Real Estate Wisconsin
A Publication of the Wisconsin REALTORS速 Association
magazine
August 2013 Vol. 29 No. 11
Time to tal k Commercial
Convention photo contest Contest voting starts this month!
Change is good
The WRA-CP form gets a facelift.
FOCUS
RPAC investment
Local regulation
Time to Talk Commercial
How and why your contributions help you. New law stops this confusion.
contents August 2013 | Vol. 29, No. 11
16 20 18 The good, the bad and the ugly A look at tax reform, Clint Eastwood-style.
6 Wisconsin housing 7 12 Change is good Necessary details 16
Chairman’s farewell
Outgoing chairman Renny Diedrich shares her final thoughts.
18 Legal Hotline Product showcase 20 Cut the confusion 27
The ins and outs about commercial real estate law. Commercial real estate-specific products from the WRA.
A new law prohibits local governments from regulating brokers.
A summary of the first half of 2013.
27
The WRA-CP form gets a facelift.
Get down to business with the commercial offer.
NEW
5K RUN/Walk
“HOME STRETCH”
Don’t miss the WRA’s “Home Stretch” 5k Run/Walk at the 2013 convention! This scenic 3-mile route through the Kalahari countryside on September 15 at 9 a.m. will help wounded veterans. Net proceeds from the race will benefit the Wounded Warrior Project, a nonprofit OME organization that honors and empowers wounded warriors. Walkers, runners and kids welcome! Register online at www.wra.org/Convention5k.
W I S C O N S I N R E A LT O R S ® A S S O C I AT I O N 5 K
8 Cover Story It’s time to talk about the Wisconsin commercial real estate market. What does real estate investment look like in Wisconsin? How does government regulation affect the practice of commercial real estate sales? What is the current status of vacant office space across the state? Top Wisconsin commercial real estate practitioners discuss these topics and much more, as well as a forward by CARW President Jim Villa, in this month’s feature story. See the full story on page 8.
WIREALESTATEMAG • AUGUST 2013
4
3
A Message from the President by Mike Theo
“
The Good, the Bad and the Potentially Ugly
WIREALESTATEMAG • AUGUST 2013
R
4
eform” is an interesting word. It connotes improvement, transformation, modernization, restructuring. All positives, right? While well-intended, some reforms can have unforeseen consequences and even be downright harmful. Congress wants to reform the tax code and the secondary mortgage market. Most Americans — and likely most REALTORS® — would agree that reforms to both are needed. But when, where and how these reforms are designed and implemented could dramatically change the real estate marketplace in America. We may be at a critical moment in history. Time to tune in. Tax reform Congress has employed a new style of discussion for tax reform this year that they call the “blank slate.” This approach asks members of Congress to start with a tax code that is blank, with no exemptions or deductions. If they want to keep existing ones or create new ones, they must justify both in terms of encouraging certain behaviors or investments and in terms of tax revenues to the government. It’s a novel, if not refreshing, approach. The National Association of REALTORS® (NAR) and the WRA have accepted that challenge and have communicated to our congressional delegation asking them to preserve, and in some cases enhance, certain specific real estate tax provisions. The most important of these tax provisions are the mortgage interest and real property tax deductions. These deductions have been among the most popular and widely used part of the tax code for over 100 years. The value of these tax benefits are embedded in home prices and the primary beneficiaries are middle class families. Eliminating them would deflate home prices and discourage homeownership. We have also asked Congress to
maintain the capital gains tax exclusion on the sale of a principal residence. Real estate, mainly in the form of the family home, is the most widely held asset for American families. The current capital gains tax exclusion makes tax filing and retirement saving easier for millions of Americans, and it encourages homeownership. We have argued that this exclusion should not only be preserved but the limits should be indexed for inflation to maintain the value of this benefit over time. Because the housing recovery if far from complete and many homeowners continue to face foreclosure, short sales or loan restructuring, we are urging Congress to maintain the exclusion of mortgage debt cancellation. The current temporary provision allows families to avoid paying income taxes on “phantom income” at a time they can least afford to pay. This is an important anti-recessionary measure and should even be made permanent. Real estate investments play a key role in economic growth and job creation, so we are also asking Congress to shorten depreciation periods for both commercial and residential buildings to reflect the true and useful lives of these assets. Moreover, we have asked that the temporary provision allowing faster write-offs for leasehold improvements be made permanent. Finally, we are advocating that Congress maintain the deferral from taxes for gains on like-kind exchanges. Our current tax code recognizes that if two properties of like kind are exchanges, nothing economically has changed and thus taxes should not be levied. Encouraging the free flow of capital among investments is good for the economy and jobs and thus the current deferral of gain on the like-kind exchange should be maintained. Mortgage market reform
Congressman Jeb Hensarling, a Republican from Texas who chairs the House Financial Services Committee, has introduced a bill to significantly restructure financial mortgage markets in America. His plan would dissolve Fannie Mae and Freddie Mac and replace them with a new Market Utility. His bill would also restructure the FHA Mortgage Insurance Program. As currently written, we are asking Congress to oppose these changes. NAR argues that without some federal government guarantee for a secondary mortgage market, 30-year fixed rate mortgages could disappear. The proposed restructuring of FHA will make many borrowers ineligible for FHA financing, regardless of their creditworthiness or the availability of alternative financing. Moreover, NAR estimates that higher down payments could make 345,000 borrowers a year ineligible for FHA financing, and lower loan limits will limit liquidity and borrowers’ access to credit. Calling all REALTORS®! Here’s the punch line: It’s time for each and every one of us to engage our members of Congress and help them understand the good, the bad and the potentially ugly impacts of these tax and mortgage finance proposals. And help them make the right decisions for American families, businesses and economy. Regardless of your political persuasion, these issues are serious, and Congress is giving them serious consideration as we speak. Take a minute to respond to Calls for Action, from NAR and from the WRA, and advocate for these important issues at this critical time. If not for your own enlightened self interest, then in the interests of families and businesses who will suffer or soar based on our success or lack thereof.
real estate inside the wra
magazine
Editorial staff: Publisher: Michael Theo Editor: Lauren Bizorik Senior designer: Ashley Breneman Managing editor: Robert Uhrina WRA executive committee: Renny Diedrich, Chairman Steve Lane, Chairman-Elect Dan Kruse, Treasurer Paul Schieldt, Vice President Peter Sveum, Vice President K.C. Maurer, Vice President Erik Sjowall, Vice President Contact information: 4801 Forest Run Rd., Suite 201 Madison, WI, 53704-7337 608-241-2047 • 800-279-1972 e-mail: editor @ wra.org website: www.wra.org POSTMASTER: please send address changes to: Wisconsin REALTORS® Association, 4801 Forest Run Rd., Ste. 201, Madison WI 53704-7337 Wisconsin Real Estate Magazine™ is published by the WISCONSIN REALTORS® ASSOCIATION. Trademark issued pursuant to Wisconsin state statute; federal trademark is pending. Wisconsin Real Estate Magazine, USPS 597-850, ISSN 1548-0526, is published monthly by the WISCONSIN REALTORS® ASSOCIATION, 4801 Forest Run Road, Ste. 201, Madison, WI 53704. Periodical postage paid in Madison, WI and additional mailing offices. An annual subscription rate of $5 is included in membership dues and a copy is mailed to every paid REALTOR® and affiliate member of the association. Nonmember subscription rate: $60. Permission to reprint or quote any material from this issue is hereby granted, provided the Wisconsin Real Estate Magazine is given proper credit in all articles or commentaries, and the WISCONSIN REALTORS® ASSOCIATION is provided with a copy of any reprint. Advertising of third party products and services herein does not imply endorsement by the WRA unless specifically stated. Furthermore, the WRA does not endorse, approve, or otherwise warrant the accuracy or legality of any information or content contained in advertisements. Any questions regarding advertising policies should be directed toward the editor.
We Want to Feature You!
Charity-driven REALTORS® are out there, and we’re looking for you! The REALTOR® in the Community column in Wisconsin Real Estate Magazine, launched in fall 2012, aims to highlight Wisconsin REALTORS® impacting communities through volunteerism and charity work. Do you coordinate an annual charity run/walk? Are you a frequent volunteer at an animal shelter? Did you organize a food drive? These examples and more are the types of charity involvement that can create a great story for the RITC column!
Visit www.wra.org/RITC for the online submission form. You can nominate yourself as well as nominate another REALTOR® you feel is deserving of recognition. If your nomination is selected to be published in a future issue of the magazine, WRA staff will reach out to you for additional information when developing your story. Don’t wait too long! The deadline to be featured in the September magazine RITC column is August 19, 2013.
Gear Up for REALTOR® Safety Month Knowledge, awareness and empowerment are the core components of the REALTOR® Safety Month campaign by the National Association of REALTORS® (NAR). As part of NAR’s efforts to keep you safe, September is dedicated as the month to kick off safety efforts — but that’s just the start. NAR also provides online tools and resources to help you keep safety on your mind all year long: • Webinars on REALTOR® safety presented by industry experts and available throughout the year. • Safety articles on parking lot safety, staying safe at open houses, showing vacant homes and more. • Quarterly safety messages sent to associations and brokers to share with REALTORS®. • Tips for customizing your safety strategy. With this REALTOR® safety information, you can keep safety awareness top-of-mind with these resources brought to you by NAR throughout the year. Let’s all work together and stay safe! To view the webinars as well as safety handouts, articles and more, visit www.realtor.org/safety.
Convention Photo Contest Voting this Month The 2013 convention photo contest is in full swing, with a new contest phase approaching! The submission phase is open now through August 16. Visit www.wra.org/ PhotoContest to submit your Wisconsin photos. The next phase of the contest kicks off on August 19: Facebook voting! A gallery will be available on Facebook from August 19 through August 30. Be ready to like, like and like! The top 10 highest-liked photos from Facebook will be in the final voting round at the convention. Will your submission get there? Submit today, and mark the Facebook voting timeline on your calendar! Visit www. wra.org/photocontest for complete details and more!
WIREALESTATEMAG • AUGUST 2013
Real Estate Wisconsin
5
CHAIRMAN'S CORNER by Renny Diedrich
Chairman's Farewell
WIREALESTATEMAG • AUGUST 2013
W
6
ell, summer is in full swing. From the statistics that I see, summer means that most of us are busier than we were last year! We continue to improve over last year. In my market, homes are selling very quickly, and some sellers are even receiving multiple offers in certain price ranges in certain areas. It is a great time to be a seller. Does that mean it is a bad time to be a buyer? Absolutely not! With great inventory coming on the market and interest rates still remaining historically low, buyers are stilling jumping into the market, as they should. At the WRA, we finished up our executive committee meeting just last month. The team worked on a balanced budget with no dues increase to members while not decreasing the value of our services to our members. I think that is an important accomplishment, and I commend the staff! The WRA’s Business Services Department continues to provide world-class educational offerings and products for us. The Operations Department keeps us running smoothly behind the scenes. The Legal Department is constantly asked to write briefs for cases that are going before the courts that affect property owners and REALTORS®. The Marketing Department is working on simplifying the website to make information more easily accessible. And the Public Affairs Department successfully passed many issues in the governor’s budget. On that note, there is one piece of the governor’s budget I would like to highlight: the state preemption of local regulations relating to real estate brokerage activities. Several local governments have started to regulate real estate brokers, which creates confusion as to when these regulations are and are not consistent with state and federal laws. For example, one community introduced a proposal that would prohibit real estate licensees from selling homes to known sex offenders. In this situation, this local ordinance was inconsistent with Wis. Stat. 452.24, which provides a real estate broker immunity from disclosing such information if the broker has provided the person a written notice of the Wisconsin Sex Offender Registry website and telephone number. The proposal that was passed was to ensure that the regulation of real estate brokers and the practice of real estate remain consistent and uniform throughout Wisconsin. The WRA recommended that local units of government be prohibited from: 1. Enacting or enforcing any regulations on the professional services provided by a broker or by a person who provides real estate brokerage services. 2. Imposing any fees on brokers or on real estate brokerage services. This is a huge win for Wisconsin REALTORS®! Thank you to the WRA legislative team!
