is the listing broker. The listing bro-ker represents the seller. Listing AgentAn individual employed by the listing broker who actually secured the business for the listing firm is the listing agent. The listing agent is the agent of the listing broker and also represents the seller.

Selling BrokerThe firm which procured the buyer and wrote the offer is the selling broker. Typically the selling broker is the principal broker’s subagent.

Selling AgentThe selling agent is an individual employed by the selling broker’s firm who procured the buyer and wrote the offer. The selling agent is the agent of the selling broker.

Buyer’s BrokerThe buyer’s broker is the firm which has entered into a buyer agency agreement with the buyer indicating that the firm is representing the interests of the buyer. The buyer broker is the agent of buyer.

Buyer’s AgentThe individual employed by the buyer broker firm who is representing the buyer in the transac-tion is the buyer’s agent. The buyer’s agent is the agent of the buyer broker.

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Seller Agency (presuming a co-broker is involved)

Buyer Agency


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THE AGENT’S DUTIESDuties to All Persons in a Transaction (Memory trick for the following list is SHO CARD.)

Licensees owe certain legal duties to all parties in a transaction, regardless of whom they represent.

1. (S) Safeguard trust funds and other property held by the broker as required by the state. Brokers are responsible for items like earnest money and transaction documents.

2. (H) Provide brokerage services to all parties honestly and fairly. 3. (O) When negotiating on behalf of a party, licensees have the duty to present contract

proposals in an objective and unbiased manner and disclose the advantages and disad-vantages of the proposals.

4. (C) Keep confidential any information given to the broker, or any infor mation obtained by the broker that he knows a reasonable party would want to be kept confidential, unless the information must be disclosed by law or the person whose interests may be adversely affected by the disclosure specifically authorizes the disclosure of particular information. A broker shall continue to keep the information confidential after the transaction is complete and after the broker is no longer providing brokerage services to the party. Confidentiality survives the transaction. Selling agent Louie of XYZ is writing an offer for a buyer on a property listed by QRS at $175,000. The buyer tells Louie he will pay full price for the property but wants to try to get the property for $165,000. Louie cannot share with the buyer the fact that Louie thinks the property is overpriced, because the buyer is a customer and Louie is a subagent of the principal broker QRS. Also Louie may not tell the seller or listing agent that the buyer is willing to pay more.

5. (A) Provide accurate information about market conditions that affect a person’s transac-tion to any party who requests the information, within a reasonable time of the request. Upon request, the licensee needs to provide information such as the sales price of proper-ties, the list price and how long properties have been on the market.

6. (R) Provide brokerage services with reasonable skill and care. This statement is referring to the competency a licensee must possess when involved in a real estate transaction.

First, discrimination is prohibited. A licensee may not discriminate against, deny equal services to, or be a party to any plan or agreement to discriminate against any person in an unlawful manner under federal, state or local fair housing law.

Secondly, a licensee shall not provide services in which they are incompetent unless the licensee engages the assistance of one who is competent. Any person engaged to provide such assistance shall be identified and their contribution shall be described. This identi-fication requirement is only required if the individual is not employed by the real estate firm. For instance, an individual who is a newly licensed sales associate would most likely not be competent to provide services to a seller who wants to list a $1.6 million strip mall. The licensee would not have the knowl-edge or experience to properly represent the seller. The licensee should get assistance from another more experienced sales associate from their company, refuse the listing, or employ the services of outside help such as an attorney. If the attorney is assisting the agent, then the attorney shall be identified.

Lastly, licensees are required to protect the public against fraud, misrepresentation and unethical practices. Licensees must be knowledgeable regarding laws, public policies and current market conditions on real estate matters and assist, guide and advise the buying or selling public based upon these factors.

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7. (D) Disclose to each party all material adverse facts that the broker knows and that the party does not know or cannot discover through reasonably vigilant observation in a timely manner, unless the disclosure is prohibited by law. A material adverse fact is defined as an adverse fact that a party indicates is of such significance, or that is generally recognized by a competent licensee as being of such significance, that it affects or would affect the party’s decision to enter into a contract or agreement concerning a transaction or affects or would affect the party’s decision about the terms of such a contract or agreement. This portion of the law requires that a licensee disclose all information that is important to a party, such as structural defects, as well as information that a party stated as important. Licensees have an obligation to disclose material adverse facts if they are aware of them, there is not an obligation to investigate for material adverse facts. A buyer tells a licensee that they are allergic to cat dander and do not want a house where cats once lived. If the licensee finds out there were cats in a house, the licensee is obligated to disclose this information to the buyer. The licensee does not have the duty to investigate and determine whether there are, or have been, cats on the property.

Often determining if information is considered a material adverse fact may be difficult. Additional information about disclosure obligations are discussed later.

Occasionally, there is information of which disclosure is prohibited by law. An example of such information often relates to a protected class. A licensee may not disclose information which constitutes unlawful discrimination, such as a seller indicating they don’t want to sell a property to a certain ethnic or racial group and asks the licensee to describe the potential buyer’s ethnic background. The information cannot be disclosed because it is a violation of Fair Housing laws. Fair housing is discussed in a later chapter.

Pre-Agency StageOften there are situations where the broker provides brokerage services without having an agency agreement and has not yet become a subagent of the principal broker in the transac-tion. A buyer first meeting an agent and receiving information about the marketplace is not always ready to determine if they are willing to enter into a buyer agency agreement. The role of providing information to consumers may include showings prior to negotiations. For instance, a buyer-customer is shopping around for a house with a broker and has not written an offer on any properties with the agent. The licensee and buyer have not discussed their relationship possibilities; whether the buyer is a customer or a client. During this period the broker does not have an agency relationship. If a buyer decides to forego entering into a buyer agency agreement, the broker does not have an agency relationship until negotiations begin.

