FAQs: Licensee Purchasing or Selling Their Own Real Estate

A licensee can be either an agent or a principal in a transaction, but conflicts of interest occur when a licensee tries to be both. Although it is technically not prohibited for a licensee to list their own property or to be the buyer, it is arguably disingenuous for the licensee to attempt to represent the seller and simultaneously be the buyer or be the seller and draft an offer for a buyer. 

The following is a series of statements and frequently asked questions to provide clarity relating to licensees purchasing or selling their own real estate.

Note: Licensees associated with a firm should check company policy as to participating in transactions where the licensee is purchasing or selling their own real estate.


Disclosure of licensure

When is a licensee purchasing or selling their own real estate required to disclose they are licensed?  

A licensee purchasing or selling their own real estate shall disclose, in writing, their status as a licensee and intent to act in the transaction as a principal at the earliest of 1) first contact with the other party or an agent representing the other party, 2) a showing of the property, 3) any other negotiation with the seller or the listing firm. See Wis. Admin. Code § REEB 24.05(5)(a).

How does the licensee make the disclosure in the transaction they are licensed and are purchasing or selling their own real estate?

This disclosure is made in writing to the other party in a transaction or to an agent representing the other party.

The easiest way to achieve this disclosure is to provide a business card if first contact is in person.

Similarly, Article 4 of the Code of Ethics provides: REALTORS® shall not acquire an interest in or buy or present offers from themselves, any member of their immediate families, their firms or any member thereof, or any entities in which they have any ownership interest, any real property without making their true position known to the owner or the owner’s agent or broker. In selling property they own, or in which they have any interest, REALTORS® shall reveal their ownership or interest in writing to the purchaser or the purchaser’s representative. (Amended 1/00)

Example: Disclosure of licensee as seller

All parties understand Seller is a Wisconsin real estate licensee.

Example: Disclosure of licensee as buyer

All parties understand Buyer is a Wisconsin real estate licensee.


Commission vs. incentive

Note: There is a distinction between incentive, referral, commission and finder’s fees. Per Wis. Stat. § 452.19, the law makes a distinction between fees for providing service and incentives. Any fee for providing brokerage services needs to be paid to a firm if the licensee is associated with a firm. 

The basics

Licensees purchasing a property for themselves cannot earn a commission.

A licensee who writes an offer as a principal is acting as a principal in the transaction and is not providing brokerage services on behalf of someone else, thus the licensee cannot earn a commission.

Licensees purchasing a property for themselves can negotiate an incentive from the seller.

A licensee acting as a principal in a transaction can negotiate an incentive from the seller. An incentive may be paid directly to the licensee. The incentive from the seller to the buyer would be negotiated in the offer to purchase. If there is financing for the transaction, the licensee may consult with the lender regarding potential implications to financing.

Licensees purchasing a property for themselves can negotiate an incentive from the listing firm.

This buyer incentive is negotiated with the listing firm and is paid directly to the licensee. Prudent practice is to document the incentive in writing. Per Wis. Admin. Code § REEB 24.05(4), a seller must consent in writing to the listing firm paying an incentive to the licensee/ buyer. The rule does not specify how this consent must be documented. The easiest method would be to refer to the incentive in the offer to purchase.

When a licensee is acting as a principal in a transaction, the licensee/buyer has no claim to cooperative compensation in the MLS. Therefore, the listing firm would be able to receive full commission from the seller and would not have to pay cooperative commission. This presumes there is no other firm acting in the transaction, meaning the licensee/buyer did not bring another agent into the transaction at any point.

Licensees purchasing a property for themselves can negotiate a referral fee.

Any referral fee would be paid to the firm if the licensee is associated with a firm. If the licensee is not associated with a firm, the referral fee can be paid directly to the licensee.

Can a firm offer an incentive to a licensee/buyer who signs a buyer agency agreement or a licensee/seller who signs a listing contract with the firm the licensee is associated with?

Yes. The incentive could be paid either as part of the transaction or outside of the transaction. Keep in mind that a buyer will have to disclose any money received outside of the transaction to avoid mortgage fraud because side deals and unseasoned funds must be disclosed to lenders. See Wis. Admin. Code § REEB 24.07(4).

Can licensees purchasing a property for themselves waive an MLS offer of compensation to the licensee’s firm from another firm?

No. The participant in the MLS is the agent’s firm, not the individual agent. Therefore, the agent does not have the ability to reduce or waive the MLS offer of compensation.


Licensee purchasing as a buyer

Should licensees drafting an offer for themselves use forms that include the licensee’s firm’s name and contact information?

