Real Estate Practice Changes

The WRA supports making changes to improve real estate practice, including establishing a safe harbor, requiring disclosures when contractual rights are being assigned, and creating consistency in the statute and administrative rule relating to disclosure obligations by real estate agents.

Background

Wis. Stat. Chap. 452 governs real estate brokerage practice, investigation and discipline of licensees, and the duties and powers of the Real Estate Examining Board (REEB). Real estate licensees are regulated by the Wisconsin Department of Safety and Professional Services (DSPS) as well as the REEB, which protects Wisconsin property buyers and sellers by ensuring safe and competent practice.

This legislation includes the following proposals.

1. Addresses real estate licensee liability in two ways

• Removing liability when using government information attributed to the source: For example, when listing a property, an agent relies on the assessor record to indicate the lot size. If it is later discovered the assessor record contained inaccuracies, the agent should not be held responsible for presenting incorrect information obtained from a government source.
• Eliminating administrative rule inconsistency: Wis. Admin. Code § REEB 24.07(3) requires an extra disclosure of information suggesting the possibility of material adverse facts. Wis. Stat. Chap. 452 requires licensees to disclose known material adverse facts. To address this inconsistency between rule and statute, AB 918/SB 870 eliminates the conflict and ensures consistency.

2. Increases transparency by requiring disclosure when assigning rights under a contract

• Wholesaling is assigning contractual rights under a contract to another.
• For illustration, an investor (wholesaler) enters an offer with the seller of real property. The wholesaler then finds a buyer interested in the seller’s property, and the wholesaler assigns their contractual rights to that buyer. The wholesaler often profits by selling the contract for a price higher than the one agreed to with the seller.
• The bill requires wholesalers to provide a written disclosure relating to their wholesaler status at the time of entering the agreement with either party. Additionally, the wholesaler must inform the buyer that while the buyer has an equitable interest, they do not own title to the property.

3. Raises the bar for real estate practitioners

• Under current law, the REEB can only assess a fine or forfeiture up to $1,000 for the most severe violations of Wisconsin license law.
• This legislation increases fines and forfeitures up to $5,000 for the most egregious violations of Wis. Stat. Chap. 452.