In this pre-agency stage, the broker and its agents owe the duties to all persons. The broker may not provide any party in the transaction advice or opinions relating to the transaction that are contrary to the interests of any other party unless required by law. This ensures the agent stays in the neutral role of providing information to the consumer without taking an agency/advocacy role for either party. The sellers and listing brokers can rest easy that the pre-agency stage agents conducting showings are not providing advice or opinions contrary to the seller. The licensee is not acting as an agent for either party, but is simply providing the consumer with information.


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Duties Owed to a Client (Memory trick for the following is NO LID.)

In addition to the duties owed to all persons, agents owe additional duties to their clients. The duties owed to all persons supersede the duties owed to a client if the two are ever in conflict. A client is a party who has signed a listing contract or buyer agency agreement.

1. (N) Negotiate on behalf of the client unless released from this duty.Waiver of the Duty - Most duties cannot be waived by a broker. However, the duty of negotia-tion may be waived by a client in part or full, if an express written waiver of that duty is made by the client. The broker must provide to the client a written disclosure containing all of the following:a) A copy of the text of what the client was waiving and a statement that, as a consequence of the client’s waiver, the broker will have no legal duty to perform the duty of negotiation.b) A statement that as a consequence of the client’s waiver, the client may require the assistance of an attorney or another service provider to fulfill the client’s goals and contrac-tual duties in the transaction.

This specific written disclosure serves two purposes, one to ensure the client understands the significance of waiving this service. The second, to warn the client that because of this waiver the client may require the assistance of an attorney or another settlement service provider during the transaction.

2. (O) Fulfill any obligation required by the agency agreement (listing contract/buyer agency agreement) and any order of the client that is within the scope of the agency agreement and is consistent with other duties.

3. (L) Loyally represent the client’s interests by placing the client’s interests ahead of the broker’s interest. The broker may not, unless required by law, give information or advice to other parties who are not the broker’s clients, if giving the information or advice is contrary to the client’s interests. Alfred is working with a buyer. The buyer indicates she is looking for waterfront property with 200 ft. of lake frontage with an existing home in good condition. The home must have at least 2,000 sq. ft. and the entire property cannot cost more than $150,000. Alfred knows this will be almost impossible to find and he thinks to himself if he found it—he’d purchase it. Surprisingly, the property described above becomes available for sale. As a selling agent Alfred can buy the property himself. If he is acting as a buyer’s agent he is obligated under loyalty to put the buyer’s interests ahead of his own and inform the buyer about the property.

4. (I) Provide, when requested by the client, information and advice to the client on matters that are material to the client’s transaction and that are within the scope of the knowledge, skills and training.

5. (D) Disclose all material facts affecting the transaction, not just adverse facts. This is information known by the broker that is material to the transaction and that is not known by the client or discoverable by the client through reasonably vigilant observation, except for the confidential information and other information that under the law cannot be dis-closed. This disclosure duty may seem very similar to the disclosure duty owed to all parties but there is a significant difference - the term adverse. A licensee must disclose to all parties mate rial adverse information; in essence, information that is important and nega-tive. A client, in addition has the right to disclosure of material information. A client must be informed of all important information regardless if it is positive or negative.

A buyer’s agent is selling a property to a buyer-client. Prior to presenting the offer to the seller the buyer’s agent discovers the zoning has changed, resulting in a significant increase of the property’s market value. The buyer’s agent is obligated to share this information with the buyer-client so it can be taken into consid-eration while negotiating the existing offer. There is not an obligation to share this information with the seller-customer. The information is material but not materially adverse.

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Duties for Subagents A subagent is a broker engaged by a principal broker to provide brokerage services in a trans-action, but who is not the principal broker’s employee. A broker engaged to provide brokerage services in a transaction as a subagent owes the duties to all persons as well as the duty of loyalty to the seller. Because subagents are not a party to the agency agreement between the principal broker they should not be subject to the provisions of the agency agreement. For instance, the duty to fulfill obligations.

A subagent of a listing broker who is helping a buyer-customer on the potential purchase of the listing, cannot put their interest ahead of the sellers or provide the buyer advice or opinions contrary to the interests of the seller unless required by law. The subagent cannot give the buyer an opinion that the property is overpriced or advise the buyer to offer less than the list price. If the buyer wants this type of opinion or advice, a buyer agency agreement between the broker and buyer is required. A subagent may negotiate on behalf of a person who is not the broker’s client if the principal broker engages the subagent with the client’s consent. A subagent is required to provide the party a disclosure form stating the broker’s duties.

AGENCY DISCLOSURE OBLIGATIONSWisconsin statutes require real estate licensees to discuss agency relationships with buyers and sellers prior to providing brokerage services. The state requires certain mandated plain-English disclosure language be provided to customers and clients involved in real estate transactions. The plain-English disclosure was created to ensure that these important disclosures to the con-sumer are meaningful.

Any agency agreement approved by the state (WB) from the year 2008 and after reflects the correct disclosure language. The Wisconsin REALTORS® Association (WRA) developed dis-closure forms so proper agency disclosure is provided to the consumer. Licensees must inform the consumer of the disclosure obligations. Any of the disclosure forms developed to meet the disclosure obligations must contain the state-mandated language.

Customer Agency Disclosure ObligationsA broker (via their agent) may not negotiate on behalf of a customer unless the broker provides to the party a copy of the state-mandated written disclosure statements. The state-mandated written disclosure states to the consumer that they are a customer of the broker. Followed by the broker is either an agent of another party (e.g. listing broker or buyer’s broker) in the transaction or a subagent of another broker in the transaction (e.g. selling broker). The statement informs the customer that the broker or salesperson for the broker may provide brokerage services to the customer.

The state-mandated language also contains the plain-language summary of the broker’s duties to a customer. Please review the previously discussed duties to all persons. A copy of the WRA Broker Disclosure to Customer form is in the Forms Appendix and should be reviewed simulta-neously to this discussion. Listing broker Smith Realty has a seller-client. The Buyer wants Jones Realty to write an offer on the Smith Realty listing, but does not wish to sign a buyer agency agreement with Jones Realty. Jones Realty becomes a subagent of Smith Realty. Due to the state-mandated agency disclosure laws, Jones Realty has certain disclosure obligations to make to the buyer. Jones Realty has to inform the buyer-customer that the buyer is not a client and then go through disclosing duties owed to all persons in a real estate transaction.