No, using a form with the firm identified implies the firm is involved in the transaction. If the licensee is not acting as an agent of the firm, forms identifying the firm should not be used.

How does a licensee/buyer who wants to draft an offer for themself complete lines 1-2 of the offer to purchase? 

If a licensee is going to draft an offer to purchase a property for themself, the licensee strikes all three agency choices on lines 1-2 of an offer because the licensee/buyer is a principal, not an agent for themself or anyone else.

Does the law require a licensee purchasing or selling their own real estate to have an agency agreement (listing contract or buyer agency/tenant representation agreement) with the licensee’s firm or any other firm?

No.

Can a firm have a policy that the licensee purchasing or selling their own real estate enter into an agency agreement with the firm (listing contract or buyer agency/tenant representation agreement)?

Yes. A firm may require the licensee to engage the firm to provide brokerage services by means of an agency agreement. In such a case, the firm will provide the brokerage services.

If a licensee drafts an offer to purchase an MLS-listed property for themself, who gets the MLS credit for the sale?

Subject to MLS rules, there is no cooperating firm, therefore the listing firm could claim the list and sell credit because there is no cooperating firm providing brokerage services.

In such a case, is there any cooperative MLS commission paid?    

No. Given there is no cooperating firm, the listing firm retains the full commission negotiated in the listing contract with the seller. There is no cooperating firm providing services to earn the MLS offer of compensation as procuring cause.

May a licensee writing an offer for an entity (that does not have a real estate license), in which the licensee has an interest, be the agent for the entity?

Yes. A licensee in this situation may be the “agent” for the entity. Therefore, the licensee would be acting as an agent of the licensee’s firm and the entity in which the licensee has an interest. Due to the relationship, the licensee should sign a buyer agency agreement with the entity on behalf of the licensee's real estate firm to avoid the appearance of any conflict of interest between agency duties and any fiduciary duties owed to the entity. The real estate licensee is providing brokerage services, and the real estate firm with which they are associated can be procuring cause for cooperative compensation offered in the MLS. The firm is paid the MLS offer of compensation, and the licensee earns compensation per the independent contractor agreement the licensee has with their firm.  

For illustration:

Emerson is a member of the Wind Group LLC. Emerson is licensed with ABC Realty. The Wind Group LLC wishes to purchase a property. Emerson signs a WB-36 Buyer Agency/Tenant Representation Agreement as a member of the LLC buyer and as a buyer’s agent on behalf of ABC Realty. 

If the Wind Group LLC purchases a property covered under the WB-36, and ABC Realty is procuring cause, then ABC Realty can claim the MLS cooperative compensation. Emerson could get paid the amount as provided in the independent contractor agreement between licensee Emerson and ABC Realty. In addition, Emerson would disclose buyer agency status at first contact. The offer would include the necessary disclosure of interest as Emerson is a licensee with an ownership interest in the Wind Group LLC.  

As a real estate licensee writing an offer for the licensee and the licensee’s spouse, should the licensee have a buyer agency agreement with the spouse?  

While it may be advisable for real estate licensees who are writing offers or other written proposals on property on behalf of an immediate family member, including spouses, to have a buyer agency agreement, Wisconsin law does not require it. However, due to the relationship, the licensee should consider signing a buyer agency agreement with their spouse to avoid the appearance of any conflict of interest between agency duties and loyalties to the spouse.

If a real estate licensee signs a buyer agency agreement with the licensee’s spouse or immediate family member, may the licensee earn commission if the licensee was also a buyer in the transaction?

The real estate firm could try to claim commission if the property were listed in the MLS. Arguably, the agent would not earn commission as a licensee principal, however, the agent could attempt to negotiate an incentive in that capacity. This situation raises a conundrum because the licensee is simultaneously acting in two capacities: as a buyer’s agent for the spouse and as an unrepresented principal requesting an incentive. Office policy may require another agent from the firm provide the brokerage services to these buyers.

Can a licensee principal write their own offer to purchase for themself for a For Sale By Owner (FSBO) property? 

Yes. A licensee acting as a principal shall disclose their status as a licensee and intent to act in the transaction as a principal at the earliest of 1) first contact with the other party or an agent representing the other party, 2) a showing of the property, 3) any other negotiation with the seller or the listing firm. (See Wis. Admin. Code § REEB 24.05(5)(a).) However, since the licensee principal is not providing any brokerage services to anyone, the licensee would not provide the seller a disclosure to customer form.


Licensee with ownership interest in an entity

What are the requirements for a licensee writing an offer for an entity (which does not have a real state license) in which the licensee has an interest?

