Chapter 13 - Ethical Real Estate Practices Flashcards
Obligation of Competency
Under this law, licensees are not allowed to offer services that they are not competent to provide. It’s difficult to be competent in every aspect of the real estate business, so it is acceptable for a real estate agent to ask for assistance from a professional who is deemed competent (i.e., another agent, your manager, your mentor). The main goal of competency is to take the necessary steps to keep the public as protected as possible, from start to finish.
What agreements are required to be in writing?
- Listing Agreements
- Buyer’s Agreements
- Guaranteed Sale Agreements
- Offers to Purchase
- Property Management Agreements
- Option Contracts
What 2 agreements are considered illegal in Wisconsin?
- Net Listings
2. Tie-in Agreements
Net Listing
listing in which the licensee stipulates a net price for the owner and then states that any excess will go to the agency as commission. Net listings can result in thousands of dollars lost for the seller that would have originally been theirs.
–EX: agent says that can get the seller a net price of $300K for their home, but it sells for $450K. The seller will get $300K and forfeit $150K to the agent
Tie-in Agreement
Agreement that occurs when an agent attempts to handle another property on top of the one that they were originally hired for. The consumer has to accept a second contract to be able to go through with the one they want.
- -EX: Agent saying/implying that a buyer has to purchase a plot of land next to a single family home (even though they’re being sold separately)
- -EX: agent stipulating that a certain builder needs to work on the land in order to secure the vacant land sale
Advertising Regulations
As a real estate agent, you are not allowed to advertise anything that is false, deceptive, or misleading. All advertising must be done under the supervision of your firm (i.e., supervising broker or manager), approved by the property seller, and be transparent as to your association with a brokerage or your status as a licensee.
–EX: advertising that your properties sell for 10% higher than similar properties in the area (cannot give the impression of guaranteeing this)
What is the exception to including the name of your firm in your advertisements?
The exception to this is if you’re representing yourself in your own transaction without going through your brokerage firm.
–EX: if you rent out the basement of your property to a tenant, you would need to identify yourself as a real estate agent in your listing, but would not need to include your broker’s business name.
What must be approved by the property owner in a sale?
- -Advertising
- -Price of the property - single number or price range
Real estate agents can disclose the specific terms of one buyer’s offer to another buyer - T/F?
FALSE - agent cannot tell one prospective buyer that another buyer has already offered the listing price of the home. Licensees are required to encourage buyers to put their best offer forward.
Real estate agents must stay quiet about everything related to buyers’ offers - T/F?
FALSE - agents can tell a buyer that other offers have been made on the property or that a seller has already accepted an offer. They can also tell the buyer if certain offers are subject to contingencies or if any of the offers contain a bump clause.
Bump Clause
clause that gives the seller the power to bump one buyer for another if the buyer can’t meet certain terms
–EX: seller has entered into agreement w/ a buyer that still needs to sell their own home. So, the agreement is contingent on the sale of the home, but the seller has the right to “bump” this buyer if another buyer comes along and the first buyer has not been able to get their home sold yet.
Right of First Refusal
potential buyer who has the right to enter into a sales transaction with the seller over a third party.
- -EX: tenant, w/ ROFR, is interested in buying the home in which they are currently renting. Landlord is required to give the tenant the first opportunity to buy the property before they consider other offers, as long as the tenant is willing to match the offer amount from the third party. The goal is to give the first-refusal buyer the best chance of securing the property.
- -MUST be disclosed in writing
What actions are required to be completed in a timely manner by real estate agents, related to preparing & submitting offers?
- Access to the Property must be allowed in a timely manner
- Presentation of offers to the client - this ensures fairness to both parties and puts the power in the hands of those being represented. Sellers have the right to consider each offer in real-time and discuss the potential advantages/disadvantages of each one–this is where an agent can help clients make difficult decisions.
Do offer negotiations btwn prospective buyers and sellers need to be done through the firm?
YES, unless the firm has consented to outside negotiation or when there is no formal agreement between the firm and the client. This means the seller cannot call the buyer in private to discuss what they’re looking for in an offer.
–real estate agents should ideally be keeping detailed spreadsheets of when offers were made, how they were received, and what the outcome was for each one.
If a licensee is acting as an agent, they’re either paid directly by the client or thru the agency they work for - T/F?
TRUE - if a licensee accepts compensation from anyone else, they must have written consent from all parties involved in the transaction (i.e., all parties would need to state that they understand and approve of this arrangement before moving forward)
–EX: you have an agreement with a home inspector where you receive 5% of the fee should a client choose them over one of their competitors (and/or vice versa) - but to ensure there are no hard feelings on either side, you might encourage your client to do their own research on home inspectors before deciding one way or another.