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Client Agency Disclosure ObligationsA broker (via their agent) shall provide a copy of the state-mandated written disclosure state-ments to a client no later than the time the broker enters into an agency agreement (listing contract or buyer agency agreement) with the client. Simply stated, at the time of entering an agency agreement the broker must address agency disclosure.

The following discussion details the state-mandated client disclosure information. During this discussion please refer to the agency disclosure language included on lines 86-163 of the WB-1 Residential Listing Contract. A copy of this form is included in the Forms Appendix.

The mandated client disclosure language restates the duties owed to all persons followed by the duties owed to a client. Please review the previous duties owed to client section in the materials. The client disclosure language also addresses the issue of multiple representa-tion without and with designated agency. This disclosure reiterates that a salesperson will not reveal any of the client’s confidential information to another party unless the licensee is required to do so by law.

An example of information that the licensee may be required to disclose by law is a material adverse fact known to the licensee which the seller has failed to disclose.

The state required client disclosure language also informs the client of multiple representation. The client disclosure provides a space for the client to indicate one of three choices for the agency relationship. See the options stated below. It also indicates to the client that they may withdraw consent to multiple representation relationships by written notice at any time. Please review the previously discussed agency models for further clarification relating to the options below.

INITIAL ONLY ONE OF THE THREE LINES BELOW:______I consent to designated agency.______I consent to multiple representation relationships, but I do not consent to designated agency.______I reject multiple representation relationships.

Licensees must be able to communicate clearly what all of the options represent, indicate that the client may only select one option and must do so by the client initialling on the blank line. All clients to the agreement must unanimously agree on the agency model and the licensee is strongly encouraged to have all of the clients to the agency agreement initial.

The state-mandated client language declares the broker is required to disclose in the agency agreement the commission or fees the client may owe to the broker. The disclosure statement also indicates that any questions the client has about the broker’s commissions or fees should be asked before signing the agreement.

The disclosure language reminds the client that the broker or a salesperson can answer the cli-ent’s questions about brokerage services, but cannot provide legal advice. It also declares that if a client enters into an agency agreement with a broker to receive brokerage services related to real estate primarily intended for use as a residential property containing one-to-four dwelling units, the broker shall request the client’s signed acknowledgement that the client has received a copy of the written disclosure statement. Simply presenting the agency agreement (listing contract or buyer agency agreement) and having the client sign the agreement is enough.

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Providing Agency Disclosure Agency disclosures must be provided in ALL transactions; whether residential or commercial. There are no exemptions to the required disclosure. The agency disclosure must also be pro-vided in property management transactions if a property manager is going to be negotiating a lease on behalf of a landlord.

Acknowledgement of Agency Disclosure Licensees are required to request the party’s acknowledgment of the agency disclosure only in residential transactions involving one-to-four dwelling units. This acknowledgement can occur by having the parties sign or initial an agency disclosure form as a customer or an agency agree-ment as a client.

ClientsAll of the 2008 agency agreements do not require an additional disclosure form for clients. Until the remaining listing contracts WB-6 Business Listing Contract and WB-8 Time Sharing Listing Contract are revised, the best practice is to present a separate broker client disclosure form and request a signature before entering into the listing agreement.

CustomersCustomers are presented the disclosure form prior to negotiations. The WRA-created form pro-vides spaces for the customer’s initials, date, and printed name. One important element of the customer disclosure form is that it does not create any contractual or legal obligation on behalf of the buyer or seller. The purpose of the agency disclosure form is to meet the licensee’s state-mandated disclosure of agency.

Even though the licensee is required to ask for the buyer’s/seller’s acknowledgement in resi-dential one-to-four dwelling unit transactions the buyer/seller is not required to sign the form. If the buyer/seller refuses to sign the form the licensee should make note of such on the form, date the form and place it in the buyer’s/seller’s file.

Additional Disclosure Obligation by Buyer’s Broker A licensee representing a buyer (buyer’s broker) of real estate intended to be used principally for one-to-four family residential purposes, who is negotiating directly with the seller or listing broker, must notify the seller or listing broker of the buyer agency relationship at the earlier of the following:

1) The first contact with the seller or the listing broker where information regarding the seller or transaction is being exchanged;

2) A showing of the property;3) Any other negotiations with the seller or listing broker.

The best policy is to disclose buyer agency status at first contact. Disclosing that the licensee is a buyer’s agent at first contact prevents confusion down the road and allows the seller and listing broker to understand which side the agent is representing.

SELF-DEALINGUnder the law of agency, an agent is prohibited from competing with a principal. This concept is referred to as self-dealing. A licensee cannot perform services on behalf of a party with undivided loyalty when the licensee has their own interest at stake. Wisconsin law allows for a licensee to participate in self-dealing in limited situations, if there is full written disclosure and consent to the self-dealing.


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The following are considered forms of self-dealing: 1. Receiving compensation related to the real estate transaction from someone other than

the licensee’s client without prior written consent from all parties to the transaction. This consent is typically obtained by including a statement in the offer to purchase and buyer agency agreement that indicates the licensee will receive compensation from another person.

This commonly occurs in buyer agency situations. Anne and her buyer enter into a buyer agency agreement. On line 32 of the agreement the statement allows her to be compensated directly from the seller or listing broker. Anne drafts an offer on behalf of her buyer for a property that is being sold by owner. In the offer the buyer adds language indicating that seller will pay Anne’s 5 percent commission at closing.

2. Licensees acting as agents in a transaction are NOT allowed to act on their own behalf, on behalf of an immediate family member or firm, or on behalf of any other organization or business entity in which the licensee has an interest without the prior written consent of all parties to the transaction. This disclosure is typically made in the offer to purchase.

Licensee Todd is writing an offer for his Dad. In the offer Todd includes language that states he is the child of the buyer. At minimum, he should disclose this in the offer which most often is done in the Additional Provisions.

