Wisconsin REALTORS® Association: Pre-Agency Showing Agreement and Disclosure to Customers

Pre-Agency Showing Agreement and Disclosure to Customers

 Jennifer Lindsley, WRA Director of Legal Services and Licensing  |    August 01, 2024
PASA

One of the practice changes brought to you by the National Association of REALTORS®’ (NAR) proposed settlement agreement (settlement agreement) is the requirement to have a written agreement with a buyer before touring a home. This change has led to confusion among Wisconsin real estate agents regarding its implications. Initially, some agents believed they needed to establish buyer agency before showing properties, which is not the case. Wisconsin’s existing agency options remain unchanged. The new requirement adds some paperwork but does not alter the choices available. 

Wisconsin law has long allowed for “pre-agency,” where agents and buyers can acquaint themselves, view properties together, and determine if they wish to proceed further. When a buyer decides to negotiate, such as by making an offer, they must then choose whether to be a client or a customer of the agent’s firm. Negotiation marks the end of pre-agency. At this point, if the buyer opts to be a customer, the agent provides them with a Disclosure to Customers form. If they choose to be a client, they enter into a buyer agency agreement with the agent.

All of this is still true. The one thing that the settlement agreement changes about this is that when in pre-agency, the agent and the buyer must have a written agreement before touring a home. The written agreement is not a buyer agency agreement. The written agreement is not a Disclosure to Customers form. It is simply an agreement authorizing the agent to show properties to a buyer.

WRA Pre-Agency Showing Agreement for Wisconsin Properties

To help agents comply with the settlement agreement, the WRA created the WRA-PASA — Pre-Agency Showing Agreement for Wisconsin Properties form. This form is available in Transactions (zipForm Edition) and the WRA Forms Library, both of which are included in your WRA member benefits. It is important to note that the WRA-PASA form is not a WB form, meaning agents are not obligated to use the WRA’s version. Firms have the flexibility to create their own written agreement for showing properties to buyers as long as the written agreement contains all the requirements identified in the NAR settlement agreement.

The WRA-PASA outlines the nature of the pre-agency relationship and distinguishes between the roles of “customer” and “client” once negotiations commence. The form clearly states that it is not an agency agreement and that it does not authorize the agent to draft an offer to purchase. The WRA-PASA is not specific to a property and does not have a term. Either the firm or the buyer can terminate the agreement at any time, or they can transition from pre-agency to a customer or client relationship as they see fit.

The WRA-PASA includes a section for compensation. It will be up to each firm to decide whether the firm will charge buyers for showing properties to them and if so, how much the firm will charge. Some firms might charge, others might not. If a firm charges compensation to show properties to a buyer, the compensation must be paid to the firm and cannot be paid directly to the agent. 

Wis. Stat. § 452.19(2)

If a licensee is associated with a firm, all fees or commissions and any part thereof for performing any act specified in this chapter and all compensation for a referral or as a finder’s fee shall be paid to the firm.

Disclosure to Customers form

While not mandated by the settlement agreement, the WRA chose to enhance its WRA-BDCU Disclosure to Customers form to align with the spirit of the settlement agreement. The driving force behind the practice changes in the settlement agreement is consumer transparency. To that end, some additions were made to the WRA-BDCU form. There is a Compensation section that clarifies that the firm does not charge customers a fee to show them a home. It also specifies that commissions are negotiable and not mandated by law and cautions that firms cannot claim services are free if they receive compensation from any source. Language was added to inform the buyer customer that the firm might receive compensation from the listing firm by way of an offer of compensation. These enhancements aim to improve transparency in real estate transactions, reflecting the WRA’s commitment to help our members effectively guide buyers and sellers through a transaction. The updated WRA-BDCU form can be accessed in Transactions (zipForm Edition) and the WRA Forms Library. 

The WRA is dedicated to assisting our members in adapting to these new practice changes. We will continue to develop, revise or retire forms as necessary to support both you and Wisconsin consumers in navigating real estate transactions effectively.

Learn more

Find out more about these forms as well as the other forms changes made in response to the NAR settlement by visiting the WRA’s members-only forms update resource webpage.

Note: The information contained in this article is accurate as this magazine went to press in July 2024.

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