Top 10 Things You Should Know About the WB-1


 Debbi Conrad  |    June 08, 2016
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The updated WB-1 Residential Listing Contract will look very familiar to real estate practitioners because the basic concepts have not changed. A licensee should recognize the various provisions and be able to complete the listing contract in much the same manner as before. Are there improvements and clarifications? Of course, for ease of use and better understanding! Is there some different terminology? Well yes, to match the changes made in the recent legislation updating the real estate brokerage statutes in chapter 452. But on the whole, the revised WB-1, which has grown from five to six pages, should be welcoming and easy to use.

1. The WB-1 has no optional use date

The updated WB-1 Residential Listing Contract has a mandatory use date of July 1, 2016. However, this form is unusual because it has no optional use date. The state-approved listing contracts all include a section of disclosure language entitled the Broker Disclosure to Clients that is quoted from the statutes. The language in the statutes is changing effective July 1, 2016, and the revised WB-1 contains the new language. Using a form with the revised disclosure language before that language becomes law creates a risk that a listing could be challenged and a firm could lose out on a commission. While licensees will not have the opportunity to use the form in practice before the mandatory use date, sample forms will be made available to help everyone get up to speed.

2. Disclosure to clients

One of the best improvements to the WB-1 is in the Disclosure to Clients section, formerly called the Broker Disclosure to Clients. This is the section that first lists the duties owed to all parties in a transaction and the duties owed to the client. It goes on to explain multiple representation and designated agency in a manner that is now more consumer-friendly and a bit easier to work with. The possible agency relationships between a brokerage firm and two or more clients in the same transaction have not changed, but the selection method within the form is vastly improved. Rather than have each individual seller initial a blank line, which often had insufficient room for multiple parties, the sellers instead must agree to one selection and check the appropriate box. The check boxes eliminate the logistical challenge of trying to place multiple client initials on a line electronically. 

Further discussion of the Disclosure to Clients section is found in the article ‚ÄúChange Is on Its Way,‚ÄĚ in the February 2016 Wisconsin Real Estate Magazine at www.wra.org/WREM/Feb16/Chapter452.

Check only one of the three below: ‚Äā
ÓĀĮ The same firm may represent me and the other party as long as the same agent is not representing us both. (multiple representation relationship with designated agency)
ÓĀĮ The same firm may represent me and the other party, but the firm must remain neutral regardless if one or more different agents are involved. (multiple representation relationship without designated agency)
ÓĀĮ The same firm cannot represent both me and the other party in the same transaction. (I reject multiple representation relationships)

3. Delivery of documents and written notices

By popular demand, there is now a Delivery of Documents and Written Notices section on the top of the last page of the WB-1 that is similar to the section by the same name that appears in the REEB-approved offers. That means there will be no need to use the WRA Addendum D with this form! 

4. Fixtures

There were a few tweaks to the Fixtures definition. The list of possible fixtures now includes water softeners, satellite dishes, audio/visual wall-mounting brackets ‚ÄĒ but not the audio/visual equipment, and in-ground pet containment systems ‚ÄĒ but not the collars. If history is any indicator, these same changes will be carried forward to other contracts and will eventually appear in the offers.

5. Commission

The first thing to point out in the revised WB-1 Commission section on the first page of the WB-1 is that the section has been reorganized and subheadings have been inserted to provide better clarity and understanding. Most of the content remains as before.
Under the Earned subheading is a list of the five ways in which a firm’s commission may be earned, as was the case before, and the first four have not changed. The fifth way to earn the firm’s commission has been reworded to clarify that commission is earned when there is an offer at or above full price, on substantially the same terms as in the WB-11, that was submitted by a ready, willing and able buyer, even if the seller has not accepted it. It also explains that a ready, willing and able buyer is a buyer who has the ability to complete the buyer’s obligations under the written offer.

Under the Due and Payable subheading, the WB-1 indicates that once a commission is earned, it is due and payable at the earlier of closing or the date set for closing, even if the transaction does not close, unless stated otherwise in writing. 

Under the Calculation subheading, there is an itemized list indicating to what number any commission percentage is applied depending upon whether it is a sale, option, exchange, change in control, or a full price offer the seller did not accept. For example, with an enforceable contract, the commission percentage is applied to the total consideration in the transaction. 

Some of the Commission section clarifications address comments made in a Wisconsin Supreme Court opinion questioning what a home seller would understand when reading the listing contract. See the discussion of Ash Park, LLC v. Alexander & Bishop, Ltd. on pages 1-3 of the November 2015 Legal Update, ‚ÄúCase Law Update Fall 2015,‚ÄĚ at www.wra.org/LU1511.

Commission: ‚Äā
COMMISSION: The Firm's commission shall be _________________________________________________________
_________________________________________________________________________________________________.
EARNED: Seller shall pay the Firm's commission, which shall be earned, if, during the term of this Listing:

  1. Seller sells or accepts an offer which creates an enforceable contract for the sale of all or any part of the Property; 
  2. Seller grants an option to purchase all or any part of the Property which is subsequently exercised;
  3. Seller exchanges or enters into a binding exchange agreement on all or any part of the Property; 
  4. A transaction occurs which causes an effective change in ownership or control of all or any part of the Property; or
  5. A ready, willing and able buyer submits a bona fide written offer to Seller or Firm for the Property at, or above, the list price and on substantially the same terms set forth in this Listing and the current WB-11 Residential Offer To Purchase, even if Seller does not accept the buyer's offer. A buyer is ready, willing and able when the buyer submitting the written offer has the ability to complete the buyer’s obligations under the written offer. 