The term immediate family is defined by the state as: parents, step parents, grandparents, foster parents, children, stepchildren, grandchildren, foster children, brothers and their spouses, sisters and their spouses of a licensee or a licensee’s spouse, the spouse of a licensee, aunts, and uncles, sons-in-law or daughters-in-law of a licensee or a licensee’s spouse.

3. Licensees acting as agents in a real estate transaction may NOT receive referral fees from or pay referral fees to individuals or entities for a referral.

A licensee who refers a lawn maintenance company to a seller may not receive a referral fee from the lawn maintenance company. A licensee that is a part owner in a construction company cannot refer their company to the seller unless, along with the referral, there is written disclosure and consent of all the parties.

An EXEMPTION does exist for referral fees between real estate licensees. These types of referral fees do not need to be disclosed. Although not required, a written agreement detail-ing the terms of the agreement between the two licensees is recommended.

Joshua’s sellers are moving to Florida and he refers them to a Florida licensee. When the sellers purchase their Florida home, Joshua receives a referral fee from the Florida licensee as per the licensees’ agreement. This referral fee does not need to be disclosed to the sellers because it is occurring between real estate licensees.

4. A licensee acting as a principal (the licensee is buying or selling property for themselves) in a real estate transaction CANNOT accept a commission, rebate or profit on expendi-tures made by any other party to the transaction without the written consent of the party.

Ethan, a licensee, is purchasing property for himself. He cannot collect a com mission from the seller or list-ing broker for the purchase. In practice, Ethan may negotiate an “incentive” in writing prior to closing. The incentive agreement should identify the parties, what the incentive is, how it is earned, when it is paid and who will pay it. Rather than an incentive, Ethan may choose to adjust the purchase price.

5. A licensee acting as a principal in a real estate transaction shall disclose his license status and intent to act in the transaction as a principal at the earliest of: a) The first contact with the other party or an agent representing the other party where

information regarding the other party or the transaction is being exchanged; b) A showing of the property; c) Or any other negotiation with the seller or the listing broker.

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The disclosure of license status can be made either directly to a buyer, seller, landlord, ten-ant, or to an agent representing the other party. 6. Licensees are NOT allowed to enter into tie-in arrangements. This means that they can-

not condition the sale of real estate either owned by the licensee or controlled by the licensee upon the buyer’s agreement to purchase another parcel of real estate or enter into a listing with the licensee.

An EXEMPTION exists in certain situations involving a builder. It is permissible for a builder to require buyer use a certain builder to improve a property. Permissible builder tie-arrangements may occur if:a) The builder owns a bona fide interest in the real estate and there is full disclosure

relating to this interest.b) The builder and the licensee or the builder and the owner of real estate are the

same person or are commonly controlled corporations and whose business is selling improved property and not vacant land; and there is full disclosure. ABC Builders just purchased 15 acres and plans to create a subdivision. The builders tells the buyer who wants to live in the subdivision they must use the builder to build their home. The builder will com-plete the home and then sell both the house and the lot to the buyer.

c) The agreement is a bona fide effort to maintain development quality or architectural uniformity and no consideration passes from contractor to licensee for soliciting this agreement. The subdivision deed restrictions require a certain builder to be used for architectural uniformity.

THE REAL ESTATE OFFICEThere are two main categories of individuals who work in a real estate office, licensed and unli-censed individuals. The licensed individuals, either brokers or salespersons, are allowed to par-ticipate in licensed activity such as conducting open houses, negotiating on behalf of the parties and showing properties to buyers. The unlicensed individuals provide some type of administrative support to the licensed individuals, such as managing the paperwork in a transaction, creating marketing and advertising materials or completing a contract at the direction of a licensed indi-vidual. An unlicensed personal assistant may NOT assist a licensee at an open house without direct on-site supervision and presence of a licensee, and may NOT provide services for which a license is needed.

Individuals who hold a broker license and are employed under a broker-employer are called broker-employees. These individuals are allowed to engage in the practice of real estate in his or her own name if he or she receives written permission from the broker-employer and avoids conflicts of interest with his or her employment.Adam has a property management business. He decides he wants to get involved in commercial real estate but wants to work underneath an established broker. Adam and his broker-employer enter into an agreement that allows Adam to continue to run his property management business and keep all the monies from that business separate from any type of commercial brokerage that he enters into.

Broker SupervisionA broker-employer shall supervise the activities of any licensee employed by the broker. Supervision includes, but is not limited to, the reasonable review of all listing contracts, offers to purchase, trust account records and other documents and records related to transactions as well as providing all licensees reasonable access to a supervising broker for purposes of consultation regarding real estate practice issues.


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Broker-employers shall provide all licensed employees with a written statement of procedures under which the office and employees shall operate with respect to handling documents relating to the real estate transaction. The broker’s supervision responsibilities consist of the preparation, custody, safety and correctness of all entries on real estate forms, closing state-ments and other records. Supervision duties may be delegated by the broker in writing. Broker-employers must also ensure that all licensed employees are properly licensed.

Personal AssistantsIn addition to brokers and salespeople, a real estate office may employ personal assistants. A personal assistant typically has been hired to help a firm’s sales associate with his or her real estate business. Personal assistants can be either licensed or unlicensed.

Unlicensed Personal AssistantThe state defines an unlicensed personal assistant as a person not licensed under state law or a person who is licensed but not employed for the purpose of providing services for which a license is required. This seems like an awkward way to define an unlicensed personal assistant but it does make sense in situations where an individual who holds a valid real estate license wants to handle the administrative tasks of another real estate licensee, and does not want to be involved in the actual practice of real estate.

Unlicensed personal assistants can be employed either by the broker-employer or the real estate licensee he or she is assisting. Also, unlicensed personal assistants cannot receive payment based upon production (commissions). He or she must be paid either hourly or salary wages.

Licensed Personal AssistantLicensed personal assistants, because they have the ability to practice real estate, must be employed directly by the broker-employer. Licensed personal assistants can be paid based upon production, hourly, or salary.