As we think about the fall — I know, it seems so far away — please remember to sign up for this year’s state convention. The convention is back in Wisconsin Dells at the Kalahari Resort on September 15-16. The convention committee has promised another great convention with several new and exciting programs and events. One of the new convention activities on the schedule is the “Home Stretch” 5k Run/Walk benefiting the Wounded Warrior Project. What a great cause! If you cannot participate, please consider making a generous donation. All of you are also invited to the Chairman’s Reception where Steve Lane will be sworn in as the 2013-2014 chairman of the board.
Technology tip Try “Skitch” for your photo needs! Skitch is a fun program that helps with photo editing. It is great for when you have an aerial view map of a property. With Skitch, you can outline a property, insert arrows that point to specific pieces of the property, and more. You can crop and manipulate with this great app. Skitch is part of the Evernote suite of products. Skitch can be a great benefit to your practice, and it won’t break the bank. Skitch is free! Happy skitching!
Thank you! I just wanted to thank you for the opportunity to serve as your 2012-2013 chairman of the board. I have had the opportunity to meet a lot of new people around the state. I made some great friends and learned a lot. It has been a pleasure that words can’t describe. I wish you all much success in the years to come!
Renny Diedrich, Chairman of the Board 2012-2013 Wisconsin REALTORS® Association
wisconsin monthly housing report by David Clark
Home Sales and Prices Rise in First Half of 2013 WISCONSIN HOUSING STATISTICS MONTHLY ACTIVITY — JUNE 2013 Statewide JUNE 2013 JUNE 2012 % Change YTD 2013 YTD 2012 % Change New Listings 12,095 10,719 +12.8% 64,731 63,934 +1.2% Closed Sales 7,228 7,012 +3.1% 33,065 29,670 +11.4% Median Sales Prices $159,500 $142,000 +12.3% $140,000 $130,000 +7.7% Median Price Existing Home Sales Region JUNE 2013 JUNE 2012 % Change YTD 2013 YTD 2012 % Change Southeast $172,000 $155,000 +11.0% 2,642 2,480 +6.5% South Central $184,000 $169,950 +8.3% 1,601 1,520 +5.3% West $153,000 $135,000 +13.3% 714 742 -3.8% Northeast $135,000 $124,400 +8.5% 1,275 1,241 +2.7% Central $119,000 $110,000 +8.2% 420 425 -1.2% North $125,000 $120,000 +4.2% 570 598 -4.7%
WIREALESTATEMAG • AUGUST 2013
W
isconsin home sales rose an impressive compared to June 2012, and were up 7.7 11.4 percent in the first six months of percent for the first six months of the year. View Online 2013 compared to last year, according “We’ve seen very strong growth in housing prices since they started improving 16 months to recent statistics compiled by the Wisconsin View all of the housing statistics at ago,” said WRA President and CEO Michael REALTORS® Association (WRA). In June alone, www.wra.org/housingstatistics. Theo. And while higher prices impact housing Wisconsin home sales were up 3.1 percent affordability, homes in Wisconsin remain a relative to last June, posting the 24th straight good value. The Wisconsin Housing Affordability Index (HAI) month of positive sales growth in the state. Median prices also shows the percent of the median-priced home that a buyer earning continued to increase year-to-date, rising 7.7 percent to $140,000 the estimated median family income can afford to buy, assuming compared to the first half of 2012. In June, prices were up 12.3 current mortgage rates and a 20 percent down payment. In June, percent to $159,500 compared to June 2012. the index was at 214, indicating that a household with median “The pace of sales in the first half of this year is well family income of $63,100 can afford to buy 214 percent of the ahead of last year,” said Renny Diedrich, WRA board median-priced home of $159,500. This is down from 239 in May chairman, “which is especially noteworthy since 2012 was and significantly below its peak of 292 in January of this year. “With an exceptional post-recession year for housing sales.” personal incomes and mortgage rates virtually unchanged from last According to WRA numbers, sales for the most recent sixyear, the dip in affordability can be attributed to raising prices,” month period are up 33.1 percent over the first half of 2011 — an Theo said, but added Wisconsin housing remains very affordable increase of more than 8,700 additional home sales. Moreover, when compared nationally. He noted that the National Association construction of new homes is showing signs of solid improvement of REALTORS® predicts its HAI will fall to 156 in the second as well. “The rebound in building is a very positive sign for our quarter of 2013 compared to its level of 203 in the first quarter. markets in Wisconsin,” said Diedrich. She noted that new singleAlthough state and national job growth has been relatively slow family housing starts have increased 12.3 percent between January the last couple of years, there have been some recent improvements and May in 2013 compared to that same period last year and are for the state of Wisconsin. According to preliminary estimates up 27.7 percent compared to the first five months of 2011. released by the Wisconsin Department of Workplace Development Adding to the good news was a significant drop in foreclosures and the U.S. Bureau of Labor Statistics, the seasonally adjusted during the first half of 2013. Unique foreclosures in the state unemployment rate in Wisconsin improved to 6.8 percent in June are down 37.2 percent in the first half of 2013 compared from 7.0 in May, and the state has added nearly 27,000 nonfarm to that same period in 2012, and down 44.5 percent in the jobs since January (also based on seasonally adjusted data). “These second quarter this year compared to quarter two of 2012. preliminary jobs figures are promising, and if the trends continue, “All in all, this paints a very healthy picture of the Wisconsin they bode well for a strong second half of the year,” said Theo. residential home market at the midyear point,” Diedrich said. “With mortgage rates in the 4-percent range and home prices still All regions of the state saw healthy growth in home sales relatively low, this is an excellent time to work with a REALTOR® through the first six months of 2013 over last year. The regions to identify the best values in your neighborhood,” he said. with the strongest growth were the South Central, up 15.7 percent; the West, up 13.4 percent; and the Southeast, up David Clark, Ph.D., is a professor of economics at Marquette 12 percent. Growth in the other three regions was also solid, University and serves as a consultant to the WRA in the analysis of ranging between 9.9 percent for the Central region and 7.3 existing home sales data as well as in the preparation of the monthly percent for the Northeast region, to 6.9 percent in the North. Wisconsin Housing Report. For more information, contact Clark at Wisconsin median prices increased 12.3 percent in June 2013 C3 Statistical Solutions at 414-803-6537.
7
Forward by Jim Villa, CAE; President and CEO, Commercial Association of REALTORS® Wisconsin
WIREALESTATEMAG • AUGUST 2013
Compiled by Lauren Bizorik, Editor, Wisconsin Real Estate Magazine
8
A
s we learn from some of the top practitioners featured in this edition of Wisconsin Real Estate Magazine, the commercial real estate market is making a steady recovery in Wisconsin, a positive indicator for our overall economy. Commercial real estate practitioners are the state’s foremost economic development professionals, often managing a great deal more than just a real estate transaction. By facilitating new workspaces for their clients, REALTORS® help businesses grow, create jobs, and grow the community.
James Barry III, J.D., CCIM President, Cassidy Turley Barry Milwaukee
Ralph Kamps Managing Partner, Commercial Real Estate Investment Exchange (CIREX)
Adam Redman, ABR, CDPE, e-Pro Broker/Owner, Redman Realty Group LLC Minocqua
Tom Shepherd, CCIM Partner, Colliers International — Wisconsin Milwaukee
Wisconsin continues to be a place where businesses and investors look to when seeking a stable, productive place for their investment. The cost of real estate, the expansive and qualified labor pool, excellent infrastructure, and the improving tax and regulatory climate has put our state back on the map for commercial real estate investors. While the trend lines are moving in the right direction here in Wisconsin, national and global economic and political unrest continue to give pause to businesses and investors driving the segment. Public policy advocacy and political involvement, perhaps once a luxury, are now essential tools for any successful commercial real estate professional. Policy decisions made hundreds, or even thousands of miles away, are now more than ever steering the economy and ultimately our members’ bottom lines. Like its residential counterpart, commercial real estate is complex and requires a unique set of skills and knowledge to provide clients with superior service. The Commercial Association of REALTORS® Wisconsin (CARW), along with other local boards under the leadership of the WRA, works to provide the tools and training our members need to advance their careers, serve their clients and, ultimately, boost our economy. In November 2012, CARW was recognized by NAR Commercial with the ACE Award for providing Accredited Commercial Excellence for our members and the industry. Learn more about us at www.CARW. com, and enjoy this edition’s focus on commercial real estate!
How has government regulation impacted your practice? Jim Barry:
Government regulation has a strong impact on the commercial real estate (CRE) industry. While some regulation is of course necessary, the costs and benefits of such regulations should be weighed carefully before they are imposed. For a long time, Wisconsin had overly burdensome environmental regulations that, without question, stifled reasonable development. Numerous projects were scrapped or never even considered because of very restrictive rules governing wetlands or protected species such as the Butler garter snake, which is no longer deemed protected. Recently, these regulations were given another look, and more sensible rules that allow for reasonable development projects have been put in force. This regulatory overhaul is long overdue and should continue on an ongoing basis at all levels of government. Ralph Kamps: Very colloquial question. Nationally, the Health Care Act, when and if it does get hammered out, will affect corporations’ bottom lines as well as brokerage houses with 50 or more employees. Do independent contractors (IC) — which most sales people are — become exempt? Will everyone become an IC? But if the act does affect bottom lines of corporations, that means that corporations may be looking at occupancy costs, ownership, downsizing instead of expansion, and other revisions. This could definitely impact the lease and sales transactions of the commercial agent. It will be interesting to see how this plays out and if it is a good or bad thing … probably will be both. State and local, especially local, governing bodies always seem to delay the process with development. In Madison, for example, a sign ordinance almost ignited a minor riot until our association intervened and had both sides and the Mayor resolve the issue. Still a bit of a hassle. We also had a rewrite of zoning laws with input from our Commercial Committee
WIREALESTATEMAG • AUGUST 2013
feature
9
feature
of RASCW and a host of others. This seems to be playing out well with city administrators trying to get projects through rather than having them snuffed out. It is all about the people in these positions and their attitude. We shall see. As an aside, we have a very active Political Affairs Committee headed by WRA Government Affairs Director Phil Salkin. Nothing escapes Phil, yet he does not make mountains out of rubbish piles either. Phil picks the battles we as CRE professionals feel are important. Overall, I think Wisconsin CRE REALTORS® are ahead of the game and can serve as a model for NAR. Tom Shepherd: Recently I have seen local and regional government economic development groups play a larger role in attracting companies to their communities. Sometimes, the economic developer is the second call on a broker’s checklist after the preferred site or building is located. There is a perception, real or not, that there are large government pools or incentives available for development in every community.
WIREALESTATEMAG • AUGUST 2013
What is the biggest obstacle (or obstacles) that you face in a commercial transaction?
