Wisconsin Real Estate Broker Exam — All Questions

Wis. Admin. Code § REEB 24.02 (12) defines a "material adverse fact" as an adverse fact of such significance that it affects or would affect a party's decision to enter into a contract concerning a transaction, or the party's decision about:

• a.the terms of such a contract or agreement✓
• b.the choice of a firm to represent the party
• c.the lender the party will apply to for a loan
• d.the price the party's own appraiser will set

Subsection (12) defines the term as an adverse fact that a party indicates is of such significance, or that a competent licensee generally recognizes as being of such significance to a reasonable party, "that it affects or would affect the party's decision to enter into a contract or agreement concerning a transaction or affects or would affect the party's decision about the terms of such a contract or agreement." The definition is about the contract, not about the party's choice of broker, lender or appraiser. An "adverse fact" is defined one level down in § REEB 24.02 (1) and in Wis. Stat. § 452.01 (1e).

A Wisconsin licensee is asked to handle a matter outside the licensee's competence. Under Wis. Admin. Code § REEB 24.03 (2) (a), the licensee may proceed by engaging a competent person, provided that person is:

• a.identified and the contribution described in the transaction records✓
• b.licensed under ch. 452 and associated with the licensee's own firm
• c.approved in advance by the department on a prescribed written form
• d.paid directly by the client rather than out of the firm's commission

Paragraph (2) (a) says licensees may not provide services they are not competent to provide "unless the licensee engages the assistance of another person who is competent. Any person engaged to provide such assistance shall be identified and that person's contribution shall be described in the documents or records related to the transaction." There is no requirement that the helper be a licensee, that the department approve the arrangement, or that the client pay directly. Paragraph (2) (d) makes clear licensees are not expected to hold the technical knowledge of home inspectors, plumbers, electricians or land surveyors.

Wis. Admin. Code § REEB 24.03 (2) (d) states that Wisconsin licensees are not required to have which of the following?

• a.Knowledge of laws and public policies on real estate matters
• b.The ability to guide the parties on current market conditions
• c.The technical knowledge of competent third-party inspectors✓
• d.An understanding of the approved forms used in a transaction

Paragraph (2) (d) provides that "[l]icensees are not required to have the technical knowledge, skills or training possessed by competent third party inspectors and investigators of real estate and related areas," with the code note giving home inspectors, plumbers, electricians and land surveyors as examples. Paragraph (2) (c) runs the other way and requires the licensee to be knowledgeable about laws, public policies and current market conditions and to assist, guide and advise the parties on those factors. Competence with the board's approved forms is the core of the drafting duty in ch. REEB 16.

Under Wis. Stat. § 452.136 (2) (a), advertising by a licensee must disclose the firm's name exactly as printed on the license, or a trade name previously filed with the department, and must also clearly indicate that:

• a.the property is listed with a multiple listing service member
• b.the advertised price is subject to the owner's final approval
• c.the licensee is compensated only by the seller of the property
• d.the firm is a business enterprise and not a private party✓

Paragraph (2) (a) requires the licensee to disclose the firm's name or filed trade name "and shall in either case clearly indicate that the firm is a business enterprise and not a private party." The rule exists to stop blind ads that read like a for-sale-by-owner listing. Section 452.136 (2) (c) carves out the occasional sale or purchase of the licensee's own real estate, provided the licensee clearly identifies himself, herself, or itself as a real estate licensee in the advertisement. Wis. Admin. Code § REEB 24.04 simply directs licensees to follow § 452.136.

A Wisconsin firm wants to advertise a property it has not listed. Under Wis. Stat. § 452.136 (3), the firm may do so only if:

• a.it discloses that it is not the listing firm in the ad copy
• b.the property has been on the market for more than 90 days
• c.it has obtained consent to advertise from the listing firm✓
• d.the owner has signed a one-party listing with the firm

Subsection (3), captioned ADVERTISING WITHOUT AGENCY AGREEMENT PROHIBITED, allows a firm to advertise a property only where the firm is the listing firm or where the firm or an associated licensee "has obtained consent to advertise the property from the listing firm for the property." A disclaimer in the copy is not a substitute for consent, and neither days on market nor a one-party listing with a different arrangement supplies it. Section 452.136 (4) separately bars advertising a property at a price other than the price agreed on with the owner, though a range or general terms are allowed if they reflect that price.