Notifying the Department of Safety and Professional ServicesLicensees have responsibilities to notify the Department regarding changes to their practice thus affecting their license. The following are some circumstances of when a licensee is required to notify the Department.

• A licensee who wishes to engage in real estate practice as an employee of a broker-employ-er shall notify the Department of the name of the broker-employer on forms provided by the Department.

• All real estate licensees must notify the Department of their licensed status and any changes made to their license.

• The Department must be notified of a licensee’s employment prior to the licensee practicing real estate.

• If the licensee transfers to another company the Department must be notified upon transfer and pay a fee.

• A licensee who terminates employment must notify the Department in writing within 10 days of termination.

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TRUE/FALSE

1. T/F Brokers and salespersons are considered licensees but time-share salespersons are not.

2. T/F An example of an exchange would be where a seller exchanges his personal residence for a four-unit apartment building.

3. T/F Under an option to purchase both the seller and buyer are obligated to complete the sale of the property.

4. T/F When selling a business it must be determined whether the sale includes any real property.

5. T/F A builder who enters into 10 building contracts in one year must have a broker license.

6. T/F A broker-employer does NOT have the authority to limit a salesperson to working with only buyers.

7. T/F One may act as a property manager without being licensed under state law.

8. T/F A personal representative may create a “pattern of sales” without being licensed under state law.

9. T/F The term client and customer both refer to the party represented in a real estate transaction.

10. T/F Sally listing agent writes an offer for a buyer-customer on her listing. Sally has a multiple representation relationship.

11. T/F Stephanie, a buyer’s agent for company A, writes an offer on one of company B’s listings. Company A and company B are acting as co-brokers.

12. T/F If a licensee has to choose between complying with a duty owed to all persons or a duty owed only to a client he should comply with the duties owed to all persons.

13. T/F A licensee is obligated to disclose to a customer all material facts in a real estate transaction.

14. T/F The duty of confidentiality survives the real estate transaction.

15. T/F A buyer’s agent from XYZ has a buyer request information on properties that have recently sold in a neighborhood so they can determine the offering price for a home listed by ABC. The buyer’s agent provides the data sheets to the buyer along with an explanation that suggests the list price of the home is too high. The buyer’s agent is acting properly according to agency law.

16. T/F A listing agent discloses in writing to the buyer that there is a leak in the seller’s basement. This disclosure is made against the seller’s wishes. The listing agent is acting properly according to agency law.


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17. T/F A licensee representing a buyer in a real estate transaction must notify the seller or listing broker of their agency status.

18. T/F Agency disclosure is only required on residential one-to-four family transactions.

19. T/F The broker disclosure to customer form obligates the buyer to work with a particular licensee.

20. T/F The broker disclosure to customer form must be signed by the buyer on all one-to-four family transactions.

21. T/F Multiple representation is allowed only with full written disclosure to and written consent from all parties to the transaction.

22. T/F In a multiple representation relationship without designated agency the broker takes a neutral position in the negotiations of the transaction.

23. T/F If broker D is engaged in multiple representation with designated agency, broker D’s agent may provide the client information and advice to assist the client in the negotiations.

24. T/F Consumers who choose multiple representation with designated agency do NOT have to consent in writing.

25. T/F If a broker’s client withdraws consent to multiple representation with designated agency, the broker must remain neutral even if their other client in the transaction has consented to multiple representation with designated agency.

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TRUE/FALSE ANSWER KEY1. False: The state defines a licensee as any person licensed or registered under state law and

this includes a broker, salesperson, or time-share salesperson.2. False: The property involved in an exchange must be held for productive use in a trade, a

business, or for an investment. It cannot be the property owner’s personal residence.3. False: Only the seller (optionor) is bound by the option agreement.4. True.5. False: The requirement of a broker license applies when the sale of real estate or business

opportunities is involved. The sale of a building contract is a personal property transaction; therefore, there are not limits that a builder needs to be concerned with. If the building contracts included the sale of the land then the builder would be concerned with the pattern of sales rule.

6. False: A broker-employer can limit or define the types of real estate transactions one of his agent’s can participate in because the agent is a legal extension of the broker.

7. True.8. True.9. False: A client is the party being represented in a real estate transaction. The customer

does not receive representation.10. False: Sally the listing agent is representing the seller and working with the buyer. Sally may

have created an implied agency relationship with the buyer if she had treated the buyer as a client, but the facts do not present such circumstances. Implied agency is discussed in detail in the next chapter.

11. True.12. True.13. False: A licensee must disclose to a customer all material adverse facts. There is a

difference between a material adverse fact and a material fact. A material fact is something that must be disclosed only to a client.

14. True.15. True: The buyer’s agent, because he represents the buyer, can suggest that the buyer

write an offer for a dollar amount less than list price. The buyer’s agent is acting properly by providing the data sheets to the buyer and may interpret the information on those sheets for the buyer.

16. True.

17. True.

18. False: Agency disclosure is required on all real estate transactions.

19. False: The broker disclosure to customer form does not create any contractual or legal obligations on behalf of the buyer or seller. The purpose of the agency disclosure form is to meet the licensee’s state-mandated disclosure of agency in a timely manner.

20. False: A licensee is required to ask for the buyer’s/seller’s signature on a broker disclosure to customer form in residential one-to-four family transactions; however, the buyer/seller is not required to sign the form.

21. True.


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22. True.23. True.24. False.25. True.

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CASE STUDIES

1. Contractor Michael is starting his new subdivision at Sunshine Acres. Sunshine acres consists of 20 lots. He is planning on selling all 20 lots this year. What concerns, if any, should Michael have if he is successful in selling all 20 lots this year?

2. A selling agent is drafting an offer for buyers on a vacant lot. When presenting the offer to the listing broker, the selling agent mentions she is related to the buyers and the buyers have refused to sign a buyer’s agency agreement. Is this permissible? If so, what should the selling agent do to disclose the relationship with the buyers.

