Real Estate Terminology

Question 1

Terminology

Licensee

Answer 1

A salesperson, broker or sales entity

Question 2

A Broker is someone who:

Answer 2

1) Negotiates for another person
2) Develops a pattern of sales
3) Shows property
4) Advertises property
5) Issues a written report of property value

Question 3

Negotiation Three Part Definition Consists of:

Answer 3

1) Acting as an intermediary
2) Completing/Preparing approved forms
3) Presenting forms/Proposals

Question 4

Acting as an intermediary:

Answer 4

Facilitating or participating in communications between parties related to the parties interests in the transaction

Question 5

Completing/Preparing approved forms

Answer 5

Completing, when requested by a party, appropriate board approved forms or other writings to document the parties proposal consistent with the parties instruction.

Question 6

Presenting forms/Proposals

Answer 6

Presenting to a party the proposal of other parties to the transaction and giving the party a general explaination of the provisions of the proposal.

Question 7

Pattern of Sales

Answer 7

Wholly or in part, is in the business of selling or exchanging interests or estates in real estate or business, including businesses’ goodwill, inventory or fixtures whether or not the business includes real property, to the extent that a patter of sales or exchanges is established, whether or not the person owns the real estate.

(If I sell five properties in one year or ten sales in five years I’m creating a pattern of sales. This mostly targets developers and builders. They are not allowed to continue if the pattern exceeds four sales even after the one year mark because a pattern could be 5 sales in one year or 10 in 5. Once you exceed the fourth sale even after one year it fixes into 10 sales in five. To continue the pattern of sales, said developer/builder must hire someone with a brokerage license)

Question 8

Show Property

Answer 8

For another person and for commission, money, or other thing of value, shows real estate or a business or its inventory of fixtures, whether or not the business includes real property, except that it does not include a person showing rental properties.

(Exception is property management where new tenants are welcome to potential rental properties, other than that if I am showing FOR SALE properties, a license is required)

Question 9

Advertising Property

Answer 9

For another and for commission, money, or other thing of value, promotes the sale, exchange, purchase, option, rental, or leasing estate, a time share, or a business or its goodwill, inventory, or fixtures, whether or not the business includes real property. This does not include publishing or disseminating verbatim information by another person.

(EX: If I am advertising property of value on my business pages or social media, Wisconsin law recognizes that as license activity. EXCEPTION: If someone hires a newspaper company to advertise, verbatim, what they are selling. The newspaper company does not have to acquire a license to advertise)

Question 10

Issues a written report of property value

Answer 10

Prepared for another person, such as a seller, and that is not an appraisal. In some cases, someone may hire you to get an opinion on the value of a property even though they are not intending to list the property for sale in the near future.

(EX: Lawyer is helping someone appraise an estate and the family cabin has not been appraised in 20 years, instead of hiring an appraiser they may ask your opinion of value.)

Question 11

Property Managers

Answer 11

DO NOT need to obtain a license UNLESS they are signing leases or negotiating leases on behalf of the landlord. If lease terms and prices can be negotiable, then said property manager must obtain a license.

Question 12

Exchange

Answer 12

A tax planning tool for a property owner to exchange one property for another and defer payment of the tax on the gain realized from the transfer. To qualify for tax benefit, the exchange must involve real property held for productive use in a trade, a business, or as an investment.

(If someone wants to sell their condo and sees a $400,000 gain on that property they will be taxed on the capital gain of the sale. Although, if that person can find another property with the same value as the condo, then the seller can swap properties and not have to worry about capital gain until further down the road)

Question 13

Option to Purchase

Answer 13

An agreement to keep open, for a period of time, an offer to sell or lease real property. An option gives a buyer time to resolve questions of financing, title, or zoning before committing to purchase the property.

(Can be used while a developer acquires several parcels of land and make sure tasks at hand get finished. Can be used to the right to purchase property doesn’t go away.)

Question 14

Business Sale

Answer 14

Any type of business that is for sale including the goodwill of an existing business and all the assets. A business sale does not necessarily include the building in which the business is located

(Ex: A person owns a building she operates a restaurant. She wants to sell the business but keep the building. The new owner purchases the restaurant and leases the space back from the owner.)

Question 15

Who does NOT need a license?