10
Jim Barry: The largest obstacle we currently face in completing commercial transactions is the lack of economic and political predictability. Many business owners, real estate developers and investors are concerned about what the future holds regarding taxes, health care costs and regulatory impositions. The role of the government should be to set these rules definitively and then get out of the way — not create the perpetual dramas and crises that are all too common right now. Ralph Kamps: The answer depends on the type of transaction. Again, this is a misunderstanding of CRE agents deriving commissions. We have “for sale” transactions, but a large percentage of commission is also derived from “for lease” transactions. Each transaction has a unique set of circumstances. Sale transactions seem to have the appraisal problem or loan to value (LTV) of a property. Also, buyers are having a heck of a time qualifying as individuals and companies — it seems as though appraisers are beholding to the bank that orders the appraisal. For owners, refinancing is still a murky and oftentimes disappointing road. Great rates, but LTV doesn’t work. In leasing transactions, we have gone through a massive market shift where the tenant seems to hold all the cards with little risk. They are asking for low rates, free rent, build-outs, shorter terms and so forth. This has been hard on landlords, as often times they give great concessions only to have the tenant skip out on the lease. I see that starting to shift the other way. Adam Redman: With relatively low vacant land prices and abundant inventory, many business owners want to build new facilities rather than invest in existing structures. With few restrictions on where
businesses can be located, commercial sprawl can dilute a central-business district, although with the low density of people in the Northwoods, many people have their business close to home and a business hub is diluted anyway. Tom Shepherd: This biggest obstacle or challenge is closing the pricing/ expectation gap between buyers and sellers in a changing market. Values and rents are now stabilizing, so each quarter, this gap is becoming less of a concern as our market continues to recover. Transactional activity is picking up, so there are more data points in the market for brokers and appraisers to point to when it comes to advising clients on market value.
What changes do you think could be made to solve the problems you face in your business? Jim Barry: If one consults history, it is not too hard to determine how the CRE market can be improved: • Lower taxes and other governmental costs so that more capital can be directed into real estate investment. • Improve business confidence so that those who use real estate will be willing to use more of it. • And keep interest rates and inflation at predictable levels so that real estate investors can make informed long-term decisions. In other words, create a business-friendly environment that will “lift all boats”; an improved commercial market will follow. Ralph Kamps: Not sure on the leasing end of things. I think the answer just may be the economy perking up and waiting for the market and adapting to it. Rather than bucking the trend, just ride it out. It too will swing as other markets do. But no question that leasing has shot up dramatically, and as vacancy declines, rates increase. In sales transactions, I already see a small trend starting called “outside financing” in which small groups of investors pool money to make mortgages without all the banking red tape. They want to make the deals work. Also “crowd funding” or “crowd sourcing” is emerging as another financing tool. Local or community banks must get more involved as well or they will be left behind like the national ones and create a sour taste in the investors’ or buyers’ minds. Some of the fed’s requirements may need to be revisited in order to give the banks more leeway in lending. Adam Redman: Many businesses are investing in an exterior “facelift,” which helps with the first impression people are having whether they are buying a product or being provided a service from a business. Minocqua and many other towns are moving in the right direction by investing in infrastructure, which creates a small-town feel/ experience for consumers. We need to remember that tourism is still the backbone of the Wisconsin economy, and to keep our environment relatively pristine and attractive will set us apart in the long run — and is key to commercial success.
feature
Where do you feel that commercial real estate is headed in your market? Jim Barry: We see slow but steady improvement in most CRE sectors. Right now, the multifamily market is very strong with a great deal of current and planned projects. The industrial market is also gaining strength, with positive space absorption for 13 consecutive quarters and a vacancy rate hovering around 6.5 percent. We are cautiously optimistic that the market will continue to improve, though this may happen in fits and spurts. Ralph Kamps: Well, the market could not have become more flat than it did. The bottom was hit a few months ago and there is cautious optimism. Residential apartment buildings are sprouting like dandelions in Madison — commercial follows. With pockets of increased density, retail comes along to serve the needs of all the people. It also brings companies in to relocate or expand to greater Madison and tap into this highly educated pool of talent. Vacant, overbuilt office space is being absorbed at a steady but slow rate. As the economy slowly improves, so will commercial real estate. I believe the apartment boom has peaked as there are several large projects that are or will be starting
development soon. Overall, this is a wait-and-see situation with cautious optimism here in South-Central Wisconsin and greater Madison/Dane County. My advice would be to go out and make hay while the sun is shining. Adam Redman: There are lots of opportunities in the Northwoods! Businesses thrive when they meet consumers’ needs or when they create an experience that people can’t get anywhere else. The Northwoods is truly a beautiful place, and as long as we protect and promote that fact, there will always be business opportunities here. Tom Shepherd: We are realizing the early stages of a market upswing. Both debt and equity capital are readily available for good, core “A” projects and acquisitions. There is still a glut of what we call “F,” or distressed real estate, on the market. That is selling too. Note that REO buyers continue to remain very active as they see an opportunity window closing — that is to buy real estate at the bottom. Marginal and functionally obsolete space and/or investment properties remain very challenging to move. They must be priced appropriately and of course marketed appropriately. Vacancy rates for industrial, retail and Class “A” office space have tightened dramatically over the last eight quarters. My prediction is that we will begin to see significant new development in these sectors in 2014.
NAR’S SHORT SALES & FORECLOSURE RESOURCE CERTIFICATION Seller Solutions · Buyer Opportunities · Real Estate Recovery
We understand the complexity of these transactions, which is why the National Association of REALTORS® (NAR) developed the Short Sales and Foreclosure Resource (SFR®) certification program to help REALTORS® like you gain confidence towards becoming the short sales and foreclosure resource for your community. Find out how to become SFR® certified at realtorSFR.org.
®
WIREALESTATEMAG • AUGUST 2013
Short sales and foreclosures are quickly becoming the new “traditional” real estate transaction. Learning the skills necessary to help buyers and sellers navigate the distressed property market is critical for today’s agents.
11
legal by Cori Lamont
The WRA’s Revised Commercial Lease Listing Is on its Way A lot of notable events happened in 1998. For example, comedic great Chris Farley died, the nation was introduced to White House intern Monica Lewinsky, some team other than Green Bay won Superbowl XXXII (sensitive topic, I know), and the WRA Exclusive Listing Contract for Lease of Commercial Property was revised.
I
t has been 15 years since the WRA’s commercial lease listing has been revised, and its time for revision has come. As you know, the state of Wisconsin has created the WB-37 Residential Listing Contract — Exclusive Right to Rent (WB37), which is considered to be a form for residential rentals. Commercial brokers may choose to use the WB-37 form when taking a commercial lease listing; however that may require a great deal of modification to the preprinted language. In addition, the broker may choose to use a form drafted by an attorney. The WRA created the WRA-CP form for use by real estate licensees when listing a commercial property for lease. You will notice as you look at the revised form that its appearance is similar to the format and wording of WB forms. A great deal of the language and inspiration came from three specific state-approved forms: the WB-5 Commercial Listing, WB-6 Business Listing and the WB-37. This intent of this article is to highlight some of the bigger changes to the WRA’s commercial lease listing form. To ensure we create a form that is both useful and that addresses all of the necessary legal issues, we reached out to brokers throughout the state who focus on commercial transactions. Due to the timing of this publication and the final release of the form, the following excerpts are to be considered drafts and proposed language and are used for discussion purposes only. If areas of the WRA-CP have not been addressed, it is because either nominal or no changes were made.
location of gaining access to the registry. • Term of contract: This section of the form is now substantially the same as the WB-5 Commercial Listing.
Most notable updates and inclusions Delivery: The form now reflects the delivery language similar to that of the WB-15 Commercial Offer to Purchase. The most notable is e-mail delivery. DELIVERY OF DOCUMENTS AND WRITTEN NOTICES Unless otherwise stated in this Listing, delivery of documents and written notices to a Party shall be effective only when accomplished by one of the methods specified at lines xx-xx. (1) Personal Delivery: giving the document or written notice personally to the Party, or the Party’s recipient for delivery if named at line xx or xx. Owner’s recipient for delivery (optional): ___________________________ Broker’s recipient for delivery (optional): ___________________________ (2) Fax: fax transmission of the document or written notice to the following telephone number: Owner: (___) _______ Broker: (____)______ (3) Commercial Delivery: depositing the document or written notice fees prepaid or charged to an account with a commercial delivery service, addressed either to the Party, or to the Party’s recipient for delivery if named at line xx or xx, for delivery to the Party’s delivery address at line xx or xx. (4) U.S. Mail: depositing the document or written notice postage prepaid in the U.S. Mail, addressed either to the Party, or to the Party’s recipient for delivery if named at line xx or xx, for delivery to the Party’s delivery address at
WIREALESTATEMAG • AUGUST 2013
line xx or xx.
12
Basics • Revised the title: The 1998 form was entitled “Exclusive Listing Contract Right for Lease of Commercial Property.” The title of the 2013 version, “Exclusive Listing Contract Right to Rent Commercial Property,” more accurately reflects the nature of the form and shares similar verbiage for a relative consistency with the WB-37. • Defaults have been inserted: Default language was inserted in areas that included a Strike One opportunity. • Notice about sex offender registry: The website was updated to reflect the appropriate
Delivery address for Owner: ___________________________________ Delivery address for Broker: ___________________________________ (5) E-Mail: electronically transmitting the document or written notice to the Party’s e-mail address, if given below at line xx or xx. If this is a consumer transaction where the property being rented or the rental proceeds are used primarily for personal, family or household purposes, each consumer providing an e-mail address below has first consented electronically to the use of electronic documents, e-mail delivery and electronic signatures in the transaction, as required by federal law. E-Mail address for Owner: ____________________________________ E-Mail address for Broker: ____________________________________
Owner’s Cooperation: A sentence was added to the end of this section to include the owner’s agreement to allow the broker to “advertise incentives, repairs, build-outs, credits, etc. offered by Owner in additional provisions” or per an addendum. Owner’s Disclosure Report and Owner Representation Regarding Defects: This section of the form reiterates Wisconsin license law requirements of the real estate licensee relating to asking the owner about the condition of the property as well as the owner’s disclosure obligations. OWNER’S DISCLOSURE REPORT Wis. Admin. Code Chapter REEB 24 requires listing brokers to make inquiries of the Owner on the structure, mechanical systems and other relevant aspects of the property and to request that the Owner provide a written response to the broker’s inquiry. Owner agrees to provide Broker with written disclosure of all defects known to Seller with regards to the Property and to complete any and all other disclosure report(s), as may be applicable or required by law. Owner agrees to promptly amend the report(s) to include any defects (as defined in the report(s)) which Owner learns of after completion of the report(s), but before acceptance of a buyer’s offer to purchase. Owner authorizes Broker to distribute the report(s) to all interested parties and their agents inquiring about the Assets, and acknowledges that Broker has a duty to disclose all material adverse facts, as required by law. OWNER REPRESENTATIONS REGARDING DEFECTS Owner represents to Broker that as of the date of this Listing, if an owner’s disclosure report or other form of written response to Broker’s inquiry regarding the condition of the Property has been made by the Owner, the Owner has no notice or knowledge of any defects affecting the Property other than those noted on owner’s disclosure report or written response. Owner’s Obligation: Items 1 and 2 below were added to emphasize the owner’s obligations during the term of the listing. OWNER’S OBLIGATION’S During the term of this Listing, Owner agrees to provide to Broker: (1) Copies of all code violation orders and notices, information and reports regarding environmental concerns on the Property, and all other records and documents relating to conditions affecting the Property; (2) Any Owner-approved leases, addenda, rules and regulations and related forms and materials required in connection with the renting of the Property; and (3) Make available to Broker all data, records, documents, rules and regulations, and other materials required in connection with the renting of the Property. Updated Broker Disclosure to Clients: The agency laws contained in Wis. Stat. Chapter 452 were modified in 2006. Upon the passage of the new statutory language, the agency language included in the WRA-CP was not accurate. Therefore, the WRA struck the language and attached the appropriate Broker Disclosure to Client form required by law. This section of the WRA-CP now reflects current law and therefore the additional Broker Disclosure to Client form is no longer needed when using the 2013 WRA-CP. The updated section begins and ends as follows: • BROKER DISCLOSURE TO CLIENTS: UNDER WISCONSIN LAW, A
BROKER OWES CERTAIN DUTIES TO ALL PARTIES TO A TRANSACTION: During the term of this Listing, Owner agrees to provide to Broker: (a) The duty to provide brokerage services to you fairly and honestly. (b) The duty to exercise reasonable skill and care in providing brokerage services to you. (c) The duty to provide you with accurate information about market conditions within a reasonable time if you request it, unless disclosure of the information is prohibited by law. (d) The duty to disclose to you in writing certain material adverse facts about a property, unless disclosure of the information is prohibited by law. (See lines xxx-xxx) (e) The duty to protect your confidentiality. Unless the law requires it, the broker will not disclose your confidential information or the confidential information of other parties. (See lines xxx-xxx) (f) The duty to safeguard trust funds and other property the broker holds. (g) The duty, when negotiating, to present contract proposals in an objective and unbiased manner and disclose the advantages and disadvantages of the proposals. • BECAUSE YOU HAVE ENTERED INTO AN AGENCY AGREEMENT WITH A BROKER, YOU ARE THE BROKER’S CLIENT. A BROKER OWES ADDITIONAL DUTIES TO A CLIENT: (a) The broker will provide, at your request, information and advice on real estate matters that affect your transaction, unless you release the broker from this duty. (b) The broker must provide you with all material facts affecting the transaction, not just adverse facts. (c) The broker will fulfill the broker’s obligations under the agency agreement and fulfill your lawful requests that are within the scope of the agency agreement. (d) The broker will negotiate for you, unless you release the broker from this duty. (e) The broker will not place the broker’s interests ahead of your interests. The broker will not, unless required by law, give information or advice to other parties who are not the broker’s clients, if giving the information or advice is contrary to your interests. (f) If you become involved in a transaction in which another party is also the broker’s client (a “multiple representation relationship”), different duties may apply. • MULTIPLE REPRESENTATION RELATIONSHIPS AND DESIGNATED AGENCY: • A multiple representation relationship exists if a broker has an agency agreement with more than one client who is a party in the same transaction. In a multiple representation relationship, if all of the broker’s clients in the transaction consent, the broker may provide services to the clients through designated agency. • Designated agency means that different salespersons employed by the broker will negotiate on behalf of you and the other client or clients in the transaction, and the broker’s duties will remain the same. Each salesperson will provide information, opinions, and advice to the client for whom the salesperson is negotiating, to assist the client in the negotiations. Each client will be able to receive information, opinions, and advice that will assist the client, even if the information, opinions, or advice gives the client advantages in the negotiations over the broker’s other clients. A salesperson will not reveal any of your confidential information to another party unless required to do so by law.