3. A broker has hired an unlicensed personal assistant. The broker will not be able to sit at an open house this weekend. Is it legally permissible for the assistant to be at the open house alone just hand out brochures?


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4. A licensee had a listing that closed several months ago. The buyer has been dissatisfied since the day he moved in. The buyer has repeatedly asked the listing broker for the seller’s new address and phone number. Is the listing broker obligated to give this information to the buyer?

5. Tim is a non-licensee manager of an apartment complex for Peter. Does Tim need to have a real estate license or does it depend on the acts he performs as the property manager?

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CASE STUDIES ANSWER KEY1. According to Wis. Stat. §452 Michael should be concerned about creating a pattern of sales by

being involved in more than five sales in one year. If he meets the pattern of sales, Michael may be in violation of practicing real estate without a license. To avoid this violation Michael should either obtain a broker license or hire a broker to represent him in the sale of the lots.

2. Yes. Agency law allows an agent of the seller to be related to the buyer if all parties consent. However, a selling agent related to the buyer should disclose the relationship to the seller in writing as part of the offer.

3. No. Per administrative rules, an unlicensed personal assistant would need to have onsite supervision by the broker or another real estate licensee.

4. No, the agent is not obligated under law to give the this information. Arguably, the seller’s address is confidential information and licensees are required to keep confidential any information given to the broker in confidence. Wis. Stat. §452.133(d) states that the duty of confidentiality shall continue after the transaction is complete. The listing broker may contact the seller and ask for permission to give the buyer the requested information. In the alternative, the agent may provide the buyer’s information to the seller and allow the seller to contact the buyer directly.

5. A property manager does not need to be licensed as a broker, although many are. Rental agents who merely show residential rental property, accept applications and provide information to prospective tenants are not regarded within the definition of “broker.” However, actual negotiations of lease terms or entry into a lease by the rental agent on the landlord’s behalf are acts of real estate brokerage, and therefore, require licensure.


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EXAM1. A broker wishes to purchase a property he has listed. The biggest danger in this situation is the

broker will breach his duty of:a. careb. confidentialityc. loyaltyd. obedience

2. An Agreement whereby one of the parties acquires the right to purchase a parcel of real estate at a fixed price within a certain period of time is called:a. an exchangeb. an offer to purchasec. a leased. an option

3. Sam Seller listed his property with salesperson Sadie Thompson who works for Broker XYZ. Which of the following statements INCORRECTLY describes the relationships among the parties?a. XYZ is the agent of Sam Seller.b. Thompson is the agent of XYZ.c. Thompson and XYZ owe fiduciary duties to Seller.d. If Thompson dies, the agency will be terminated.

4. High Quality Builders owned a lot in a subdivision and sold the lot to the Andersons. There was a contingency in the offer requiring the Andersons to build their home with High Quality Builders. This is a/an: a. illegal tie-in arrangement because it is a violation of antitrust lawsb. illegal tie-in arrangement because it is a violation of Wisconsin administrative rules c. legal tie-in arrangement according to Wisconsin administrative rulesd. llegal tie-in arrangement because High Quality Builders are obviously high quality

5. Broker Smith is also licensed as an insurance agent. Smith lists the property of Jones and wants to also sell Jones household insurance on the new property Jones is moving into. Smith:a. is acting unthically and may not represent himself as an insurance agent with his principalb. is acting ethically and may freely sell all of his clients and customers insurancec. is acting ethically only if Jones is informed of the self-dealingd. must do his insurance business in a separate office from his real estate office and never mix

the two

6. Broker Abe is going to sell property that is owned by his son. To assure that Abe meets the requirements of Wisconsin’s administrative rules on ethical conduct, it is essential that Abe:a. makes full disclosure of the property’s ownership to any other party involvedb. refuses to list the property because of potential conflict of interestc. declines to accept any commission from the son for selling the propertyd. notifies the Department of the self-dealing

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7. If Brad Barnard listed his real estate for sale with Lawton, a licensed real estate broker, which of the following describes this relationship?a. Barnard is Lawton’s client.b. Barnard does not have an agency relationship with Lawton.c. Lawton is the selling broker to Barnard.d. Lawton is an agent, but not a fiduciary to Barnard.

8. Which of the following is an INCORRECT statement relating to broker-employer supervision responsibilities?a. Reasonable review of all documents and records related to transactions.b. Ensure all licensed employees are properly licensed.c. Supervision duties may not be delegated by the broker-employer.d. Provide all licensed employees a written statement detailing the office procedures of handling

transaction documents.

9. Listing broker Jessica owes the duties of providing brokerage services fairly and honestly, providing accurate market conditions, safeguarding trust funds, using reasonable skill and care, disclosure of all material adverse facts, confidentiality, and objectively presenting offers to:a. the sellerb. the buyerc. the selling brokerd. all parties to the transaction

10. A salesperson, when representing a buyer or seller:a. Must act as a selling subagentb. Can carry out activities in his/her namec. Is responsible to the broker under whom he or she is licensedd. May practice without working for a broker

11. If two brokers were involved in one transaction, it would be known as?a. Single agencyb. Multiple Representationc. Unethicald. Cobrokerage

12. According to Wisconsin state statutes, when is a licensee required to inform a client about multiple representation relationships?a. When presenting the closing statementb. When entering the agency agreementc. Before commission is paidd. Any time

13. The listing broker owes all the following duties to seller EXCEPT:a. loyaltyb. insider tradingc. negotiation unless waivedd. disclosure of material facts


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14. In Wisconsin, a real estate broker acting as the listing broker:a. is obligated to fulfill the requirements within the scope of the agency agreement b. can make a profit at the seller’s expense, no matter whatc. can represent a buyer and place their needs ahead of the seller’s in the sale of the seller’s

home, if the buyer agency agreement was signed before the listing contractd. must always put the needs of the seller first

15. Broker Corinne Anderson lists Sam and Julia Kaufman’s house for $87,000. Sam has been transferred to another state and the couple must sell their house quickly. To expedite the sale, Anderson, without the seller’s permission, tells a prospective buyer that the couple will accept at least $5,000 less for the house. In this situation: a. Anderson has not violated her agency responsibilities to the Kaufmansb. Anderson should have disclosed this information to the buyers since it will help sell the homec. Anderson violated her agency responsibilities to the Kaufmansd. Anderson did not violate any laws

16. The seller hires which of the following?a. Listing brokerb. Listing agentc. Selling brokerd. Selling agent

17. Which of the following is INCORRECT in a multiple representation relationship?a. The multiple representation must be disclosed in writing.b. Both parties must consent in writing to the multiple representation.c. The party with the earliest signed agency contract will receive the higher level of brokerage

services.d. Both parties have the right to confidentiality.