Answer 15

Receivers, trustees, personal representatives, guardians, other persons appointed by the court. (Property Managers/Attorneys)

(EX: A personal representative must sell eight properties according to the descendants will. The personal representative will create a pattern of sales but is exempt from needing a real estate license. Trustees also include in this, although transactions take on over the course of several years, it’s considered a finite transaction and they are doing it for the personal gain of another not themselves.)

Question 16

Firm

Answer 16

A licensed individual broker acting as a sole proprietorship or a licensed broker business entity.

Question 17

Sole Proprietorship

Answer 17

A business owned and operated by a single individual.

(With a brokers license, Jennifer could hire 15 agents to work for her as a sole proprietor. Jennifer would be responsible for all agents transactions.)

Question 18

Salesperson

Answer 18

1) A licensee, other than a broker, who is associated with a firm.
2) Holds a real estate license, provides real estate brokerage services on behalf of the salesperson’s firm, and is supervised by a broker.
3) A legal extension of the salesperson’s firm, and acts as an agent of the firm in real estate transactions.
4) Must be associated with a firm to practice
5) If the salespersons firm loses its license, even if it’s temporary suspension, the salesperson cannot practice

Question 19

Agent

Answer 19

Acts on behalf of a principal and carries out the directions of the principal.

(Principal = buyer, seller, landlord, tenant.)
(If I am the buyers agent, the buyer hires the FIRM. Even if the seller lists a property with you and you sign the listing contract, the contract belongs to the firm, that’s where the relationship is. Back to being an EXTENSION of the firm. The buyer/seller hires the firm, the firm then finds the best fit for said client.)

Principal —-> Hires ——-> Agent

Question 20

Client

Answer 20

A party to a transaction who has an agency agreement with a firm for brokerage services. The client hires a firm to represent clients interests.
Listing contract = Seller is the client
Buyer Agency = Buyer is the client

Client ——> Hires ——> FIrm

Question 21

Principal Firm

Answer 21

A firm that engages in a subagent to provide brokerage services in a transaction. In many transactions, the principal firm is the listing firm. A subagent is the agent of the principal firm.

Question 22

Subagent

Answer 22

A firm that is engaged by a principal firm to provide brokerage services in a transaction, but that is not associated with the principal firm.

(EX: Seller lists a property with your firm, seller is the client, your firm is the listing firm, if a buyer contacts another agent from another firm and a buyer does not sign a buyer agency agreement with me, that person is a CUSTOMER. No written contract between the buyer and myself)

A client must consent to the clients firm using the services of a subagent. The consent occurs in the listing contract.

Client —> Hires —> Agent (principal firm) —> engages —> Subagent

Question 23

Customer

Answer 23

A party to a transaction who receives brokerage services, such as drafting an offer to purchase, from a firm but who is not the firms client. Does not enter into an agency agreement. If the customer wants to draft up an offer but does not enter into agency agreement, they will remain a customer. Until an agency agreement is signed we cannot go through with the transaction UNTIL customer becomes client.

Question 24

Agency Models

Answer 24

Single Agency
Multiple Agency

Question 25

Single Agency

Answer 25

When a firm represents either the buyer or the seller but never both in the same transaction. (A seller lists a property with firm ABC. A buyer-customer asks firm XYZ to write an offer on the sellers house. The seller is a client of Firm ABC. Firm ABC has a single agency relationship because the represent just one party in this transaction. Ther buyer is a customer of Firm XYZ and Firm XYZ is a subagent of the principal firm, which is Firm ABC.)

Question 26

Multiple Representation Agency

Answer 26

When a firm represents two or more clients in the same transaction. If a buyer and a seller are both clients of the same firm and they are participating in the same transaction, the firm is representing multiple parties in the transaction and it is a multiple representation relationship. Considering this could be a conflict of interests, both parties must consent to the multiple representation relationship, full written disclosure. The disclosure to the parties must contain duties owed to clients and non-clients and provide the clients the opportunity to consent to the firm providing services to more than one client in the transaction.