WIREALESTATEMAG • AUGUST 2013
legAL
13
WIREALESTATEMAG • AUGUST 2013
legal
14
• If a designated agency relationship is not in effect you may authorize or reject a multiple representation relationship. If you authorize a multiple representation relationship the broker may provide brokerage services to more than one client in a transaction but neither the broker nor any of the broker’s salespersons may assist any client with information, opinions, and advice which may favor the interests of one client over any other client. If you do not consent to a multiple representation relationship the broker will not be allowed to provide brokerage services to more than one client in the transaction. INITIAL ONLY ONE OF THE THREE LINES BELOW: _______ I consent to designated agency. _______ I consent to multiple representation relationships, but I do not consent to designated agency. _______ I reject multiple representation relationships. NOTE: YOU MAY WITHDRAW YOUR CONSENT TO DESIGNATED AGENCY OR TO MULTIPLE REPRESENTATION RELATIONSHIPS BY WRITTEN NOTICE TO THE BROKER AT ANY TIME. YOUR BROKER IS REQUIRED TO DISCLOSE TO YOU IN YOUR AGENCY AGREEMENT THE COMMISSION OR FEES THAT YOU MAY OWE TO YOUR BROKER. IF YOU HAVE ANY QUESTIONS ABOUT THE COMMISSION OR FEES THAT YOU MAY OWE BASED UPON THE TYPE OF AGENCY RELATIONSHIP YOU SELECT WITH YOUR BROKER YOU SHOULD ASK YOUR BROKER BEFORE SIGNING THE AGENCY AGREEMENT. • SUBAGENCY: The broker may, with your authorization in the agency agreement, engage other brokers who assist your broker by providing brokerage services for your benefit. A subagent will not put the subagent’s own interests ahead of your interests. A subagent will not, unless required by law, provide advice or opinions to other parties if doing so is contrary to your interests. PLEASE REVIEW THIS INFORMATION CAREFULLY. A broker or salesperson can answer your questions about brokerage services, but if you need legal advice, tax advice, or a professional home inspection, contact an attorney, tax advisor, or home inspector. This disclosure is required by section 452.135 of the Wisconsin statutes and is for information only. It is a plain language summary of a broker’s duties to you under section 452.133 (2) of the Wisconsin statutes. • CONFIDENTIALITY NOTICE TO CLIENTS: Broker will keep confidential any information given to Broker in confidence, or any information obtained by Broker that he or she knows a reasonable person would want to be kept confidential, unless the information must be disclosed by law or you authorize Broker to disclose particular information. Broker shall continue to keep the information confidential after Broker is no longer providing brokerage services to you. The following information is required to be disclosed by law: 1) Material adverse facts, as defined in section 452.01(5g) of the Wisconsin statutes (lines xxx-xxx). 2) Any facts known by the Broker that contradict any information included in a written inspection report on the property or real estate that is the subject of the transaction. To ensure that the Broker is aware of what specific information you consider confidential, you may list that information below (see lines xxx-xxx). At a later time, you may also provide the Broker with other information you consider to be confidential. CONFIDENTIAL INFORMATION: _________________________________. NON-CONFIDENTIAL INFORMATION (The following may be disclosed by Broker): _________________________________________________.
Owner’s Warranties, Covenants and Representations: This area now imitates the structure of the WB-37. In this provision, the owner warrants all of the information and materials are true and complete and that all forms comply with applicable laws. In addition, this section provides that the owner will hold the broker harmless from any loss from the broker’s use of the form. OWNER’S WARRANTIES, COVENANTS AND REPRESENTATIONS Owner represents any materials and information given to Broker by Owner are true and complete and that the lease and other forms provided to Broker by Owner comply with all applicable laws. Owner agrees to hold Broker harmless from loss by reason of Broker’s use of these materials, forms and information pursuant to the terms of this Listing, including the payment of reasonable attorney’s fees in the event of any suit against Broker arising out of the use of these materials, forms and information. Owner warrants and represents to Broker that: (1) Owner has no notice or knowledge of any conditions affecting the Property unless indicated at lines xxx-xxx or attach addendum per lines xxx-xxx. (2) Owner has no notice or knowledge of other conditions or occurrences which would significantly reduce the value of the rental interest to a reasonable person with knowledge of the nature and scope of the condition or occurrence. (3) Owner has made no rent concessions or other agreements affecting the Property other than those disclosed in writing to Broker prior to execution of this Listing. (4) Owner has authority to lease the Property. If the Owner is an entity, Owner agrees, within ten days of (Broker’s request) (execution of this Listing) STRIKE ONE (“execution of this listing” if neither stricken), to provide Broker with a copy of documents evidencing that the lease of the Property has been properly authorized. If Owner is a tenant subleasing the Property, Owner represents that Owner has authority to enter into this Listing and to sublease the Property. Owner agrees, within ten days of Broker’s request, to provide Broker with a copy of documents evidencing that the sublease of the Property has been properly authorized. (5) Owner agrees to make the following repairs and build-outs to the Property: ________________________________________________. STRIKE AND COMPLETE AS APPLICABLE Exceptions to representations stated in lines xxx-xxx: ________________. Owner agrees to promptly inform Broker, in writing, of any information that would modify the above representations during the term of this Listing. Showing Responsibilities: This was updated to include the owner’s acknowledgement that showings may be conducted by licensees other than the broker; and appraisals, inspections and tests may be conducted without being accompanied by a licensee, and potential tenants and licensees may be present at all inspections and testing. Lastly, this section includes the statement that potential tenants or licensees photograph or videotape the property. SHOWING RESPONSIBILITIES Owner is aware that there is a potential risk of injury, damage and/or theft involving persons attending a showing of the Property. Owner accepts responsibility for preparing the Property to minimize the likelihood of injury, damage and/or loss of personal property.
legAL
ADVERSE FACT: An “adverse fact” means any of the following: (a) A condition or occurrence that is generally recognized by a competent licensee as doing any of the following: 1) Significantly and adversely affecting the value of the Property; 2) significantly reducing the structural integrity of improvements to real estate; or 3) presenting a significant health risk to occupants of the Property. (b) Information that indicates that a party to a transaction is not able to or does not intend to meet his or her obligations under a contract or agreement made concerning the transaction. DEADLINES – DAYS: Deadlines expressed as a number of “days” from an event are calculated by excluding the day the event occurred and by counting subsequent calendar days. MATERIAL ADVERSE FACT: A “material adverse fact” means an adverse fact that a party indicates is of such significance, or that is generally recognized by a competent licensee 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. PERSON ACTING ON BEHALF OF TENANT: “Person acting on behalf of tenant” shall mean any person joined in interest with tenant, or otherwise acting on behalf of tenant, including but not limited to tenant’s immediate family, agents, servants, employees, directors, managers, members, officers, owners, partners, incorporators and organizers, as well as any and all corporations, partnerships, limited liability companies, trusts or other entities created or controlled by, affiliated with or owned by tenant, in whole or in part whether created before or after expiration of this Listing. PROTECTED TENANT: “Protected tenant” means a tenant who personally, or through any Person Acting On Behalf of Tenant, during the term of the Listing: 1) delivers to Owner or Broker a written rental proposal regarding the Property; 2) negotiates directly with Owner by discussing with Owner the potential terms upon which tenant might acquire a rental interest in the Property; or 3) attends an individual showing of the Property or discusses with Broker or cooperating brokers the potential terms upon which tenant might acquire a rental interest in the property, but only if Broker delivers the tenant’s name to Owner, in writing, no later than three days after the expiration of the Listing. The requirement in 3), to deliver the tenant’s name to Owner 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 tenant has requested that the tenant’s identity remain confidential, by
delivery of a written notice identifying the broker with whom the tenant negotiated and the date(s) of any showings or other negotiations. A Protected Tenant also includes any Person Acting on Behalf of Tenant joined in interest with or otherwise acting on behalf of a Protected Tenant, who acquires an interest in the Property during the extension of listing period as noted on lines xx -xx. PROCURE: A tenant is procured when a lease of all or part of the Property is entered into between the Owner and a tenant or when a ready, willing and able tenant submits a written lease proposal at substantially the terms specified in this Listing. A tenant is ready, willing and able when the tenant submitting the written lease proposal has the ability to complete the tenant’s obligations under the lease. See lines XXX-XXX Extension of Listing: This section has been modified to reflect similar language and flow as the WB-5. • EXTENSION OF LISTING: The Listing term is extended for a period of one year as to any Protected Tenant. Upon receipt of a written request from Owner or a broker who has listed the Property, Broker agrees to promptly deliver to Owner a written list of those buyers known by Broker to whom the extension period applies. Should this Listing be terminated by Owner prior to the expiration of the term stated in this Listing, this Listing shall be extended for Protected Buyers, on the same terms, for one year after the Listing is terminated. Termination of Listing: This section has been modified to reflect similar language and flow as the WB-5. • TERMINATION OF LISTING: Neither Owner nor Broker has the legal right to unilaterally terminate this Listing absent a material breach of contract by the other party. Owner understands that the parties to the Listing are Owner and the Broker (firm). Owner and Broker agree that any termination of this Listing by either party before the date stated on line xxx shall be indicated to the other Party in writing and shall not be effective until delivered to the other Party in accordance with lines xx-xx. Exclusions: The language is now sustainably similar to the WB-5, for example, “week” was changed to “seven days.” In addition, the following sentence was added for clarification: “These other tenants are no longer excluded from this Listing after the specified date unless, on or before the specified date, Seller has either entered into a lease with the tenant or rented the Property to the tenant.” Signature lines: The signature lines have been modified to provide for an owner that is an entity. If there is an individual owner, that person would sign his or her name, place the date, and print his or her name. The rental listing contract must be signed by whoever is agreeing to pay the commission and will be enforceable against those signatories. The revised WRA-CP will be available this month in zipForm®. Cori Lamont is Director of Regulatory Affairs for the WRA.