The entity is a separate party and is the buyer. The licensee may provide brokerage services as either a buyer’s agent with a WB-36 Buyer Agency/Tenant Representation Agreement or as a subagent of the listing firm. Although a buyer agency agreement is not required by law, it avoids the appearance of a conflict of interest wherein the licensee has an interest in the buyer entity but is acting on behalf of the listing firm. Per Wis. Admin. Code § REEB 24.05(2), the licensee must obtain written consent from all parties to the transaction because the licensee is acting on behalf of a business entity in which the licensee has an interest. A licensee shall obtain the written consent in the offer to purchase, option, lease or other transaction contract.

Example: Disclosure of Licensee Entity Interest as Buyer or Seller

All parties understand licensee, __________, has an interest in the (Buyer) (Seller) [STRIKE ONE] entity or organization and consent to the licensee serving as a real estate agent for that entity or organization in this transaction.

This example presumes the licensee is acting in a licensed capacity on behalf of the firm in the WB-36 Buyer Agency/Tenant Representation Agreement and not just a signatory for the unlicensed entity.

Can a licensee write an offer to purchase on a FSBO property for an entity (which does not have a real estate license) in which the licensee has an interest without having a buyer agency agreement?

Yes. A licensee may write an offer for an unlicensed business entity in which the licensee has an interest acting as an unrepresented party. Although licensed, the individual is signing the offer as a member of the unlicensed entity. In this scenario, there is a FSBO property and an entity, and no licensees are providing brokerage services. The licensee is neither providing brokerage services to the entity nor to the seller and is not acting as a licensee but rather in the capacity of a member of the unlicensed buyer entity. Therefore, the licensee is not obligated to enter into a buyer agency agreement with the entity or provide the seller a disclosure to customer form. While not required by Wisconsin law, prudent practice would be for the licensee to disclose their interest as a licensee in the unlicensed entity.

Licensee purchasing as buyer

Paid directly to licensee Seller must approve payment in writing Negotiated with seller in the transactions Fee must be paid to the firm Claim MLS offer of compensation Claim procuring cause
 Earn a commission Not permitted Not permitted Not permitted Not permitted Not permitted Not permitted
 Negotiate an incentive from the listing firm Permitted Permitted Not permitted Not permitted Not permitted Not permitted
 Negotiate an incentive from the seller Permitted Permitted Permitted Not permitted Not permitted Not permitted
Negotiate a referral fee Not permitted Not permitted Not permitted Permitted Not permitted Not permitted



Licensee/seller as listing agent

When a licensee is associated with a firm, may a licensee list their own home with the firm?

Yes, presuming the real estate firm’s policy permits it. The real estate firm policy may require a listing contract to be entered into with another agent acting as the listing agent. By having another licensee act as the listing agent, the licensee may reduce the appearance of a potential conflict of interest as well as maintain the separation between a seller’s disclosure obligations and a licensee’s disclosure obligations. A seller must disclose known defects whereas a licensee has to disclose known material adverse facts and information suggesting material adverse facts. In addition, the firm should check its errors and omission insurance as to any consequences or lack of coverage if a licensee acts as their own agent on behalf of the firm in a transaction where the licensee is a principal.

An unlicensed entity owns a property, and the licensee has an ownership interest in the entity. May the licensee list the property?

Yes. When the licensee is associated with a firm, the seller entity may enter into a listing with the firm. The firm will earn a commission per the listing, and the licensee would earn compensation per the independent contractor agreement with the firm. The licensee potentially could sign the listing contract on behalf of the seller entity and on behalf of the real estate firm with which the licensee is associated. The licensee must obtain the consent of all parties in a transaction to act as an agent on behalf of the entity in which the licensee has an interest. The licensee shall obtain the written consent in the offer to purchase, option, lease or other transaction contract.

May a licensee who owns their home with a spouse or significant other list the home?

Yes. When the licensee is associated with a firm, the sellers may enter into a listing with the firm. The firm will earn a commission per the listing, and the licensee would earn compensation per the independent contractor agreement. If a licensee is a seller or the licensee’s immediate family members are the sellers, then the licensee must obtain the consent of all parties to act as an agent on behalf of a family member and on their own behalf. A licensee shall obtain the written consent in the offer to purchase, option, lease or other transaction contract.

Example: Disclosure of Licensee Related to Seller   

xx.xx  Licensee Related to Seller

All parties understand Seller is a Wisconsin real estate licensee who is related to the Seller and is acting on Seller’s behalf and consent to the licensee serving as a real estate agent in this transaction.

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