Real Estate Practice Changes

LEGISLATION

2023 Wisconsin Act 208
Wisconsin Legislative Council Act Memo: 2023 Act 208

MEMOS SUPPORTING LEGISLATION

WRA Memo on AB 918
WRA Amended Memo on AB 918

The WRA supports making changes improve real estate practice, including establishing a safe harbor, requiring disclosures when contractual rights are being assigned, and creating consistency in the statute and administrative rule relating to disclosure obligations by real estate agents.

Background

Wisconsin Statute Chapter 452 governs real estate brokerage practice, investigation and discipline of licensees, and the duties and powers of the Real Estate Examining Board (REEB). Real estate licensees are regulated by the Wisconsin Department of Safety and Professional Services (DSPS) as well as the REEB, which protects Wisconsin property buyers and sellers by ensuring safe and competent practice.

This legislation:

  • Addresses real estate licensee liability by:
    • Removing liability when using government information attributed to the source.
      For example, when listing a property, an agent relies on the assessor record to indicate the lot size. If it is later discovered the assessor record contained inaccuracies, the agent should not be held responsible for presenting incorrect information obtained from a government source.
    • Eliminating administrative rule inconsistency.
      Wis. Admin. Code § REEB 24.07(3) requires an extra disclosure of information suggesting the possibility of material adverse facts. Wis. Stat. Chap. 452 requires licensees to disclose known material adverse facts. To address this inconsistency between rule and statute, AB 918/SB 870 eliminates the conflict and ensures consistency.
  • Increases transparency by requiring disclosure when assigning rights under a contract:
    Requires wholesaler buyers and sellers to provide written disclosure of the purchase or sale of a property. In most simple terms, wholesaling is assigning contractual rights under a contract to another.What is real estate wholesaling? A strategy often utilized by investors in which the investor, also known as the wholesaler, enters into a purchase agreement with the seller of real property. The wholesaler then finds a buyer interested in the property and assigns their contractual rights to that buyer for the seller’s property. The wholesaler most often profits by selling the contract to the buyer for a price higher than the one agreed to with the seller.

    AB 918/SB 870 requires wholesalers to provide a written disclosure explicitly stating their wholesaler status to both the seller and the buyer at the time of entering the agreement. In addition, the wholesaler must let the buyer know that even though the buyer has an equitable interest in the property, the buyer does not own title to the property.

  • Raises the bar.
    Increases fines and forfeitures up to $5,000 for the most egregious violations of Wis. Stat. Chap. 452. Under current law, the REEB can only assess a fine or forfeiture up to $1,000 for the most severe violations of Wisconsin license law.