A Wisconsin real estate task force wants to clarify the responsibilities of limited-service brokerage models while preserving their right to exist.
The Wisconsin Realtors Association License Law Task Force, which has met for the past three years, this month issued a set of recommendations that focus on three key areas: fill in the gaps in license law; address agency issues of concern to licensees and consumers; and minimize unnecessary complexity. The association will push for changes to real estate licensing law that support the task force’s recommendations.
Realtor groups in several states have supported policy changes to better define minimum service requirements for limited-service real estate companies.
According to an overview of the task force’s recommendations, available at the Wisconsin Realtors Association Web site, “Limited-service brokerage models have raised concerns in the industry because the industry has not developed effective cooperation practices on either side of the transaction,” noting that the situation with limited-service companies “is nearly identical to the somewhat difficult emergency of buyer agency practices in the ’80s.”
The task force recommendations seek to clarify “that only the duties to provide information and advice to the client on real estate matters and the duty to negotiate on behalf of the client are waivable,” according to the overview report. Those brokers who waive such duties “must provide detailed written disclosures and cautions to their client and the waiver extends to all brokers in the transaction.” The task force proposal also “recognizes that limited serviced brokerage is a lawful and ethical form of practice.”
Rick Staff, general counsel for the Wisconsin Realtors Association, said the association plans to pursue legislation supporting the recommendations, and that in the best possible scenario the new legislation could be adopted in January 2006. “That’s optimistic,” he said. The recommendations call for a modernization of state real estate law and for simplifying language in the law, he said.
Staff said that the task force’s interest in defining limited-service brokerage responsibilities is to ensure that such business practices don’t “unfairly obligate other agents to do things that the limited service broker hasn’t done.”
The push to implement the task force recommendations “is certainly going to be a key legislative priority” for the association, he said.
Corey Scholtka, who owns a flat-fee brokerage based in Wauwatosa, Wis., said he is “cautiously optimistic” about the task force recommendations, and he said he was encouraged that task force members considered his input in drafting the recommendations. Scholtka has been an outspoken advocate for the rights of new real estate business models.
Scholtka said, “For my association to make that groundbreaking report and say we’re going to preserve these emerging business models is great. I think other states need to look at what Wisconsin has done in educating the members so that people get up to speed on what all the new business (models) are.”
William Black, a lawyer for Wisconsin’s Real Estate Board who was assigned to the task force as an observer, said that the task force’s recommended law changes mostly apply to a chapter in state law that most recently had some substantial revisions in 1988. Those 1988 revisions “related to the rights and duties of a broker pertaining to agency work,” Black said.
Anecdotally, Black said that he has sometimes heard complaints from consumers who say they are confused as to who is representing them in a real estate transaction. Generally those questions relate to seller agency, he said.
The task force recommendations, in addition to calling for better disclosure of services relating to limited-service brokerages, also call for improved regulatory definitions relating to broker liability for the acts of an agent. And the recommendations call for language that clarifies brokers’ responsibilities to clients when there is an agency agreement in place. Agency agreements are agreements between consumers and brokers that provide for payment for real estate services.
Brokers with agency agreements, when requested by the client, shall “provide information and advice to the client in real estate matters within the scope of the knowledge, skills and training required for licensure as a broker or salesperson under this chapter in order to assist the client to accomplish the party’s expressed goals in the transaction,” and the recommendations define real estate matters as including “market information as well as contract, legal and regulatory issues.”
The recommendations also outline a proposal for a broker disclosure statement to consumers who participate in an agency relationship with a brokerage. Brokers have a duty to treat consumers “fairly and honestly,” according to the proposed disclosure statement, “to use reasonable skill and care when providing you brokerage services,” and to “to disclose in writing known defects affecting the property and other material adverse facts affecting the transaction,” among other duties.
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