WIREALESTATEMAG • AUGUST 2013
Owner agrees to hold Broker harmless for any losses or liability resulting from personal injury, property damage or theft occurring during showings other than those caused by Broker’s negligence or intentional wrongdoing. Owner acknowledges that showings may be conducted by licensees other than Broker, that appraisers and inspectors may conduct appraisals and inspections without being accompanied by Broker or other licensees, and that potential tenants or licensees may be present at all inspections and testing and may photograph or videotape Property unless otherwise provided for in additional provisions at lines XXX-XXX or attach an addendum per lines XXX-XXX. Definitions now include: Adverse Fact, Deadlines–Days, Material Adverse Fact, Person Acting on Behalf of Tenant, and a slight modification was made to protected tenant.
15
legal by Debbi Conrad
Commercial Offer Building Blocks Versatile WB-15 is the customization foundation Commercial transactions involve a wide variety of real estate used for retail, office, industrial, manufacturing, recreational and mixed uses. These transactions run the gamut from the sale of a small retail shop to the purchase of a gas station to the acquisition of a major shopping center or manufacturing facility in an industrial park. It is impossible to include in preprinted forms all of the provisions that might be desirable in all of these different deals. Accordingly, the WB-15 Commercial Offer to Purchase by necessity provides a basic framework. Transaction-specific provisions are added in the contingencies and the Additional Provisions section or addenda to custom-build the specific contract. Commercial contingencies Commercial practitioners can use tools such as the Proposed Use Contingencies, the Document Review Contingency and the Environmental Evaluation Contingency in drafting an offer that gathers the information the buyer needs to evaluate and complete the transaction.
WIREALESTATEMAG • AUGUST 2013
Proposed Use Contingencies (WB-15 Lines 116-139)
16
Each Proposed Use sub-contingency is based upon the buyer obtaining the documentation, permit, assurances, etc. that the buyer needs to proceed with the buyer’s proposed use or development plans. The seller’s main role is to cooperate with the buyer as needed. If the buyer discovers that a planned use or improvement is not legal or will involve significant delays or higher costs, the buyer can give notice to end the contract, by documenting the disconnect between the buyer’s proposed use and the results of the sub-contingency. Easements and Restrictions (Lines 123-126) The buyer purchasing a manufacturing facility in an industrial park can take advantage of the Easements and Restrictions sub-contingency to obtain and evaluate applicable easements, reciprocal easement agreements, or covenants and restrictions because significant restrictions may be in place in office or industrial parks with shared facilities. This buyer also should be alert to provisions that permit future changes such as relocation of access roads or developer rights to grant additional easements on common areas. Approvals (Lines 127-132) If the buyer is purchasing a retail shop intended for a liquor store, the buyer may want to use this sub-contingency to make
the offer contingent on receiving a liquor license or at least confirming that the requisite licenses would not be precluded by local quotas or restrictions. The buyer could also take advantage of this sub-contingency if the facility being purchased will be used for a dry cleaning, lawn care or pest control business to ensure that the requisite permits and licenses relative to chemical storage and application are attainable. Access to Property (Lines 133-134) The access sub-contingency provides the buyer with the chance to ensure that the property has adequate access from public streets. Commercial property buyers may need to confirm legal access for the sake of their customers and clients, suppliers, delivery vehicles and emergency vehicles, particularly if the property is in a remote area. Related items that may be addressed in other contingencies or Additional Provisions include whether the property has sufficient parking, truck loading facilities or railroad access, for the proposed use. Land Use Approval (Lines 135-139) This sub-contingency gives the buyer the opportunity to secure any rezoning, conditional use permits, licenses and variances, as well as building and occupancy permits needed for the buyer’s proposed use. Note that it may not always be possible for a buyer to actually secure the needed permit or action prior to closing, while in other circumstances it may be possible to obtain desired assurances if the buyer and seller work together.
Document Review Contingency (Lines 157-177) The Document Review Contingency gives the commercial purchaser the opportunity to request a wide range of paperwork, including documents confirming the sale has been
legAL
Environmental Evaluation Contingency (Lines 379-395) The Environmental Evaluation Contingency provides the framework and standards for a Phase I Environmental Site Assessment. A Phase I assessment identifies all potential or known areas of environmental contamination via a walk-through inspection of the property; review of the ownership and use history; review of aerial photographs; review of environmental licenses, permits or orders issued for the property; evaluation of any prior environmental sampling and analysis; and a determination of whether the property is listed on governmental agency databases as a site or facility posing possible health or environmental risks. The assessment is conducted by the independent environmental consultant of the buyer’s choice and does not include subsurface testing of the soil or groundwater or other testing. It is important to start the Phase I assessment early on so if problems are disclosed there is time to follow up with tests and possible remediation. If, for example, the Phase I assessment discloses any prior use for a gas station, a machine shop or a dry cleaner — then the parties will typically engage a contractor for a Phase II Site Assessment. The Phase II assessment typically includes sampling and laboratory testing of soils, groundwater and other elements.
Additional provisions and addenda While there is no end to the additional provisions which might be useful in a commercial transaction, the following examples provide a taste of the concerns that might face the buyer and inspire inspection or testing contingencies in the commercial offer. • Accessibility: It is important to determine whether existing improvements on the property comply with applicable accessibility requirements. The Americans with Disabilities Act (ADA) ensures that businesses that provide goods and services to the public are accessible to people with disabilities. A change in use or construction of additional improvements may trigger additional accessibility compliance requirements. See Legal Update 01.10, “Accessible Offices and Homes: A Guide to the ADA and Visitability,” online at www.wra.org/LU0110. • Lead Paint Testing: Lead paint is most problematic in residential settings, such as multifamily housing, where child safety is a concern and where federal law requires disclosure to tenants and buyers in residences built prior to 1978. See the May 2010 Legal Update, “Lead-Based Paint in Target Housing” at www.wra.org/LU1005. Lead paint can also be problematic in industrial settings, since it can significantly affect how repainting and refurbishing activities are conducted. For example, sandblasting and removal of old lead paint often will require significant precautions in order to avoid lead contamination problems. • Floodplains: Floodplain or Special Flood Hazard Area designation can adversely affect the development potential, applicable building standards and the availability of financing, as well as flood insurance requirements and costs. The buyer may want a provision confirming whether the property is within the floodplain or that the cost of flood insurance will not exceed a specified amount. See the latest comprehensive information from NAR at www.realtor.org/topics/national-flood-insuranceprogram-nfip and “Flood Insurance Rate Adjustments: Helping property owners keep premiums in check” in the July 2013 Wisconsin Real Estate Magazine at www.wra.org/WREM/ July13/FloodInsurance. • Wetlands: The presence of wetland conditions can have a significant effect on the operation and development potential of a property. As a result, it is important to check with the applicable municipality to determine whether any portion of the property is considered wetlands or shoreline. Wetlands and certain uplands located near navigable waters may be subject to significant use and development restrictions. If the property has or may contain wetlands, it may be helpful to include the WRA Addendum W (see dnr.wi.gov/topic/wetlands/documents/ addendumw_2008final.pdf) in the offer. Debbi Conrad is Senior Attorney and Director of Legal Affairs for the WRA.
Recommended reading For more information about the commercial offer, see the March 2012 Legal Update, “2012 WB-15 Commercial Offer to Purchase,” at www.wra.org/LU1203.
WIREALESTATEMAG • AUGUST 2013
authorized, an inventory, a UCC lien search and rent rolls. There are also blank lines where other items may be written in and a confidentiality provision that requires the return of all originals and reproductions should the deal not close. Entity Authorization When dealing with a company or business entity, a decision to sell an asset such as a commercial building requires specific authorization. Although REALTORS® should be familiar with the types of documentation that may be provided by a corporation or limited liability company (LLC), the title company or an attorney decides what documentation is or is not legally acceptable. Inventory An inventory provided here may be the preliminary snapshot of the attachment used for a bill of sale transferring any personal property included in the sale. The WB-25 Bill of Sale does not provide warranties regarding the condition of the personal property, so if such warranties are desired, the parties must provide for them in Additional Provisions or in an addendum. Other title documents may be needed, for example, a Department of Transportation title transfer, if the florist delivery truck is included with the sale of a flower shop. Other — Leases and Contracts In the Other lines, a buyer might require the seller to provide copies of all service contracts on the property — such as HVAC maintenance, snow removal or landscaping — so the buyer can determine whether they may wish to have them assigned to the buyer. Contracts for elevator service and HVAC service may be retained because of the nature of these trades and the warranties that may come with the contracts.
17
best of legal hotline by Tracy Rucka
WIREALESTATEMAG • AUGUST 2013
Best of the Legal Hotline: Commercial Comments
18
Offers to sell The seller of a commercial listing is quite anxious and asked the broker to write an offer to purchase on the property and submit it to a potential buyer. Is this okay to do? How to proceed? Although this situation is somewhat unusual because the seller typically doesn’t know which provisions, contingencies and time frames the buyer would want, this situation is feasible by modifying an offer to purchase form, in this
case, the WB-15 Commercial Offer to Purchase. First, the broker would change the title to “Offer to Sell.” The language on the lines at the beginning of the form should then appropriately be changed to read, “The Seller, ______, offers to sell the Property ...” It also may be helpful in the offer or in an addendum to make clear that this is an “Offer to Sell” from the seller to the buyer. The signature lines may be reversed because the seller instead of the buyer will be signing first. Also it is best to modify the acceptance lines at the end of the form since the buyer is the one who hopefully accepts the offer. The broker should review the document in its entirety and make additional
best of legal hotline legAL
Independent practice Can a licensee be employed by more than one company? For example, can a broker be licensed under a residential company for selling homes and, at the same time, be licensed under a commercial real estate company for leasing commercial property? Would written permission from both broker-employers be needed? A licensee may not be employed by more than one broker at a time per Wis. Admin. Code § REEB 17.03(3). The independent practice rule in Wis. Admin. Code § REEB 17.03(1) allows an individual who is employed by another broker to conduct some independent practice. To qualify for independent practice, the individual must have a broker’s license, not a salesperson’s license, and the licensed individual must have the written consent of the employing broker and must avoid conflicts of interest. In addition, the licensed individual may not employ other licensees in this independent practice. For further information about independent practice, see the March 2008 Legal Update, “Running a Real Estate Office,” at www.wra.org/LU0803.
RECR or VLDR? On commercial or business vacant land parcels, is a condition report required? Effective July 1, 2012, sellers of vacant land are required to complete a Vacant Land Disclosure Report (VLDR). All sellers who are subject to Wis. Stat. § 709.033 must complete a disclosure report with the necessary provisions or risk buyer rescission of the purchase contract. The Wis. Stat. § 709.033 disclosure provisions generally must be completed by all persons who transfer Wisconsin real estate that does not include any buildings. Pursuant to the Wis. Admin. Code § REEB 24.07(1)(b), real estate licensees who are listing any property are required to inspect the property, ask the seller about the condition of the property and ask the seller to provide his or her answers in writing. This obligation to inspect and request a written statement applies to all transactions, even vacant land. Read
the May 2012 Legal Update, “Vacant Land Disclosure Report” at www.wra.org/LU1205 for FAQs and practice tips.