Question 27

Forms of Multiple Representation (2)

Answer 27

1) Multiple representation WITHOUT designated agency 2) Multiple representation WITH designated agency

Question 28

Multiple Representation WITHOUT designated agency

Answer 28

A firm provides services as agreed to in the clients’ agency agreements, but the firm and all the licensees associated with the firm must remain neutral in the transaction negotiations. (The firm and its licensees cannot place the interests of one client ahead of the interests of another client in the transaction. Whether you are an agent handling two clients in a single transaction or have two agents representing each client, if multiple representation WITHOUT designated agency is consented, no information that could be disadvantageous to one client over the other may not be shared.) Seller —> Hires —> Firm <— Hires <— Buyer

Question 29

Multiple Representation WITH designated agency

Answer 29

Firm represents both parties in the transaction. Each Party gets his or her own agent. Agents are NOT neutral but rather negotiate on behalf of the agents respective clients. Each client receives full negotiation services from the clients respective client (Note: If one client chooses multiple representation WITH designated agency and the other client chooses WITHOUT, it will automatically default to Multiple Representation WITHOUT Designated Agency)

Question 30

Fiduciary

Answer 30

A person responsible for the property of another. (EX: Seller hires Firm ABC to list a property, Firm ABC is the seller fiduciary. Firm ABC becomes responsible for items such as earnest money payments, transaction documents, sales contracts, and inspection reports.)

Question 31

Cooperating Firms

Answer 31

Firms that cooperate in one transaction. (EX: A seller lists a property with Firm ABC. A buyer uses Firm XYZ to draft an offer, which the seller accepts. Firm ABC and Firm XYZ are cooperating firms)

Question 32

Cooperating Firms [Listing Firm & Buyers Firm]

Answer 32

The seller is a client of Firm ABC and lists a property for sale with said Firm. The buyer is a client of Firm XYZ and signs a buyer agency agreement with said Firm. Firm XYZ drafts and offer for the buyer, which the seller accepts. Firm ABC and XYZ are cooperating firms. There is no subagency.

Question 33

Cooperating Firms [Listing Firm & Subagent Firm]

Answer 33

The seller is a client of Firm ABC and lists a property with said Firm. The buyer asks firm XYZ to draft an offer on Firm ABC’s listing, which the seller accepts. The buyer does not sign a buyer agency agreement with Firm XYZ. The buyer is a customer of Firm XYZ. Both firms are cooperating firms. Firm XYZ is a subagent of Firm ABC. Firm ABC is the principal firm.

Question 34

Listing Firm

Answer 34

The firm that the seller hires with the listing contract. Seller (client) —-> Listing Firm

Question 35

Listing Licensee/Agent

Answer 35

The agent of the listing firm that executives the listing contract on behalf of the firm. Seller (client) —-> Listing Firm —-> Listing agent (agent of listing firm) (Technically correct term is Listing Licensee and will be on the state licensing exam)

Question 36

Selling Firm

Answer 36

The firm that finds the buyer and writes the offer. The selling firm is a subagent of the listing firm. This means we are dealing with a customer. We have not yet got to the stage of signing a buyer agency agreement. (Looking for potential buyers)

Question 37

Selling Licensee/Selling Agent

Answer 37

The licensee associated with the selling firm that finds the buyer and writes the offer.

Question 38

Buyers Firm

Answer 38

The firm that a buyer signs an agency agreement with. Buyer (client) —-> Buyers firm (agent of buyer) (EX: Seller is a client with and lists property with firm ABC, the SELLING firm. Buyer signs buyer agency with Firm XYZ, that firm is the buyers firm and is a client of said firm.)

Question 39

Buyers Licensee/Buyers Agent

Answer 39

The agent who drafts the offer for the buyer-client. Buyer (client) —> Buyer’s Firm —> Buyers Agent

Question 40

The Agent’s Duties

Answer 40

1) Licensees must provide brokerage services to all parties honestly and fairly 2) Provide services with reasonable skill and care (No discrimination. Reasonable skill and care also falls under competency. If you are not competent to participate in a transaction the licensee can engage he assistance of one who is competent. EX: If one would not stand competent to list agricultural places such as a farm. Hire someone who can do such appraisals and go on from there. Licensees must also protect the public against fraud, misrepresentation, and unethical practices.) 3) Disclose to each party all material adverse facts that the firm knows and that the party does not know or cannot discover through reasonably vigilant observation. 4) STAY CONFIDENTIAL!! Unless the information must be disclosed by law or the person whose interests may be adversely affected. 5) Provide accurate information about market conditions. (Sale price of properties, the list price, and how long properties have been on the market. 6) Safeguard trust funds and other property. Earnest money and transaction documents 7) Present contract proposals in an objective and unbiased manner and disclose the advantages and disadvantages.