Wis. Admin. Code § REEB 24.05 (5) requires a licensee acting as a principal to disclose the licensee's license status and intent to act as a principal. That disclosure must be made:

• a.orally at the first showing and in writing before the offer is drafted
• b.in writing, at the earliest of first contact, a showing, or negotiation✓
• c.in writing, no later than the time the offer to purchase is presented
• d.in the transaction contract, before the parties sign the closing papers

Paragraph (5) (a) requires the disclosure at the earliest of the first contact where information about the other party or the transaction is exchanged, a showing of the property, or any other negotiation with the seller, the listing firm, or the other party or its firm. Paragraph (5) (b) then requires that "[t]he disclosure under this subsection shall be made in writing to the other party in a transaction or to an agent representing the other party." Waiting for the offer or for closing is too late, and an oral disclosure does not satisfy (5) (b).

Under Wis. Admin. Code § REEB 24.05 (4), a listing firm may pay compensation or an incentive to a licensee who is acting as a buyer in the transaction only with:

• a.prior written consent from the seller✓
• b.prior written approval of the department
• c.prior consent of the buyer's own lender
• d.prior oral notice to the seller's agent

Subsection (4), captioned DISCLOSURE TO SELLER, provides that "[a] listing firm may not pay any compensation or incentive to a licensee who is acting as a buyer in a transaction without prior written consent from the seller." The consent must come from the seller, in writing, and in advance. The related compensation restrictions in Wis. Stat. § 452.133 (3) (a) and (c), which § REEB 24.05 (1) and (2) point to, also turn on written consent or written disclosure to the parties.

Wis. Admin. Code § REEB 24.07 (1) (a) requires a licensee engaging in real estate practice involving real estate improved with a structure to conduct a reasonably competent and diligent inspection of:

• a.accessible areas of the structure and immediately surrounding areas✓
• b.every room, crawl space and attic in the structure without exception
• c.only those areas the seller identifies on a real estate condition report
• d.the structure's mechanical systems, operated to confirm they function

Paragraph (1) (a) requires an inspection "of accessible areas of the structure and immediately surrounding areas of the property to detect observable, material adverse facts." Paragraph (1) (d) then sets the limits: the inspection does not require operating mechanical equipment, opening panels, doors or covers, moving furniture or boxes, entering areas presenting an unreasonable risk of injury, or reaching areas accessible only by ladder or by crawling. For vacant land, paragraph (1) (a) requires an inspection only if the land is accessible, and paragraph (1) (d) requires observation from at least one point on or adjacent to the property.

A licensee learns that a buyer has a side agreement with the seller that the buyer has not disclosed to the buyer's lender. Wis. Admin. Code § REEB 24.07 (4) requires the licensee to:

• a.advise the buyer to disclose it and take no further action
• b.terminate the agency agreement with the buyer immediately
• c.disclose the fact to the party's secured lender in writing✓
• d.report the fact to the board within 48 hours of learning it

Subsection (4), captioned DISCLOSURE OF SIDE AGREEMENTS, requires a licensee who becomes aware that a party has not disclosed that party's entire agreement regarding the transaction to that party's secured lender to "disclose this fact, in writing and in a timely manner, to the party's secured lender." Advising the client and stopping short of disclosure does not satisfy the rule, and neither termination nor a report to the board is what it calls for. "Secured lender" is defined in § REEB 24.02 (15) as an individual or organization originating a loan secured by the real estate or by business assets.

Wis. Admin. Code § REEB 24.075 (2) prohibits a licensee from conditioning the sale of real estate the licensee owns or effectively controls on the buyer's agreement to:

• a.use a title company the licensee has an interest in
• b.list the buyer's own real estate with the licensee✓
• c.waive the buyer's right to a home inspection report
• d.pay the licensee's commission directly at the closing

Subsection (2) bars conditioning such a sale "upon the buyer's agreement to list the real estate or other real estate owned by the buyer with the licensee," and the code note gives requiring a buyer to list a present home with the licensee as one of the two classic examples. Subsection (1) covers the parallel case of conditioning the sale on the buyer's agreement to purchase another parcel. A violation of § REEB 24.075 is expressly treated as improper, fraudulent or dishonest dealing under Wis. Stat. § 452.14 (3) (k) by § REEB 24.01 (4).

Under Wis. Admin. Code § REEB 24.075 (3), a licensee selling vacant real estate the licensee controls may condition the sale on the buyer's employing a specific builder if:

• a.the builder has been recommended in writing by at least two prior buyers of the land
• b.the builder owns a bona fide interest in the real estate, with full disclosure✓
• c.the buyer is given a written estimate from that builder before the closing
• d.the builder agrees to pay the licensee a referral fee that is disclosed

Subsection (3) states the prohibition and then lists the exceptions. Paragraph (3) (a) applies where "[t]he builder owns a bona fide interest in the real estate; and there is full disclosure as specified under s. 452.133 (3) (c), Stats." Paragraph (3) (b) covers the case where the builder and the licensee or owner are the same person or commonly controlled corporations selling improved property, again with full disclosure, and paragraph (3) (c) permits a bona fide effort to maintain development quality or architectural uniformity where no consideration passes from the builder to the licensee. A referral fee is the opposite of what (3) (c) allows.

