The Best of the Legal Hotline: Listing Protection Issues


 Tracy Rucka  |    November 30, 2006
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Does the first broker always have a right to listing protection?

No, listing protection is a contractual right based in the terms and conditions of the Department of Regulation and Licensing WB listing contracts. There are two requirements to activate the extension of listing provisions ‚Äď negotiation by the buyer during the listing and timely seller notification of the buyer‚Äôs identity. Under certain circumstances listing protection is automatic because the seller participates in the negotiation and knows who the buyer is. For example, a buyer who submits an offer to purchase during the listing is automatically protected. Submitting the offer is obviously negotiation and the seller knows the buyer‚Äôs identity. Likewise, a buyer who negotiates directly with the seller is also automatically protected.

Oftentimes, however, the seller may be unaware of a buyer’s identity or his or her interest in the property because showings and other negotiations are conducted by the listing broker or cooperative brokers. The names of these buyers must be delivered to the seller within three days of the expiration of the listing contract in order to create listing protection.

Negotiation

What constitutes negotiation? Does sending a buyer a spec sheet or a buyer coming to an open house suffice?

No, these acts alone would not rise to the level of negotiation as defined in the listing contact. ‚ÄúNegotiated,‚ÄĚ for the purpose of listing protection, means that the buyer discussed the potential terms upon which the buyer might acquire an interest in the property or attended an individual showing.

Delivery

Can the agent send the list of protected buyers via email?

Email is not included in the three enumerated delivery methods contained in the standard language of the WB listing contracts. Lines 166-169 of the WB-1 Residential Listing Contract Exclusive Right to Sell, for example, provide for personal delivery, mail and fax. A list that is emailed must also be delivered by one of these methods to be an ‚Äúeffective delivery‚ÄĚ that establishes listing protection.

If the seller does not receive the first broker’s listing protection list within three days, are the buyers protected?

A written list of protected buyers must be delivered to the seller no later than three days after the expiration of the listing. The contract requires delivery, not receipt, within three days. Agents should be sure to follow the contract provisions and office policy regarding delivery. The broker may require agents to obtain evidence of timely delivery. The broker may work with the postal service, or other commercial delivery systems to determine what type of delivery documentation is most effective. See www.usps.com for United States Post Office mailing options.

One-party listings

A one-party listing contract expired immediately before the broker listed the property. Is the buyer named on the first one-party listing considered a named exclusion for the second listing?

The question is whether the buyer submitted an offer, attended an individual showing, discussed the potential terms upon which the buyer may acquire an interest in the property or negotiated directly with the seller, thereby effectuating listing extension. In other words, did the buyer negotiate? If so, the identification of the buyer in a one-party listing fulfills the requirement for delivery of the buyer‚Äôs name. The extension of listing provisions would apply for one year from the expiration of the first listing. See pages 8-10 of the February 2004 Legal Update, ‚ÄúListing Procedures for the Prudent Broker,‚ÄĚ online at www.wra.org/LU0402 for further discussion of listing protection issues.

A potential buyer has been named on a one-party listing with another agency. The buyer does not want to be on this listing and would like to work with a different broker. Is this legal?

The listing agreement is entered into between the sellers and the listing broker. The buyer cannot dictate who the sellers will have representing them in the real estate transaction. Although the buyer is named in the listing, the buyer may choose another agent or attorney to draft the offer to purchase.

If the broker wishes to provide brokerage services, a buyer agency agreement to represent the buyer may be entered into. Because this is a one-party listing and not in the MLS, the buyer’s broker may wish to determine if the listing broker is willing to offer compensation before providing brokerage services.

Second listing brokers

What can the second listing broker do in light of the first broker’s listing protection rights?

The first thing is to ask good questions to determine if there are any protected buyers. If there are questions about whether any buyer was properly protected, refer the seller to their attorney. The seller has seven days after entering into the new listing to produce a complete list of protected buyers for the second broker during which time the seller may obtain any legal opinions necessary regarding questionable named buyers.

 

  • Was the property previously listed?
  • Were there any offers submitted?
  • Did the seller negotiate with any buyers directly?
  • Did the previous broker(s) send the seller any names?
  • Did any list include all protected buyers?

 

Send the previous broker a written request for the names of all protected buyers.

Although the second broker may not represent the seller in a sale to a protected buyer, the seller and broker may agree to set a listing termination fee if the listing were terminated due to a sale to a protected buyer. The fee could be a set dollar amount or based upon actual costs incurred by the listing broker.Once it is determined there are protected buyers, the Wis. Admin. Code ¬ß RL 24.13(5) provides that licensees are required to negotiate the sale of property through the listing broker. In addition, Article 16 of the Code of Ethics prohibits REALTORS¬ģ from acting in a manner that violates the exclusive representation agreement another broker has with his or her client. The first listing broker retains the listing for the protected buyers and the second listing broker enters into the listing subject to the prior broker‚Äôs legal rights. When a cooperating agent, working with a protected buyer, inquires about the status of the property, access for showing purposes or submits an offer, the second broker should refer the agent to the first listing broker because the previous broker retains the agency authority to represent the seller in any transaction with a protected buyer.

When negotiating with a seller, the broker should guard against taking any action that would subject the seller to a double commission or otherwise take advantage of the seller. The courts take a dim view of brokers who take advantage of consumers for the sake of their own financial advantage.

The seller has a list of protected buyers from the first broker. Can the second broker draft an offer for one of the protected buyers?

Although the second listing broker can write the offer, it is the first broker’s right to present the offer and represent the seller in the transaction. Assuming the buyer was properly protected, the first listing broker has, in essence, a one-party listing for one year from the expiration of the listing for the protected buyers. However, because the listing is no longer in the MLS, the second broker may determine if the listing broker is willing to offer cooperation and compensation before providing brokerage services for the transaction. If not, the second broker may enter into a buyer agency agreement to represent the buyer in the transaction.

A seller was unhappy with his listing broker and tried to terminate the listing. The first broker took it off the MLS and took the sign down. Now the broker has given the seller a copy of the listing that looks altered and is saying that the seller is still under contract. The seller wants to list with a second broker. What can the second broker do?

The second broker may not give the seller legal advice regarding the seller’s rights under the first contract or how to terminate the contract. The second broker should refuse to review any documents offered from the first listing as it places the broker in a potentially compromising situation in regard to license law and the Code of Ethics. A licensee who coaches a seller about how to terminate a listing may be accused of license law and ethical violations and sued in court for damages. Therefore, the broker should refer the seller to the first broker or private legal counsel to review the contract and advise the seller.

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