Question 41

Adverse Facts

Answer 41

A condition or occurrence that will: 1) Significantly and adversely affect the value of the property 2) Significantly reduce the structural integrity of improvements to real estate 3) Presenting a significant health risk 4) Information that indicates a party is not able to or does not intend to fulfill contractual agreement. (BASICALLY: Value, health and safety, or structural issues with the property.)

Question 42

Material Adverse Facts

Answer 42

Defined as an adverse fact that a party indicates is of such significance it will weigh on their decision to enter a contract. (EX: Someone with a severe cat allergy does not want to look at or purchase a house where cats have lived. If the licensee has information of cats having lived in said house, they are to disclose that information, if licensee is unaware, it is not their duty to investigate whether or not the previous owners had cats.) A licensee may not disclose any information that constitutes unlawful discrimination, such as whether a buyer is part of a certain ethic or racial group.

Question 43

Pre-Agency

Answer 43

A firm and licensees associated with the firm can provide some brokerage services before a consumer decides whether to be a client or a customer. (Showing properties or giving provide information to consumers. Cannot make negotiations in the pre-agency stage. Remains neutral.)

Question 44

Duties Owed to a Client

Answer 44

1) Represent the clients interests loyally. 2) Provide information and advice to the client on matters that are material to the clients transaction. 3) Disclose all material facts affecting the transaction, not just adverse facts. 4) Fulfill any obligation required by the agency agreement . 5) Unless a client waives the duty, negotiate on behalf of the client.

Question 45

Waiver of Duty

Answer 45

A client can waive a licensee’s duty of negotiation. (When a client wants to waive the duty of a licensees duty, the licensee must provide a written disclosure including: A) A copy of the text of what the client is waiving and a statement, that as a consequence of the client’s waiver, they will not receive negotiations. B) A statement that the client may require the assistance of an attorney or another service provider.

Question 46

Represents Clients Loyally

Answer 46

If the relationship is salesperson to customer then if you find a property that is in your customers interests but you also take interest, you can and are able to purchase the property for yourself. If relationship is salesperson to CLIENT then you as a salesperson owe it to your client to notify them of said property before putting your own interests before them.

Question 47

Duties for Subagents

Answer 47

1) Cannot put interests ahead of sellers interests not can they share anything that would be disadvantageous to your seller 2) Not a party to the agency agreement and is not subject to the provisions of the agency agreement. 3) Cannot give the buyer an opinion that the property is overpriced or advise the buyer to offer less. (If customer wants this type of opinion they must become a client) 4) May negotiate on behalf of a person who is not the principal firm’s client if the principal firm get the clients consent.

Question 48

Agency Disclosure Obligations

Answer 48

Discuss agency relationships with buyers and sellers before providing brokerage services. (Determining whether the buyer wants to go from customer to client. Must use plain-language. Agency Disclosure = Make sure the consumer understands agency and the agents role in the transaction. No state approved form, so whatever form a firm uses must contain word-for-word the statutory agency disclosure language.)

Question 49

Agency Disclosure to Customers

Answer 49

If the buyer chooses to stay a customer, then the agent has to do an agency disclosure to said customer so they are aware of your position and your duties to them as a customer.

Question 50

Client Agency Disclosure

Answer 50

A firm (directly or licensee associated by firm) must provide mandated written disclosure agreements no later than the time of entering into an agency agreement. (Includes: the duties owed to all parties and duties owed to clients, description of agency relationships, and firms role in the transaction) Provides true client an opportunity to select (Multiple representation with/without designated agency or to reject multiple representation relationship. Provides a statement that the client can withdraw the agency choice at any time (must be in writing.) Language also recommends that the client ask questions about commission or fees before signing agreement. Firms and licensees associated cannot provide legal advice. (Questions/Concerns of that level will have to be met with by an attorney)

Question 51

Providing Agency Disclosure

Answer 51

A licensee must provide agency disclosure in all transactions, not just residential. This includes: commercial, agricultural, business, vacant land, and property management transactions (If property manager is negotiating leasing terms)

Question 52

Acknowledging Agency Disclosure

Answer 52

Must ask a party to acknowledge receipt of the agency disclosure in residential transactions involving one-to-four dwelling units. A party does not have to sign the acknowledgment, it the licensee must ask for it and record it in their files.