Wis. Admin. Code § REEB 24.08 requires a licensee to put listing contracts, buyer agency agreements, offers to purchase and similar proposals in writing, expressing:

• a.the firm's standard office practice
• b.the licensee's opinion of fair terms
• c.the board's recommended language
• d.the exact agreement of the parties✓

Section REEB 24.08 requires the licensee to put those documents in writing "expressing the exact agreement of the parties." The section does not apply where the writing is completed by the parties or their attorneys, or where the writing is outside the scope of the licensee's authority under ch. REEB 16. Substituting office practice, the licensee's view of fairness, or generic language for what the parties actually agreed is the failure the rule is aimed at.

Wis. Admin. Code § REEB 24.09 bars a licensee from misleading a potential client about the benefits of the licensee's services and also about:

• a.the length of time the property is expected to be on market
• b.the market value of the real estate or business opportunity✓
• c.the number of other clients the licensee is serving already
• d.the commission rates charged by competing brokerage firms

Section REEB 24.09 provides that a licensee "may not mislead a potential client regarding the benefits that might be realized by using the licensee's services" and "also may not mislead a potential client regarding the market value of real estate or a business opportunity to be leased, rented, purchased, optioned, or sold under an agency agreement." Inflating a listing price to win the listing is the conduct the rule targets. A related but separate prohibition, § REEB 24.085, bars drafting or using any document the licensee knows falsely portrays an interest in real estate.

Wis. Admin. Code § REEB 24.10 prohibits a licensee from obtaining or negotiating a listing contract that provides for:

• a.a stipulated net price to the owner, with the excess as commission✓
• b.a term longer than one year without the owner's written renewal first
• c.a commission earned when a ready, willing and able buyer is produced
• d.a commission stated as a flat dollar amount rather than a percentage

Section REEB 24.10, captioned NET LISTING PROHIBITED, bars a licensee from obtaining, negotiating or attempting to obtain or negotiate "any listing contract providing for a stipulated net price to the owner with the excess over the stipulated net price to be received by the firm as commission." Flat-fee commissions are lawful, and the WB-1 leaves the commission blank precisely because rates are negotiable. Earning a commission when a ready, willing and able buyer submits a bona fide written offer at the list price is a standard WB-1 term, not a prohibited one.

Under Wis. Admin. Code § REEB 24.12 (1), what may a Wisconsin licensee disclose to a competing prospective buyer without the seller's authorization?

• a.The purchase price in a pending offer
• b.That other offers on the property exist✓
• c.The financing terms of a pending offer
• d.The closing date a competing buyer set

Subsection (1) forbids disclosing "any of the terms of one prospective buyer's offer to purchase, exchange agreement, or option to any other prospective buyer," then expressly permits a different disclosure: "A licensee may, but is not required to, disclose information known by the licensee regarding the existence of other offers on the property, that a seller has accepted an offer, that the offer is subject to contingencies, and that the offer is subject to a clause requiring removal of certain contingencies upon the occurrence of an event." Price, financing terms and the closing date are all terms, so all three are barred. The rule also directs licensees to encourage all prospective buyers to submit their best offers.

A licensee knows that a listed property is subject to a right of first refusal. Under Wis. Admin. Code § REEB 24.12 (2), the licensee must disclose it, in writing and in a timely manner, to:

• a.the holder of the right of first refusal and no one else at all
• b.all persons seeking to acquire an interest subject to the right✓
• c.the seller's attorney, who then notifies interested purchasers
• d.the multiple listing service in which the property is listed

Subsection (2) requires disclosure "in writing and in a timely manner, to all persons seeking to acquire an interest subject to the right of first refusal." After that disclosure the licensee may deliver a copy of that party's offer, exchange agreement, option or lease to the holder of the right, and licensees are not responsible for implementing any right-of-first-refusal terms. "Right of first refusal" is defined in § REEB 24.02 (16m) as the right to have the first opportunity to purchase or lease real property.