Verbal offers and letters of intent The broker has a commercial listing priced at $1.5 million, and the seller wants offers only from legitimate buyers. The cooperating broker is demanding the listing broker present a verbal offer of less than a million dollars to the seller. Alternately, the cooperating broker says that the listing broker should draft a letter of intent for the buyer. How to proceed? In Wisconsin, verbal offers regarding real property are not enforceable. Although the broker is not prohibited from verbally telling the seller there is an interested buyer, without a written offer, there can be no valid, binding contract. It is the seller’s prerogative to refuse verbal offers or offers below a certain price. Wis. Admin. Code § REEB 24.13(1) indicates that licensees should draft and submit all offers to the seller unless “contrary to the specific instructions of the owner.” Although the rule does not require the instructions to be in writing, the broker may document the seller’s instructions in a WB- 42 Amendment to Listing. The buyer may be a legitimate buyer, only offering a low purchase price to initiate negotiations. The listing broker may refer the cooperating broker to Wis. Admin. Code § REEB 24.08, and the Code of Ethics if he is a REALTOR®, which require licensees to put all offers to purchase in writing unless the writing is completed by the parties themselves, their legal counsel or is outside the licensee’s authority. The cooperating broker may use a commercial offer or possibly a letter of intent. Although letters of intent are often used in commercial transactions, there are risks for brokers who elect to draft them. A broker may decline to draft a letter of intent to avoid unintended unlicensed practice of law concerns or violation of the Wis. Admin. Code chapter REEB 16 rules. See the November 2012 Wisconsin Real Estate Magazine article, “The Purpose and Power of Letters of Intent” at www.wra. org/WREM/Nov12/LOI. And for more information about getting it in writing, see the July 2013 Wisconsin Real Estate Magazine article “Believe it When You See it” at www.wra.org/WREM/July13/Writing. Tracy Rucka is Director of Professional Standards and Practices for the WRA.
WIREALESTATEMAG WIREALESTATEMAG • • AUGUST AUGUST2013 2013
changes as necessary. Even if the offer to sell is countered by the buyer, at least the seller has triggered some active negotiation. When the seller initiates an offer to sell, the question of how to complete the financing contingency often arises. According to the financing contingency, the seller may elect to self-finance if the buyer is unable to obtain the financing described in the financing contingency or other financing acceptable to the buyer. Therefore, when completing an offer to sell, the seller may state the financing terms that the seller would provide if the seller were to self-finance. If the terms are not acceptable to the buyer, the buyer may counter. More information about creating an offer to sell is available in the March 2005 Legal Update, “Customizing the Offer to Purchase,” online at www.wra.org/LU0503.
19 19
product showcase by Nichole Mickelson
The Land of Commercial Real Estate
F
or anyone involved solely in residential real estate, commercial real estate can seem like completely foreign territory. From the legalities and financing to even just the language, residential and commercial real estate are two different worlds. Whether you are a “native” to the commercial scene, or thinking about “taking a tour,” consider the options below for your guides through the land of commercial real estate.
WIREALESTATEMAG • AUGUST 2013
The Insider’s Guide to Commercial Real Estate
20
Just released in 2013 in its 2nd edition, The Insider’s Guide to Commercial Real Estate is revamped to reflect the current commercial real estate (CRE) market. This book covers CRE basics, from different types of developments to different types of buyers. CRE-specific terminology, including a complete glossary to help familiarize you with commercial property terms, is covered. Using explanations and examples, the book walks you through the most common math problems in the field. Each chapter contains case studies that allow you to apply your knowledge to real-world scenarios as well as checklists that you can take into the field. The book also provides an insider’s look at how the CRE profession operates, from financials to contracts, such as the sales contract, lease and property management agreement. Advice for getting started in different commercial real estate careers, such as brokerage, investment, development and property management, is also covered. The Insider’s Guide to Commercial Real Estate is
a great resource to read if you are considering and/or getting started in the commercial real estate business. For more information and to order, go to www.wra.org/PUB186.
Mega Producer Results in Commercial Real Estate In Mega Producer Results in Commercial Real Estate, author Bob L. Herd provides a personal reference handbook with stories and advice from those in the field of CRE. Beginning with an overview of commercial real estate and a self-evaluation, this book helps you determine if commercial real estate is right for you and what you need to know to succeed in the field. The book includes chapters on writing contracts, financing, marketing, property management, leasing and an entire chapter on how to develop an annual business plan, broken down into monthly increments. The second part of the book covers types of CRE investments such as apartment complexes, retail shopping centers, mobile home parks and land brokerage. Use Mega Producer Results in Commercial Real Estate as your blueprint for entering or transitioning into building a successful CRE career. For more information and to order, go to www.wra.org/PUB207. Nichole Mickelson is the Products Coordinator for the WRA.
education
WRA Education and Events Whether your goal is to become a real estate sales licensee, enhance your career with a designation, or renew your license with continuing education, this section offers you the key information you will need.
Commercial CE Milwaukee For CE with a focus on commercial real estate, look no further than the WRA’s commercial CE courses! Early August, the commercial CE courses will be available On Demand with upcoming courses scheduled in 2014 in Milwaukee: • January 30, 2014: Modules 1 & 2 • February 13, 2014: Modules 3 & 4 • February 20, 2014: Electives B & D • September 18, 2014: Modules 1 & 2 • September 25, 2014: Modules 3 & 4 • October 2, 2014: Electives B & D • November 6, 2014: Modules 1 & 2 • November, 13 2014: Modules 3 & 4 • November 20, 2014: Electives B & D
August 12-15, 19-22, 2013 — Milwaukee Real estate broker? Yes — that can be you! Mark your calendar for the eight-day Broker Pre-license Course in Milwaukee this August. This course satisfies the DSPS requirements for broker license education and will aid in preparation for the state-administered broker exam. Content includes topics such as contracts, consumer protection, duties to other brokers, alternative transfers, business ethics, business management, and much more. Completion of the Broker Pre-license education, passing the broker exam and receiving the broker’s license fulfill the 2013-2014 continuing education requirement. Visit www.wra.org/BrokerPL for more information. Instructors: Jennifer Lindsley and Pat Dollins.
Real Estate Sales Pre-license October 14-18; 21-23, 2013 — Madison To obtain a real estate license in the state of Wisconsin, you must first complete 72 hours of approved education courses, such as the WRA Sales Pre-license Course, and next, you must pass the stateadministered exam. The WRA will offer an eight-day accelerated 72-hour sales program this fall in Madison. For more information, visit www.wra.org/SalesPL. Instructor: Jennifer Lindsley
Upcoming CRS Electives Hudson, Wisconsin
September 25, 2013 — At Home with Diversity 8:30 a.m. – 5:00 p.m. Cost: $59 This course addresses issues regarding fair housing, cultural differences and diversity, and you’ll learn how to develop professional and sensitive guidelines for working with people of different cultures. Earn the At Home With Diversity certification as well as CRS elective credits with this one-day course. Instructor: Eric Kodner, CRS.
September 26, 2013 — Working in the Cloud and Top Secrets of Outlook E-Marketing Strategies 8:30 a.m. – 5:00 p.m. Cost: $99 With access to all your files all the time, this course will teach how to utilize cloud technology so you’ll never be caught again missing critical information! And you’ll become an Outlook guru with learning the ins and outs of using Outlook for real estate. Earn six CRS elective credits with these courses. Instructor: Mark Porter, CRS. *All courses qualify for CRS elective credits – attend both days for $150 Both courses will be held at the Phipps Center in Hudson, Wisconsin. Courses are co-sponsored by the Minnesota CRS Chapter, the Wisconsin CRS Chapter, Minnesota Association of REALTORS® and the Wisconsin REALTORS® Association.
WIREALESTATEMAG • AUGUST 2013
Broker Pre-license Course
21
education
WRA Education Schedule Visit www.wra.org/CourseSchedule for full schedule and details. Conferences and Conventions Date September 15-16, 2013
Event/Course WRA Annual Convention
Location Wisconsin Dells
Real Estate Continuing Education Date Course Location Price August 6, 2013 2013-2014 Course 4 Racine Call 262-884-7833 August 7, 2013 2013-2014 Courses 2 & 1 Madison $27 member/$35 nonmember August 8, 2013 2013-2014 Courses 2 & 1 Brookfield $27 m/$35 nm August 14, 2013 2013-2014 Courses 4 & 3 Madison $27 m/$35 nm August 21, 2013 2013-2014 Electives A & D Madison $27 m/$35 nm August 22, 2013 2013-2014 Courses 4 & 3 Brookfield $27 m/$35 nm September 4, 2013 2013-2014 Elective A Racine 262-884-7833 September 11, 2013 2013-2014 Electives A & D Brookfield $27 m/$35 nm September 15, 2013 2013-2014 Elective C Wisconsin Dells Included with convention registration September 16, 2013 2013-2014 Courses 1 & 2 Wisconsin Dells Included with convention registration October 1, 2013 2013-2014 Elective D Racine 262-884-7833 October 1, 2013 2013-2014 Courses 1 & 2 Appleton 920-739-9108 October 2, 2013 2013-2014 Courses 3 & 4 Madison $27 m/$35 nm October 3, 2013 2013-2014 Courses 1 & 2 Green Lake 920-294-6850 October 3, 2013 2013-2014 Courses 1 & 2 Green Bay 920-739-9108 October 10, 2013 2013-2014 Courses 1 & 2 Madison $27 m/$35 nm October 15, 2013 2013-2014 Courses 3 & 4 Appleton 920-739-9108 October 17, 2013 2013-2014 Courses 3 & 4 Green Lake 920-294-6850 October 22, 2013 2013-2014 Electives A & D Appleton 920-739-9108 October 24, 2013 2013-2014 Electives B & C Madison $27 m/$35 nm October 24, 2013 2013-2014 Courses 3 & 4 Green Bay 920-739-9108 October 31, 2013 2013-2014 Electives A & D Green Lake 920-294-6850 Real estate (classroom) classes are also approved for 3 hours of Minnesota Real Estate CE. Course 1 qualifies for Agency Law and Fair Housing and Elective D qualifies for Agency Law. Courses are also approved for Wisconsin Appraiser and Assessor CE credits.
Pre-License Date Aug. 12-15; 19-22, 2013 Oct. 14-18; 21-23, 2013
Course Broker Pre-license Course Sales Pre-license Course
Location Milwaukee Madison
Member $325 $325
Nonmember $345* $335*
ATD Additional $20
*Plus books
WIREALESTATEMAG • AUGUST 2013
Designations
22
Date Course Sept. 25, 2013 At Home w/Diversity Sept. 25, 2013 Working in the Cloud & Outlook E-Marketing
Location Hudson Hudson
Member $59 Both for $150 $99
Date Course Location Oct. 25, 2013 Military Relocation Professional (MRP) Madison Oct. 29-30; Nov. 13-14 GRI Course 3/CRS 202 (Madison live) Remote locations: Appleton, Eau Claire, Milwaukee Nov. 13-14, 2013 CRS 202 (Madison live) Remote locations: Appleton, Eau Claire, Milwaukee
Member $110 $320
Nonmember $120 $330
ATD $140 $350
$195
$205
$225
IT TO THE W I S C O N S I N R E A LT O R S ® A N N U A L S TAT E C O N V E N T I O N
REGISTRANT ONE INFORMATION:
Check here if you are an Association Executive Name __________________________________________ Firm name __________________________________________ Address ________________________________________ City ______________________ State _____ Zip____________ Phone (W) ( ) ________________________________ (H) ( ) ________________________________________ E-mail address ____________________________________ WRA member # _______________________________________
SEPTEMBER 15-16, 2013
*TWO-FER CONVENTION SPECIAL: Register one WRA member for one full convention pass at regular price and register a second WRA member at a special introductory price. See details at www.wra.org/Convention. Your second guest must be a member of the WRA who has NEVER attended the annual convention or has NOT attended in the past five years. Limit one discounted registration per order. Register using this form or by visiting www.wra.org/Convention. After you have registered, you will receive a promotion code. Give this promotion code to a WRA member and tell that member to visit the website to register and take advantage of the discounted pricing.