Question 53

Additional Disclosure for Buyers Firm

Answer 53

Buyers Agent? Disclose to seller or listing firm the earliest of : 1) First contact with the seller/listing firm 2) A showing of the property 3) Any other negotiations with the seller/listing firm (Basically… If I’m a buyers agent I need to disclose my buyers agency the first chance I get)

Question 54

Disclosure of Compensation and Interests

Answer 54

1)Licensee acting as an agent cannot accept compensation from anyone other than the licensee’s client, principal firm or associated firm. 2)Cannot act on own behalf or for a member of immediate family/ on behalf of any firm/organization/business entity in which the licensee has interest without prior written consent from all parties. Immediate family includes: parent/step parent, grandparent, foster parent, child/stepchild, grandchild, foster child, brother/sister, aunt/uncle, spouse/partner 3) May not receive referral fees. Firm cannot pay compensation/incentive to a licensee who is acting as a buyer without prior written consent. 4) Disclose in writing licensed status and intent to act in the transaction as early as possible. 5) Licensees cannot enter into certain tie-in arrangements

Question 55

Tie-In arrangements licensees cannot enter in disclosure of compensation and interests:

Answer 55

1) Selling real estate the licensee owns or controls to a buyer only if the buyer agrees to purchase another parcel of real estate 2) Selling real estate the licensee owns or controls only if the buyer agrees to list a piece of property with the licensee; or 3) Selling vacant land the licensee owns or controls only if the buyer agrees to use one of more specific builders to develop land UNLESS: A) The builder owns bona fide interest and there is full disclosure B) The licensee is the builder or the builder owns the real estate C) The agreement to sell if the buyer uses one or more specific builders is a bona fide effort to maintain developement quality.

Question 56

Family and Firm

Answer 56

A licensee cannot act on the licensee’s own behalf/member of immediate family without prior written consent of all parties.

Question 56

Referral Fee from Service Providers

Answer 56

Licensees acting as agents cannot receive referral fees UNLESS the licensee discloses in writing that they might receive compensation for said referral. (EXCEPTION: Referral fees between licensee. If I hire someone to appraise land/property I am not competent to appraise, those fees exchanged between licensees does not have to be disclosed to the buyer)

Question 57

Disclosure of Licensure

Answer 57

Licensee acting as principal in a transaction must disclose status at the earliest of: First contact with other party or agent, showing of the property, any other negotiation with other party or agent. (Whether you sell/buy a home, you must disclose that you are a licensee, disclosure does have to be in writing)

Question 58

Tie-In Arrangements

Answer 58

Where the sale of one product is conditioned on a consumer purchasing another. (EX: I will sell you this house that I own only if you agree to purchase this other property that I own.) (UNLESS: 1) A builder owns a bona fide interest in the real estate and there is full disclosure. 2) The builder and the licensee or the builder and the owner of the real estate are the same person and whose business is selling improved property not vacant land with full disclosure. 3) Effort to maintain development quality = this is when a buyer is buying vacant land in a new subdivision and they have to use two or three approved builders to build on the property.)

Question 59

Licensed Individuals in the Real Estate Office can:

Answer 59

Any of the brokerage activities discussed. (Showings, open houses and negotiating offers)

Question 60

Unlicensed Persons in the Real Estate Office Can:

Answer 60

Provide clerical or administrative support like scheduling showings, answering phone calls, helping with paperwork/files

Question 61

Notifying the DSPS

Answer 61

1) When licensee wants to associate with a firm, the name of the firm. 2) Changes in licensed status 3) Notify of licensee’s association with a firm before the licensee provides services. 4) If a licensee transfers and pay a fee ($10) before providing services. 5) A licensee terminates association, must notify in writing within 10 days. 6) A firm that terminates a licensee’s association, must notify within 10 days. 7) If convicted of a crime - 48 hours to notify.