The Best of the Legal Hotline: Licensees Attending Inspections

When difference of opinions and expectations intersect


 Tracy Rucka  |    August 04, 2017
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There is no one right or wrong determination on whether a licensee should accompany or attend an inspection because there are pros and cons to justify attending or not attending an inspection. Each firm should make the analysis. The crux of whether a licensee, either listing or cooperating, is required to attend or accompany the buyer on an inspection is to determine the buyer’s and seller’s expectations as evidenced in the agency agreements and the offer.

The decision to attend 

 

Does the Department of Safety and Professional Services (DSPS) require the licensee to attend the inspection? 

The DSPS has not taken a position on the issue, other than that the Administrative Code rules do require real estate licensees to make a reasonable inspection of the property during the course of a transaction. See Wis. Admin. Code § REEB 24.07(1).

Does the WRA have a recommended policy about licensees attending inspections? 

No. The WRA does not have a definitive recommendation or statement about whether a licensee should attend a home inspection. There have been several articles regarding the home inspection contingency, home inspections, home inspectors and liability issues. Included are discussion points on the advantages and disadvantages of brokers/agents attending home inspections. 

The bottom line of the conversation is the WRA does not endorse a specific position other than to educate the buyer and the seller about the potential issues, risks and benefits. Based on the objectives of the parties, the contracts should be negotiated to reflect their expectations. Licensees may need to alter the listing contract or add additional language to the listing or buyer agency agreement to make it consistent with office policy and/or the wishes of individual sellers or buyers.

Listing broker and seller 

What does the listing contract say about inspections? 

The conversation starts at the time the listing broker enters into the listing with the seller. Historically many brokers and sellers have assumed that it is the listing broker‚Äôs job to protect the seller‚Äôs home and its contents during open houses and showings. This is presumed to include providing security ‚ÄĒ allowing only those authorized to enter ‚ÄĒ and protecting the seller‚Äôs furnishings and valuables. However, the listing contract speaks to the contrary and shifts most, if not all, of this responsibility to the seller. Unless modified, the brokers have no duty to escort home inspectors at the listed property.¬†

The standard language educates the seller as follows: 

Seller acknowledges that individual showings and open houses may be conducted by licensees other than agents of the Firm, that appraisers and inspectors may conduct appraisals and inspections without being accompanied by agents of the Firm or other licensees, and that buyers or licensees may be present at all inspections and testing and may photograph or videotape Property unless otherwise provided for in additional provisions at lines 303-308 or in an addendum per lines 309-310.

If the seller requires the inspector or the buyers to be accompanied, the listing broker may agree to such an arrangement as a condition of the listing, either in additional provisions or an addendum. In such a case, the listing broker would not provide access to the property without accompanying the inspector or the buyers as set forth in the listing. 

Buyer and seller 

What does the offer to purchase say about inspections? 

Seller agrees to allow Buyer’s inspectors, testers and appraisers reasonable access to the Property upon advance notice, if necessary to satisfy the contingencies in this Offer. Buyer and licensees may be present at all inspections and testing.

The WB-11 Residential Offer to Purchase addresses access to the property in the Inspections and Testing provisions on page 8. The offer provides that licensees may be present at an inspection.

Because the offer only generally refers to licensees, either listing or cooperating agents may attend the inspections and testing. The offer does not require either to attend; it is optional.

Can the seller include a provision in the offer requiring a cooperating agent to attend the inspection? 

Yes, but no. Although a seller could negotiate a contingency requiring the cooperating agent to attend an inspection, the cooperating agent is not a party to the offer and is not bound by the terms thereof. The buyer, prior to accepting such a provision, would need to consult with the cooperating agent to assure his or her willingness and availability to attend the inspection or the buyer would risk breach of contract if the offer were accepted with such a contingency. The underlying question with such an approach is what are the implications if the agent does not attend? 

Broker-to-broker communication

The listing contract provided a licensee would be at all inspections and testing. Can the listing broker require a cooperating agent to accompany the inspector or buyer at the inspection? 

The listing broker may request the cooperating broker attend the inspection. In the event the cooperating broker consents to attend, the listing broker would be relieved of the obligation as negotiated in the listing. If not, the listing broker would need to attend or obtain an amendment to listing, relieving the broker from the agreement. 