18. Which of the following is a TRUE statement regarding broker agency disclosure?a. The disclosure and request for acknowledgment must occur on a single family transaction.b. Is not required in commercial transactions.c. Must occur prior to providing a buyer with information on a specific property.d. Is only mandatory in a customer relationship.

19. A broker shall provide a copy of the state-mandated written disclosure statements to a client no later than:a. writing the offerb. negotiating on the client’s behalfc. closingd. entering into an agency agreement with the client

20. What is a fiduciary?a. A set of laws which apply to the responsibilities and obligations of a person who acts for

another.b. One who acts as a trustee or who has a legal duty to act in a confidential manner on behalf of

another person.c. One who originates or starts an action which results in a desired transaction.d. A set of principles by which one conducts his business affairs.

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21. When a salesperson terminates his employment, the salesperson MUST:a. surrender his license to the Departmentb. complete termination paperwork within 10 days of terminatingc. notify the Department writing of the termination within 10 daysd. ensure that the broker has filed termination paperwork with the local real estate board

22. One who negotiates for another, for compensation in matters of real estate is the definition of a:a. brokerb. real estate companyc. salespersond. firm

23. A broker is entitled to collect a commission from both the seller and the buyer when:a. the broker holds a state licenseb. the buyer and the seller are relatedc. both parties agree in writingd. both parties have an attorney

24. Which of the following is NOT acting as a licensee?a. Brokerb. Salespersonc. Time-share salespersond. Unlicensed personal assistant that holds a valid real estate license

25. Nate is selling his own residential property and along with the buyer intends to fill-out the approved offer to purchase form. Nate:a. must be licensedb. need not be licensedc. must have his lawyer fill out the formd. must have a licensee fill out the form

26. Buyer Cannon enters into an option contract with Seller Sands. It is TRUE that:a. Cannon is the optionorb. Cannon is bound by the contractc. Sands is bound by the contractd. Sands is the optionee

27. The duty of negotiation may be waived by a client:a. in part or fullb. if an express written waiver is made by the clientc. if a properly executed express written waiver is made by the client, then the broker will not

have a legal duty of negotiationd. all of the above

28. Presumptive evidence of a pattern of sales is considered to be:a. five sales in one year or 10 sales in five yearsb. 10 sales in five years or one sale in 10 yearsc. five sales in five years or 10 sales in 10 yearsd. 10 sales in one year or five sales in five years


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29. An unlicensed personal assistant may perform all of the following EXCEPT:a. conduct an open house with a licensee presentb. create marketing pieces for the licensee’s listingsc. complete an approved form at the direction of the licenseed. negotiate an offer on behalf of a licensee’s buyer

30. Which of the following activities require a real estate license?a. A sheriff conducting a foreclosure sale.b. A loan officer completing a loan application.c. An attorney representing his client in a real estate transaction.d. An individual negotiating the terms of another’s business sale.

31. Which of the following is a TRUE statement regarding multiple representation with designated agency?a. both buyer and seller are customers of the same broker in the same transactionb. clients that select designated agency must consent in writingc. both buyer and seller may be represented by the same salespersond. consumers who selected designated agency never may withdraw their consent.

32. Under multiple representation with designated agency:a. if both parties consent to designated agency in writing each salesperson may negotiate on

behalf of their client, even if the negotiation places the interests of one client ahead of anotherb. if a client consents to designated agency the salesperson would remain neutralc. once a client consents to designated agency they may not withdraw their consentd. if the client consents to designated agency the salesperson may place the broker’s interest

ahead of the clients

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EXAM ANSWER KEY1. C: If a broker tried to purchase a property that he had listed he would not be able to keep the

seller’s interest ahead of all other interests in the transaction. Therefore it is likely that he would be violating his duty of loyalty to the seller.

2. D: An option is an agreement to keep open, for a set period, an offer to sell or lease real property.

3. D: The agency relationship is between the broker and the seller so the death of the listing agent would not affect the agency relationship.

4. C: RL §24.075(3)(a) Licensees shall not condition the sale of vacant real estate owned by the licensee or whose sale is effectively controlled by the licensee upon the buyer’s agreement to employ one or more specific builders to make improvements on the real estate unless the builder owns a bona fide interest in the real estate and there is full disclosure.

5. C: RL §24.05(2) A licensee acting as an agent in a real estate transaction may not act in the transaction on the licensee’s own behalf, on behalf of the licensee’s immediate family or firm, or on behalf of any other organization or business entity in which the licensee has an interest without the prior written consent of all parties to the transaction.

6. A: RL §24.05(2) A licensee acting as an agent in a real estate or business opportunity transaction may not act in the transaction on the licensee’s own behalf, on behalf of the licensee’s immediate family or firm, or on behalf of any other organization or business entity in which the licensee has an interest without the prior written consent of all parties to the transaction.

7. A: Brad Barnard hired Lawton to represent him in the sale of his home. Therefore Barnard is the client of the listing broker, Lawton. As a listing broker Lawton is a fiduciary to Barnard.

8. C: A broker-employer supervision responsibilities do include reasonable review of all documents and records relating to transactions (RL §17.08(1)), ensuring all licensed employees are properly licensed (RL §17.07), and providing all licensed employees a written statement of office procedures on handling transaction documents. Also, RL §17.08 states a broker-employer MAY delegate supervision duties in writing to another.