Wis. Admin. Code § REEB 24.13 (1) says a licensee may refuse to draft or submit a written proposal only where the terms of the proposal would be:

• a.contrary to specific written instructions of the other party✓
• b.so low that the licensee considers them not worth presenting
• c.outside the price range stated in the firm's listing contract
• d.unlikely to be accepted by the seller of the listed property

Subsection (1), captioned REFUSAL PROHIBITED, provides that "[l]icensees shall not refuse to draft or submit any written proposal unless the terms of the written proposal would be contrary to specific written instructions of the other party." A licensee's own judgment about the price is not a permitted ground. "Written proposal" is defined broadly in § REEB 24.02 (19) to include notices, offers, counteroffers, options, exchanges, rental agreements and amendments.

Under Wis. Admin. Code § REEB 24.13 (3) (b), a licensee associated with the listing firm may not submit a personal offer to purchase the listed property when the licensee:

• a.has knowledge of the terms of any pending offer✓
• b.has shown the property to more than one buyer
• c.has not disclosed the offer to the buyer's agent
• d.has held the listing for less than ninety days

Paragraph (3) (b) provides that where a firm has a property listed, no licensee associated with the listing firm and no listing firm "may submit a personal written proposal or offer to purchase a property, if the licensee has knowledge of the terms of any pending offer, except that a firm may arrange for a guaranteed sale at the time of listing." Knowledge of the pending terms is the disqualifier, not the number of showings, a disclosure step, or the age of the listing. Paragraph (3) (a) separately requires licensees to present all written proposals objectively and to explain their advantages and disadvantages.

Wis. Admin. Code § REEB 24.13 (5) bars a licensee from negotiating directly with a party the licensee knows has granted another licensee an unexpired exclusive right to sell, lease or negotiate. Negotiations must instead be conducted with:

• a.the party's own attorney of record
• b.the multiple listing service system
• c.the firm holding that exclusive right✓
• d.the department's mediation service

Subsection (5), captioned NEGOTIATION THROUGH FIRM, requires that "[a]ll negotiations shall be conducted with the firm holding the exclusive right to sell, lease, or negotiate, and not with the party," except with that firm's consent or where its absence or similar circumstances reasonably compel direct negotiation. A listing firm has no duty to investigate whether a buyer has granted a buyer's agent an exclusive right to negotiate, and the code note adds that the department's approved WB-36 does not grant the buyer's agent an exclusive right to negotiate.

Wis. Stat. § 452.132 (2) (b) requires a Wisconsin firm to notify each licensee associated with the firm of what?

• a.Which continuing education courses the board has approved
• b.Where a copy of the board's conduct rules may be obtained✓
• c.How the firm calculates the commission split for each deal
• d.When the firm's real estate trust account was last audited

Paragraph (2) (b) requires the firm to "[n]otify each licensee associated with the firm where a copy of the rules promulgated by the board related to the conduct, ethical practices, and responsibilities of licensees may be obtained." That is the current home of the "availability of rules" duty listed in the exam outline; there is no longer a section by that name in ch. REEB 24. Paragraph (2) (a) adds a related duty to give each licensee a written statement of the firm's procedures for handling leases, agency agreements, offers to purchase and other transaction records.

A Wisconsin licensee is convicted of a crime. Under Wis. Admin. Code § REEB 24.17 (1), the licensee must send the board a copy of the complaint or other information describing the crime and the judgment of conviction within:

• a.10 days after the judgment of conviction
• b.30 days after the judgment of conviction
• c.48 hours after the judgment of conviction✓
• d.5 days after the judgment of conviction

Subsection (1) requires a licensee convicted of a crime to send the board, "within 48 hours after the judgment of conviction," a copy of the complaint or other information describing the nature of the crime and the judgment, so the board can decide whether the circumstances are substantially related to real estate practice under Wis. Stat. § 111.335 (3) (a). Under § REEB 24.17 (2m) the board may revoke a license based on a felony conviction that bars licensure under § 452.25 (1) (a). A separate 30-day clock in § REEB 24.17 (5) governs responses to department or board requests for information.

Wis. Admin. Code § REEB 24.17 (5) requires Wisconsin licensees and applicants to respond to a request for information from the department or the board within:

• a.10 days of the date of the request
• b.60 days of the date of the request
• c.30 days of the date of the request✓
• d.14 days of the date of the request

Subsection (5), captioned DUTY TO COOPERATE WITH THE BOARD AND THE DEPARTMENT, provides that "[l]icensees and applicants shall respond to the department and the board regarding any request for information within 30 days of the date of the request." A violation of any rule in ch. REEB 24 demonstrates incompetency to act as a broker or salesperson under Wis. Stat. § 452.14 (3) (i), by force of § REEB 24.01 (3). Subsection (3) also makes it a violation to breach, or aid or abet a breach of, ch. 452, chs. REEB 11 to 25, or any board order.