Kalahari Resort and Convention Center 1305 Kalahari Dr. | Wisconsin Dells, WI 53695 Phone: 877-253-5466 or 608-254-5466
TWO-FER: 2nd WRA MEMBER INFORMATION:
Room Rates Standard: $109 I Royal African Suite: $179 Release Date: August 16, 2013
Name __________________________________________ Firm name___________________________________________ Address ________________________________________ City ______________________ State _____ Zip _____________ Phone (W) ( ) ________________________________ (H) ( ) _________________________________________ E-mail dddress ____________________________________ WRA member # ________________________________________
Kalahari Resort I Wisconsin Dells, WI
WWW.WRA.ORG/CONVENTION Hotel information:
(An additional $20 per room will be charged for the night of Sept. 14)
To see a complete list of overflow hotels, visit www.wra.org/ConventionHotel
WRA Member and/or Affiliate Before 7/31 Before 8/15 After 8/15 1-Day Pass (Sun., Mon.) circle one $59 $69 $79 Full Convention Pass $89 $99 $109 TWO-FER: 2nd WRA Member* $45 $55 $65 Unlicensed guest $30 $30 $30 Name of unlicensed spouse or guest:____________________________________________.
ATD $99 $129 $85 $50
Non-Member
ATD
• Chairman’s Reception I Sept. 15 I 6:00 p.m. – 7:00 p.m.
$129 $169
• Icebreaker Party I Sept. 15 I 8:30 p.m.
Before 7/31
1-Day Pass (Sun., Mon.) circle one Full Convention Pass
$89 $129
Before 8/15 After 8/15 $99 $139
$109 $149
Included in Registration Fee: • Real estate CE I Three courses included in full convention pass. Must register in advance. First come, first served. • Opening Session I Sept. 15 I 4:00 p.m.
Event Fees – Per Person: Real Estate Continuing Education — select up to three CE courses included for free in your full convention pass!
Golf (9/15) .................................................................................$98 Trapper’s Turn Golf Club Member One Member Two
Elective C: Wisconsin Property Management I 9:00 a.m. – 12:30 p.m. I Sept. 15 Course 1: Wisconsin Listings I 8:30 a.m. – 12:00 p.m. I Sept. 16 Course 2: Wisconsin Offers I 1:00 p.m. – 4:30 p.m. I Sept. 16 Appraisal Course — 9/16/2013 WRA Appraisal Section Member Class only Class w/ Convention
Before 7/31 Before 8/15 After 8/15
ATD
Two-Fer Pricing
5k Run/Walk (9/15) Adult participants 16 and over...........................................$25 Ages 10–15............................................................................$10 Under 10............................................................................*Free
$109 $119
$119 $129
$129 $139
$149 $159
2nd WRA Member* .....$74
CRS/CRB Luncheon (9/16) ........................................................ $22 Member One Member Two
WRA REALTOR® Member Class only Class w/ Convention
$119 $129
$129 $139
$139 $149
$159 $169
2nd WRA Member* .....$84
Special Services: Check here if you require special needs to attend. Attach written description of needs.
Appraisal Non-Member Class only Class w/ Convention
$129 $139
$139 $149
$149 $159
$169 $179
CANCELLATION POLICY: The WRA reserves the right to cancel courses if not filled. Cancellations must be made in writing prior to September 15, 2013 and will be refunded, minus a $25 administration fee. Registrations cannot be transferred from person to person. *Race participants under 10 years of age may purchase a race t-shirt for $10 and must pre-register. All other race participants automatically receive race t-shirt when pre-registering by Aug. 26. Race t-shirts not guaranteed day of race.
Payment Register by mail: WISCONSIN REALTORS® ASSOCIATION 4801 Forest Run Road, Suite 201 Madison, WI 53704-7337
Register by phone: 800-279-1972 | 608-241-2047 Register by fax: 608-241-5168
Total amount $__________________ Enclosed is my check made payable to the WRA Charge my VISA / MasterCard (circle one) Card Number ______________________________________________Exp. Date___________
membership resources
Exclusive Member Benefits As a WRA member, you can enjoy discounts on products and services to enhance your business.
Health Care Reform: Essential Health Benefits
H
ealth care reform will go into effect in January 2014 for individuals and small businesses of fewer than 50 full-time employees. The WRA’s health insurance partner, REGIT Inc., is analyzing the various provisions’ impacts on individual purchasers of health insurance. Ten Essential Health Benefits (EHBs) are incorporated in the Affordable Care Act. They are: • Outpatient services • Emergency services • Hospital stays • Maternity/newborn care • Lab services • Prescription drug coverage • Preventive and wellness services and long-term disease management • Pediatric services including dental and vision care • Mental health and substance abuse services including behavioral health treatment
• Rehabilitation services and devices like durable medical equipment and prosthetics Come January 1, 2014, not all plans will include EHBs. These EHBs must be included on individual and small employer plans, but this EHB requirement does not apply to grandfathered plans, large employers or self-insured plans. If any plan covers an EHB, however, setting a dollar limit on that EHB is prohibited. A grandfathered plan is one that was in effect on or before March 23, 2010, and certain changes (such as increasing the deductible) have not been made to it since then. Grandfathered plans do not have to include EHBs. For more information, contact REGIT with your questions regarding health care reform. REGIT can also assist in applying for coverage in and out of the Exchange/Marketplace. Contact REGIT at 800-537-9786, by via e-mail at regit@ regitinc.com, or online at www.regitinc.com/aspwra.
WRA Member Benefit Programs Business Furniture
Office Supplies
Emmons Business Interiors (EBI) has marketed and distributed quality office furnishings across Wisconsin since 1940. Through several statewide locations, EBI provides new, used and refurbished office furniture products. Also available are interior design services, installation, and project and moving management. 800-324-1691 | www.ebi.web.com
Save on office supplies with Wisconsin-based Office Supplies 2U (OS2U). OS2U can access over 30,000 products in a network that extends to three dozen distribution facilities across the country. In most parts of the U.S., customers can receive their order the next business day. Available products include office furniture, general office supplies, presentation products, janitorial supplies and much more. 888-508-6728 | www.os2u.com
WIREALESTATEMAG • AUGUST 2013
Shipping Discounts
24
Simple shipping and simple savings — it’s that easy! As a WRA member, you can save on UPS shipping services such as ground commercial, 3-day select, 2nd-day air, next-day air, and worldwide express! 800-325-7000 | www.savewithups.com/WRA
Errors & Omission Pearl Insurance offers insurance designed specifically for the real estate industry. Pearl provides coverage for claims of regulatory complaints, personal injury, lockbox liability, and allegations of discrimination. 800-447-4982 | www.pearlinsurance.com
Website Development WRA members can design and maintain their own websites through RealEstateHomePages. com. Features include easy-to-use templates, map-based property searching, an e-mail campaign manager and Flash site designs, just to name a few. No coding experience? … No problem! 800-280-6926 | realestatehomepages.com
Health, Dental and Life Insurance Save on health insurance premiums with REGIT Inc. without compromising coverage. REGIT’s program provides access to customizable insurance plans to meet your needs. 800-537-9786 | www.regitinc.com
Long-Distance Program Take advantage of leading-edge voice, data and IT solutions for your business. AMI can provide consolidation of your telecommunication services, no matter the size of your business. AMI also offers data backup, IT consulting, cloud computing, teleconferencing services and more. 800-253-3202 | www.ami.net Visit www.wra.org/ExclusiveGroupBenefits to learn more. If you have questions about the WRA member benefits, contact Debbie Thacker at dthacker@wra.org or by calling 800-279-1972.
realtor sales tips by Marcus Wally
“Rarely do people buy from a salesman — they usually only buy from an acquaintance and/ or a trusted friend.”
Earning the Business! Job hunting today is more competitive than ever — even in our business! Going after a listing is the same as interviewing for a job. It is critical that we be prepared, and the important first piece is a sharp and up-to-date bio and/or resume. You would never think of walking into a job interview without this document, so I am always surprised when my competitors don’t provide a copy of their most current resume to offer to the seller right up front. Actually, I use my resume as a way to separate me from the pack. point, I transformed from a salesman into an acquaintance in her mind. Rarely do people buy from a salesman — they usually only buy from an acquaintance and/or a trusted friend. This is a big difference, so let go of the sales pitch and get into developing a relationship based on commonalities! Once we established connections in common, I asked my potential seller if Ray and Rose had recommended me. She said that she didn’t remember where she most recently heard my name, but saw a sign with my name on it. She also mentioned that she had heard of me over the years and was quite familiar with my name and company. I asked her about her occupation — a hair dresser. I asked, “then why am I not getting my hair cut by you?”
Common connections
Our conversation morphed into a chat about loyalty and how much I appreciated her remembering me and calling me. I reassured her that I could get her top dollar in a relatively quick time frame. Notice here that my lines are all scripted, and this is a critical element to any interview, whether in person or over the telephone. I have the same script memorized, which is a critical element to earning the job ... the listing! Just like an actor memorizes lines, we too must memorize our lines and recite them without hesitation. Mistakes happen when we’re ill-prepared when we receive questions for which we
Another way to win over clients is to find out what connections you may have in common. I recently received a phone call from a woman who wanted to list her home; during the phone call, I asked for her address. When she replied that she lives on “Marilyn Avenue,” I asked if she knew her neighbors Ray and Rose — previous clients for whom I helped purchase a home on the same street two years ago. Yes, she knew them — and even mentioned that Ray helped her install a deck. At that
Practice makes perfect WIREALESTATEMAG • AUGUST 2013
D
uring my initial meeting with a seller, I offer my resume and also ask if other agents they met with also provided a copy of credentials. Of course this is a leading question, as very few agents have thought to bring their resume to the job interview. And going on a listing presentation is just that: a job interview. Providing my resume sets the stage for me to be at the top of my game from the starting gate. I then offer two business cards — one for the customer and one for them to share. When the seller mentions that I mistakenly handed out two cards, that opens the door for me to explain the seller’s role in growing my business and contributing to my overall success. People are usually interested in being part of a “team,” and are willing to help if you just ask for assistance. A big smile here draws them in.
25
realtor sales tip
lack quick and concise responses. One of best sales tips I can offer is to practice your lines and your responses to questions.
212 N. 71st St. Milwaukee, Wisconsin 53213-3744 (262) 424-8814 Office (414) 231-3227 Fax
A Better Business Bureau Accredited Company
Ask for business
WIREALESTATEMAG • AUGUST 2013
Being a top producer, showing up on time, driving a nice car, and using all the latest tech gadgets are just part of the package. But looking the customer in the eyes and allowing them to sense your genuine interest to have their business is just as important — and sometimes more important. In my 23-year career, I’ve witnessed hungry new agents take business away from seasoned veterans simply by being eager to earn business — they asked for the listing and got it. Veteran REALTORS® must remember the “human element” when interacting with customers: reach out and shake to seal the deal while saying “I would really like to earn your business and market this property ... and I know that working together, I can get your top dollar quickly.” Notice that my focus is on earning them top dollar and doing it quickly. These are the two most important elements that a seller wants to hear. See these additional tips to follow when job hunting: 1 Study the local market and analyze your competition in advance. 2 Drive by the property ... take a few pictures and use them in your live presentation. 3 Always arrive on time to the presentation and make sure the customer knows that you were on time … this shows that you respect their time as much as you respect yours. 4 Dress for success as you never get a second chance to make a good, first impression. 5 Determine the decision maker in the deal — could be absentee owners in addition to the ones you are meeting with. Make sure you get to speak directly to these owners as well. They cannot approve of you without your reaching out to them. 6 Determine the reason/desire to sell, and gear your presentation to these factors. 7 Adapt your presentation to the owners’ reaction. 8 Actively listen to the owners and respond directly to all their questions. 9 Demonstrate your value so that there is no question to your professional fee. 10 Ask for the listing (business).