9. D: Chapter §452.133(1) in providing brokerage services to a person to a transaction, a broker shall do all of the following: provide brokerage services to all parties to the transaction honestly and fairly; exercise reasonable skill and care; disclose to each party all material adverse facts; keep confidential any information given to the broker in confidence; provide accurate information about market conditions; safeguard all property coming into the possession of a broker; and when negotiating on behalf of a party, present contract proposals in an objective and unbiased manner.

10. C: A salesperson is only allowed to conduct the practice of real estate under the supervision of the employing broker.

11. D: A cobrokerage is a transaction where two firms are cooperating in the sale. One firm is the listing broker and the other firm is either the selling broker or the buyer broker.

12. B: Agency must be disclosed to customers before negotiations begin. Agency disclosure must be provided to clients at the time of entering into the agency agreement. Therefore, each client chooses to consent or not consent to multiple representation at the time of the agency agreement.


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13. B: The seller is the listing broker’s client. Therefore, the broker owes the duties to all persons as well as the additional duties owed to clients. Chapter §452.133(2) states the duties owed to clients are the duty to negotiate unless waived by the client, the duty to fulfill any obligation required in the agency agreement, loyally represent the client’s interests, provide requested information and advice, and disclose all material facts.

14. A: The broker is obligated to fulfill any obligation required by the agency agreement and any order within the scope of the agency agreement. The broker cannot make any profits other than the commission paid by the seller and the broker would need the seller’s permission to represent the buyer. A listing broker is not required to always put the seller’s needs first. The law states that the duties owed to all parties in a transaction will supersede the duties owed to a client. For instance, the buyer-customer needs to know the property has asbestos, even though the listing agent’s client (seller) has requested they not disclose such information.

15. C: Anderson has violated her duty of loyalty to the seller by disclosing such information to the buyer.

16. A: The listing broker is the only “agent” of the seller. The listing broker hires the listing agent as their agent.

17. C: Chapter §452.137(2) A broker who represents more than one client in a transaction owes the duties to each client but may not place the interests of any client ahead of the interests of another client in the transaction.

18. A: Agency disclosure is required on all real estate transactions and it must occur to customers prior to negotiations. Clients must receive agency disclosure at the time of entering into the agency agreement. Giving buyer information on a specific property does not necessarily amount to negotiating. A licensee is required to ask for the buyer’s/seller’s acknowledgment in residential one-to-four family transactions.

19. D: A broker shall provide a copy of the state-mandated written disclosure statements to a client no later than the time the broker enters into an agency agreement with the client.

20. B: “B” is the definition of a fiduciary. “A” defines the fiduciary duties.

21. C: RL §17.06 A broker or salesperson who terminates employment with a broker-employer shall send written notice to the Department within 10 days after the termination.

22. A: Chapter §452.01(2)(a) A broker is one who for another, and for commission, money or other thing of value, negotiates or offers or attempts to negotiate a sale, exchange, purchase or rental, or granting or acceptance of an option to sell, exchange, purchase, or rent an interest or estate in real estate, a time-share, or a business or its goodwill, inventory, or fixtures, whether or nor the business includes real property.

23. C: RL §24.05(1) A licensee acting as an agent in a real estate or business opportunity transaction may not accept any fee or compensation related to the transaction from any person, other than the licensee’s client, without prior written consent from all parties to the transaction.

24. D: There are two categories that fall under the term unlicensed personal assistant, either someone who has a real estate license but has not been employed for the purpose of using it or someone who does not have a real estate license. Unlicensed personal assistants are not considered to be licensees and therefore do not have the authority to practice real estate.

25. B: Nate does not need to be licensed because he is completing a form to which he is a party.

26. C: Cannon is the optionee, seller/optionor Sands is bound by the contract.

27. D: The duty of negotiation may be waived if an express written waiver of negotiation duties

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is made by the client. A client may waive, in full or in part, the broker’s duty to negotiate. The client’s written disclosure waiving the broker’s duty to negotiate must contain a) copy of the text of what the client is waiving and a statement as a consequence of that waiver, the broker will have no legal duty to perform the duty of negotiation and b) statement as a consequence of the client’s waiver the client may need to enlist the services of an attorney or other provider.

28. A: Chapter §452.01(2)(b) A broker is engaged wholly or in part in the business of selling or exchanging interests or estates in real estate or business, including businesses’ goodwill, inventory, or fixtures, whether or not the business includes real property, to the extent that a pattern of sales or exchanges is established, whether or not the person owns the real estate or business. Five sales in one year or 10 sales in five years is presumptive evidence of a pattern of sales or exchanges.

29. D: RL §17 identifies that an unlicensed personal assistant may perform clerical duties on behalf of a sales agent. This would include creating marketing pieces and filling in the blanks of an approved form. An open house can be conducted by an unlicensed personal assistant only if accompanied by a licensed individual.

30. D: Chapter §452.01(3)(a)(b)(f)(h) A broker does not include 1) receivers, trustees, administrators, executors, guardians or other persons appointed by or acting under the judgment or order of any court; 2) public officers while performing their official duties; 3) attorneys licensed to practice in this state while acting within the scope of their attorney’s license; 4) any lender when engaged in the transaction of business within the scope of its corporate powers as provided by law.

31. B: Designated agency is a multiple representation relationship; both buyers and sellers are clients of the same broker in the same transaction, but the agents of the broker have the ability to negotiate, provide information, opinions and advice on behalf of their client. Under designated agency two agents of the broker, one for each client, must be involved. Consumers who select designated agency must consent in writing and may withdraw their consent in writing, at any time.

32. A: If both parties consent to designated agency in writing, each salesperson may negotiate on behalf of their client, even if the negotiation places the interests of one of the broker’s client’s interests ahead of another. If a client does not consent to designated agency, the salesperson would remain neutral. Remaining neutral means not to place the interests of any client ahead of the interests of any other in negotiations. Once a client consents to designated agency, they may withdraw their consent in writing at any time. A broker owes the duty of loyalty to a client whether the client consents to designated agency or not.

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