The Firm’s commission shall be earned if, during the term of the Listing, one seller of the Property sells, conveys, exchanges or options, as described above, an interest in all or any part of the Property to another owner, except by divorce judgment.
DUE AND PAYABLE: Once earned, the Firm’s commission is due and payable in full at the earlier of closing or the date set for closing, even if the transaction does not close, unless otherwise agreed in writing.
CALCULATION: A percentage commission shall be calculated based on the following, if earned above:

  • Under 1) or 2) the total consideration between the parties in the transaction.¬†
  • Under 3) or 4) the list price if the entire Property is involved.¬†
  • Under 3) if the exchange involves less than the entire Property or under 4) if the effective change in ownership or control involves less than the entire Property, the fair market value of the portion of the Property exchanged or for which there was an effective change in ownership or control.¬†
  • Under 5) the total offered purchase price.¬†
NOTE: If a commission is earned for a portion of the Property it does not terminate the Listing as to any remaining Property.

6. Buyer financial capability

The Buyer Financial Capability section at the bottom of the first page also is in response to Ash Park. The concurring opinion indicates the chief justice believes the responsibility for investigating the financial ability and resources of the buyer rests with the firm. This is concerning for real estate professionals because real estate licensing and training do not require that licensees investigate or analyze a party’s financial ability. Instead the buyer works with a lender to obtain a prequalification or preapproval letter, a loan commitment or other proof of funds that demonstrate the buyer’s financial capability to the seller. Accordingly, this provision properly sets the seller’s expectations that buyer financial wherewithal is gauged by lenders or contingencies in the offer, not by the listing firm.

Buyer financial capability: ‚Äā
The Firm and its agents are not responsible under Wisconsin statutes or regulations to qualify a buyer’s financial capability. If Seller wishes to confirm a buyer’s financial capability, Seller may negotiate inclusion of a contingency for financing, proof of funds, qualification from a lender, sale of buyer’s property, or other confirmation in any offer to purchase or contract.

7. Protected buyer

Another definition with some changes is the Protected Buyer definition. While a buyer who negotiates directly with the seller was protected before, the modifications to the language make it clear that this includes buyers who view the property with the seller or communicate with the seller via any media regarding potential purchase terms. It is also clarified that the written list of prospects attending individual showings or negotiating with agents must be delivered no later than three days after the expiration or any early termination of the listing. A sentence was also added to include persons acting on behalf of the buyer during the one-year extension period as protected buyers. This is intended to try to capture those protected buyers who, for example, form an LLC during the extension period and then deny that they are protected.

Protected buyer: ‚Äā
Means a buyer who personally, or through any Person Acting on Behalf of Buyer, during the term of this Listing: 1) delivers to Seller or the Firm or its agents a written offer to purchase, exchange or option on the Property; 2) views the Property with Seller or negotiates directly with Seller by communicating with Seller regarding any potential terms upon which the buyer might acquire an interest in the Property; or 3) attends an individual showing of the Property or communicates with agents of the Firm or cooperating firms regarding the potential terms upon which the buyer might acquire an interest in the Property, but only if the Firm or its agents deliver the buyer’s name to Seller, in writing, no later than three days after the earlier of expiration or termination (lines 261-269) of the Listing. The requirement in 3), to deliver the buyer’s name to Seller in writing, may be fulfilled as follows: a) If the Listing is effective only as to certain individuals who are identified in the Listing, by the identification of the individuals in the Listing; or, b) if a buyer has requested that the buyer’s identity remain confidential, by delivery of a written notice identifying the firm or agents with whom the buyer negotiated and the date(s) of any individual showings or other negotiations. A Protected Buyer also includes any Person Acting on Behalf of Buyer joined in interest with or otherwise acting on behalf of a Protected Buyer, who acquires an interest in the Property during the extension of listing period as noted on lines 218-222.

8. Seller cooperation with marketing efforts

The seller shall promptly refer all persons making inquiries concerning the property to the firm and notify the firm in writing of any prospects with whom the seller negotiates or who view the property with the seller during the term of the listing pursuant to the Seller Cooperation with Marketing Efforts section. Once again there is inclusion of buyers who view the property with the seller as well as an effort to discourage parties from an end-around. Sellers who deal directly with buyers are in breach of the listing and may be pursued for damages.

9. Termination of listing 

Should an agent be in that unhappy situation where the seller wants to bring the contract to an end before the contract end date, the Termination of Listing section specifies that the seller must deliver written notice, using an approved delivery method, to the firm. Should the agent wish to bring the contract to an end, a written notice signed by the supervising broker must be delivered to the seller using an approved delivery method.

10. Exclusions 

In the Exclusions section, there is now a note cautioning sellers they could be sued for damages if they fail to timely provide the list of protected buyers to the listing broker. Hopefully this will help encourage sellers to produce any protected buyers lists that they may have.

Firm: ‚Äā
‚ÄúFirm‚ÄĚ means a licensed sole proprietor broker or a licensed broker business entity.


And one more thing about the new terminology. You may have noticed frequent references in this discussion to ‚Äúthe Firm‚ÄĚ and thought you had been transposed into the middle of a John Grisham thriller. Please rest assured you are not being enlisted to work for a money-laundering Memphis law firm. Rather, the terminology in chapter 452 of the statutes was overhauled to eliminate all usage of ‚Äúbroker-employer‚ÄĚ and ‚Äúbroker-employee‚ÄĚ because that sends the wrong message for an industry largely populated by independent contractors. Under the new lingo, both a brokerage company or entity, as well as a sole practitioner broker, are referred to as a ‚Äúfirm,‚ÄĚ while any individuals with a broker‚Äôs or a salesperson‚Äôs license are referred to in the WB-1 simply as ‚Äúagents.‚ÄĚ

Resources

Be sure to check the Forms Update Resources page at www.wra.org/FormsUpdate for additional WB-1 resources.

Debbi Conrad is Senior Attorney and Director of Legal Affairs for the WRA.

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