Can the MLS remarks section be used to require the cooperating broker to attend? 

No, the MLS cannot be used to demand or require the cooperating broker to attend all or any part of the inspections. 

In the MLS remarks, the listing broker indicated that the commission will be modified if the cooperating broker does not attend the inspection. Can the listing broker do this? 

No. To modify the MLS offer of cooperation in such a manner would require a bilateral agreement, or policy letter, between the two MLS participants. A policy letter is a communication from one broker to one or more other brokers, establishing the terms and conditions upon which cooperation and compensation are being offered. Policy letters can be used to establish the terms and conditions of cooperative relationships in any transaction or may be used to modify an existing agreement such as the MLS offer of cooperation and compensation. The terms and conditions established in a policy letter may be divided into two categories:

 

  1. Letters making an offer of compensation or modifying an MLS offer of compensation: These letters are given before the cooperating broker submits an offer to purchase. This type of policy letter is referred to as a ‚Äúunilateral policy letter.‚ÄĚ
  2. Letters addressing all other types of terms and conditions of cooperation: These letters are accepted by the cooperating broker‚Äôs agreement to the policy letter and delivery of the accepted policy letter back to the listing broker, or by any other actions required for acceptance under the terms of the policy letter. This type of policy letter is referred to as a ‚Äúbilateral policy letter.‚ÄĚ There must be some clear indication that there is a meeting of the minds.

 

A bilateral policy letter could result in the cooperating broker’s agreement to attend showings, modify the MLS offer of compensation if the cooperating broker does not attend or pay a fee if the cooperating broker does not attend. All would be negotiated in the bilateral policy letter as it is modifying the terms and conditions of the MLS offer of compensation and cooperation.

An agent in the MLS demanded that the selling agent be present at the inspection. The listing agent stated that if the selling agent does not attend, she will have an agent from the listing office present and will charge a $60 fee. What is this? Is this legal? 

Again, the listing broker cannot use MLS remarks to require the cooperating broker to attend nor does the listing broker have unilateral authority to charge a cooperating broker such a fee. A bilateral policy letter may be agreed upon between the brokers for such a result. 

What does the REALTOR¬ģ Code of Ethics say about inspections?¬†

The REALTOR¬ģ Code of Ethics specifically addresses access to property by REALTORS¬ģ or inspectors in both Articles 1 and 3 and the corresponding Standards of Practice.
Standard of Practice 1-16 provides that, ‚ÄúREALTORS¬ģ shall not access or use, or permit or enable others to access or use, listed or managed property on terms or conditions other than those authorized by the owner or seller. (Adopted 1/12).‚ÄĚ
Standard of Practice 3-9 indicates that, ‚ÄúREALTORS¬ģ shall not provide access to listed property on terms other than those established by the owner or the listing broker. (Adopted 1/10).‚ÄĚ


If the seller wishes to limit or condition access to the property and the listing broker is willing to meet such requirements, such details may be stated in the listing. A listing broker may not unilaterally limit a buyer‚Äôs access contrary to the terms of the listing or offer to purchase. A listing broker attempting to create an office policy or otherwise condition access could be in violation of Standard of Practice 3-8, which provides, ‚ÄúREALTORS¬ģ shall not misrepresent the availability of access to show or inspect a listed property. (Amended 11/87).¬†

Access by home inspector 

The brokers cannot agree on who will give the home inspector access in a market that does not include electronic lockboxes. How should this be resolved? 

If the inspector does not have access to the property via a lockbox system, someone will need to give the inspector access. According to lines 399-401 of the WB-11 Residential Offer to Purchase, the seller is agreeing to allow access for the inspectors, but the language does not specify who will provide it. Also, the offer states the buyer and licensees may attend the inspection but are not required to do so. Therefore, the licensees will need to work with each other, and as necessary, with the seller, to assure timely access is provided.

There have been several articles published regarding home inspections, home inspectors and liability issues. Included are discussions regarding the advantages and disadvantages of brokers/agents attending home inspections. See the resources box below.

Tracy Rucka is Director of Professional Standards and Practices for the WRA.

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