26
Marcus A. Wally, MBA, is an active REALTOR® in St. Augustine, Fla. He is the founder and broker of New World Realty, which also manages the coaching and facilitation of education classes around the world. Marcus earned his MBA from the University of North Florida in Jacksonville. He can be reached at 904-669-1081 or at marcus@newworldrealty.com. Learn more about him at www.newworldrealty.com.
C.H.I.S. offers professional “discrete-personalized” service in all aspects of the Residential / Commercial / Industrial, Asbestos & Lead Inspection, Testing and Clearance fields; ranging from Infant E.B.L. Lead Investigations to pre-renovation / demolition / fire burn, Asbestos & Lead Testing and all postremodeling / abatement and renovation clearance’s. C.H.I.S. is a registered Asbestos Company #CAP1859980 and Lead Company #DHS-185990 and I am a Certified Asbestos Inspector #AII-105095 and Lead Risk Assessor #LRA-105095 with the State of Wisconsin, Department of Health Services. John V. Wantz, CMI, CFI, CLRA, CAII. 262-424-8814
Small Company, Low Overhead, Low Rates
SINCE 1992
www.churchhomeinspection.com
legislative by Tom Larson
As part of the 2013-15 state budget, Gov. Walker signed into law a prohibition on the ability of local units of government (cities, villages, towns and counties) to regulate real estate brokers and brokerage services. This new law addresses a growing trend of local regulations occurring in both Wisconsin and other parts of the country by clarifying that the regulation of real estate brokers should occur exclusively at the state and federal levels, rather than the local level. Background Historically, real estate brokers have been regulated at the state and federal levels. The Department of Safety and Professional Services and the Real Estate Examining Board are given broad rule-making and other regulatory authority related to real estate brokers, real estate salespersons and the
practice of real estate (referred to hereinafter as “real estate brokers�). This regulatory authority includes licensing, education, supervisory responsibilities, the use of state-approved forms, trust accounts, professional conduct and ethical practices. In addition, real estate brokers are regulated by state statutes including Chapter 452, which regulates licenses, trust accounts, duties owed to consumers and agency relationships. Finally,
WIREALESTATEMAG • AUGUST 2013
New Law Prohibits Local Governments from Regulating Real Estate Brokers
27
legislative
real estate brokers are also regulated by numerous federal laws including the Real Estate Settlement Procedures Act (RESPA), the Federal Truth in Lending Act and Regulation Z. Recently, local governments have begun to regulate real estate brokers, and the regulation is creating confusion and inconsistencies with state and federal laws. For example, one community in the Fox Valley area introduced a proposal that would prohibit real estate licensees from selling homes to known sex offenders. This local ordinance is inconsistent with Wis. Stat. § 452.24, which provides a real estate broker immunity from disclosing such information if the broker has provided the person a written notice with the Wisconsin Department of Corrections website and telephone number. Another community in southeastern Wisconsin introduced a proposal that would make real estate brokers jointly and severally liable for any code violations that the seller did not fix prior to the time of sale. In yet another community in Missouri, an ordinance was adopted that required real estate brokers to analyze the zoning ordinance and disclose all the permitted and conditional uses of a property to a prospective buyer. Such a requirement could force real estate brokers to engage in an unauthorized practice of law, which would violate state law.
New law To ensure that the regulation of real estate brokers and the practice of real estate remains consistent and uniform throughout Wisconsin, the new law prohibits local units of government from: (1) Enacting or enforcing any regulations on the professional services provided by a broker or by a person who provides real estate brokerage services. (2) Imposing any fees on brokers or on real estate brokerage services.
WIREALESTATEMAG • AUGUST 2013
Why this new law is important
28
Regulation of real estate brokers at the local level will create confusion and inconsistencies: With approximately 1,800 local units of government in Wisconsin, the practice of real estate would be significantly more complex and confusing if each community regulated real estate brokers differently. Rather than one set of statewide standards, each community could have its own regulations relating to the duties owed by real estate brokers to their clients and customers, trust accounts, disclosures and other activities affecting real estate transactions. Moreover, because these activities are already regulated by state and federal law, real estate brokers may be subject to laws that are in direct conflict with one another. Thus, a real estate broker would be faced with the dilemma of either meeting the requirements of the local ordinance and violating state law, or following state law and violating the local ordinance. Local regulation of real estate brokers would increase enforcement and compliance costs: Regulating the practice
of real estate would add an additional enforcement responsibility for local communities that already face significant budget challenges. Additionally, real estate brokers that practice in more than one community would be required to comply with the various regulations of each community, which would increase the costs associated with the practice of real estate and, ultimately, increase the costs related to selling homes and other real estate.
Conclusion Regulation of real estate brokers at a local level exposes real estate brokers, their agents and their businesses to potentially cost-prohibitive, burdensome and high-risk requirements, which in turn discourage the participation of brokers in specific communities. If a community believes strongly that a real estate broker should be obligated to make a specific disclosure or duty to a member of the public, the community should pursue changes at the state level rather than the local level. Precluding local authorities from creating ordinances, rules or regulations affecting or relating to real estate brokers will create uniformity throughout the state as to the necessary disclosures and broker obligations. The WRA worked closely with lawmakers and Gov. Walker to enact this new law and to keep the regulation of real estate brokers in Wisconsin at the state and federal levels. For more information on the new state preemption law, please contact Tom Larson at tlarson@wra.org or at 608-240-8254. Tom Larson is Vice President of Legal and Public Affairs for the WRA.
legislative by Rob Keefe
Why You Should Invest in RPAC “Think about how different your job would be if attorneys were required at every closing, like they are in Illinois and Georgia.”
S
o what is RPAC all about? Perhaps you’ve heard the acronym tossed around by fellow WRA members or at the office with your fellow associates, but with your calendar full of appointments to list and sell, you just didn’t have time to look into the meaning behind the letters. The purpose of RPAC is to help elect candidates who will promote and defend issues that impact homeowners, property owners and the livelihood of every WRA member. In short, RPAC exists to kill bad laws and pass good ones. RPAC is part of the political system we must work within to ensure that vital issues to the everyday life of REALTORS® are being addressed. Through RPAC, the voice of the real estate community is heard at the local, state and national levels. Over the past several years, RPAC helped secure legislative victories that saved REALTORS® and property owners millions of dollars. These issues include: Taxes: Defeating a proposal to raise taxes a staggering $15.2 billion to create a state government-run universal health care system with a four percent employee payroll tax and a 10 percent employer tax. This would have cost the average REALTOR® $510 per month. Could you afford this? Requiring attorneys at all closings: Think about how
different your job would be if attorneys were required at every closing, like they are in Illinois and Georgia. In other states, real estate licensees are not allowed to complete offers to purchase and other state-approved forms because state bar associations in those states actively lobbied their legislatures or successfully argued to their courts that only attorneys be allowed to complete forms related to a real estate transaction. But here in Wisconsin, the state Supreme Court has recently reaffirmed your right to use these forms, responding to an amicus filed by the WRA. This saves your clients hundreds of dollars on every transaction. Prohibit REALTOR® opinions of value: In 2010, some appraisers and the city of Milwaukee attempted to pass legislation that would prevent real estate licensees from giving broker price opinions or other opinions of value unless they had an appraiser’s license. Fortunately, the WRA, with lots of help from individual REALTORS® across the state, defeated this legislation and preserved the ability of consumers to choose to hire an appraiser or real estate licensee to provide them with an opinion on the value of their property. Joint and several liability: In the 2009 Wisconsin state budget, a provision was included that would have involved REALTORS® in never-ending lawsuits. Gov. Jim Doyle’s proposal
WIREALESTATEMAG • AUGUST 2013
Decisions are being made in Washington and Madison that affect the real estate industry and your bottom line like never before. These decisions include topics such as mortgage interest, zoning, capital gains, legal liability and much more. That’s why you need the REALTORS® Political Action Committee (RPAC) as much as RPAC needs you. It’s a critically important investment in your business.
29
legislative
would have forced a defendant, who was as little as 1 percent at fault in a lawsuit, to pay up to 100 percent of the damages if the other defendants were unable to pay. The WRA and allied business organizations successfully defeated this proposal. Real estate transfer tax: The WRA defeated a state budget proposal to double the real estate transfer tax that would cost your sellers hundreds of dollars on the sale of their home. This legislation was defeated by the WRA and determined REALTORS® and homeowners across Wisconsin who opposed this tax increase. Fraudulent misrepresentation: The WRA drafted and passed legislation to overturn a misguided court case that held REALTORS® could be liable for fraudulent misrepresentations made by a third party in a real estate transaction. Without this important legislation, REALTORS® would have been exposed to lawsuits for defects or other material facts concealed by sellers that only sellers could have known. Extending levy limits to cover certain fees: Homeowners and property owners are now protected from large fee increases related to property-related services such as garbage collections, snowplowing, streetsweeping, and storm water management by discouraging communities from shifting such services from the property tax to separate fees in order to avoid current levy limits. All revenues generated by such fees are now subject to local levy limits. This is a big win for property taxpayers. State preemption of the regulation of real estate brokers
and brokerage services: Because the practice of real estate is already regulated by state and federal laws, local regulation of real estate brokers could result in the creation of laws in direct conflict of one another. A new law ensures that the regulation of real estate brokers will remain consistent and uniform throughout Wisconsin by prohibiting local communities from creating and enforcing their own regulations and fees in this area. Can you imagine the confusion if local governments could regulate brokerage services? These victories were made possible because RPAC supports candidates for public office who support real estate issues. Every two years, voters decide who will represent them in Congress and the state Legislature, and REALTORS® have played a crucial role in helping elect pro-business and pro-real estate candidates. Your contributions to and support for RPAC are critical to the success of your business. The only people we can count on to protect our industry’s interests are REALTORS® like you. That’s why your investment in RPAC is so vital. Rob Keefe is the 2013 Chairman of the REALTORS® Political Action Committee.
Our financing really delivers......
WIREALESTATEMAG • AUGUST 2013
results
30
mOre than lending– in 2012 alone, greenStone helped more than 4,000 customers lower their loan interest rate, saving them nearly $12 million annually. and we did it all without the hassles of refinancing. Share the difference with your clients today!
800-444-3276 www.greenstonefcs.com
WHAT MAKES A CENTURY 21 AGENT? GUTSPAH. IT’S LIKE CHUTZPAH. BUT WITH EVEN MORE GUTS, MOXIE AND METTLE. LIKE THE KIND OF METTLE THAT’S STRONGER THAN STEEL. WITH NERVES TO MATCH. THAT’S GUTSPAH. AND GUTSPAH DELIVERS EVERY TIME. ®
CENTURY 21 AGENTS. SMARTER. BOLDER. FASTER.
SM
C21.COM U.S. SOCCER IS A TRADEMARK OF THE UNITED STATES SOCCER FEDERATION, INC. ALL RIGHTS RESERVED. ©2012 Century 21 Real Estate LLC. All rights reserved. CENTURY 21® is a registered trademark owned by Century 21 Real Estate LLC. An equal opportunity company. Equal housing opportunity. Each office is independently owned and operated.
More home buyers are discovering the WHEDA Advantage . ÂŽ
The WHEDA Advantage is not just for first-time home buyers anymore. Our Advantage loan products have everything your home buyers need including a low, 30-year fixed interest rate, down payment assistance, job loss mortgage payment protection, quick loan approval and more. Income and loan limits apply. Refinancing is not available. Interest rates are subject to change daily. To learn more, go to www.wheda.com/Realtors. WISCONSIN HOUSING AND ECONOMIC DEVELOPMENT AUTHORITY 800.334.6873 â– www.wheda.com