2.2 Agency Duties in Wisconsin
Key Takeaways
- Wis. Stat. 452.133(1) lists the duties a firm owes to ALL parties: honest service, reasonable skill and care, written disclosure of material adverse facts, accurate market information on request, confidentiality, account for funds, and reasonable inspection.
- A 'material adverse fact' (452.01(5g)) is a fact that would significantly affect a reasonable party's decision or the value/safety of the property and is not readily observable.
- Client-only duties under 452.133(2) add loyalty, obedience to lawful instructions, and disclosure of all information material to the transaction.
- Confidentiality survives the end of the agency relationship and protects motivation, financial position, and any info a reasonable person would want kept private.
- A firm must disclose material adverse facts in writing in a timely manner UNLESS disclosure is prohibited by law (for example, federal fair-housing or HIV/AIDS-status limits).
Duties Owed to ALL Parties — Wis. Stat. 452.133(1)
Every firm owes the following to every party in a transaction, client or customer alike. Memorize these six — the exam tests which duties survive even when no agency agreement exists.
| # | Duty (452.133(1)) | Exam-critical detail |
|---|---|---|
| 1 | Provide brokerage services honestly and fairly | No misrepresentation, no fraud, applies equally to both sides |
| 2 | Exercise reasonable skill and care | Negligence standard; competent, diligent performance |
| 3 | Disclose material adverse facts in writing | Timely, to each party, unless disclosure is prohibited by law |
| 4 | Keep confidential information confidential | Survives the relationship; not waived just because someone is a customer |
| 5 | Provide accurate market information on request | Within a reasonable time when a party asks |
| 6 | Account for property/funds; safeguard trust funds | Earnest money, deposits held in trust |
The firm must also conduct a reasonably competent and diligent inspection of accessible areas to detect observable material adverse facts — Wisconsin does NOT impose a full structural inspection duty, only observation of what is reasonably detectable.
Material Adverse Fact — the Defined Term
Under Wis. Stat. 452.01(5g), a material adverse fact is an adverse fact that a party indicates is significant to their decision, OR that is generally recognized as significant to a reasonable party, AND that the firm has reason to know the other party does not have and cannot reasonably discover. "Adverse fact" includes a condition or defect that reduces value, significantly impairs health/safety, or shortens the property's normal life.
| Likely material adverse fact | Likely NOT required to disclose |
|---|---|
| Known structural defect, recurring basement flooding | Property was site of a homicide/suicide (452.23 — not adverse) |
| Failing private septic (POWTS) | Occupant had/has HIV or AIDS (452.23 prohibits) |
| Defective well or unsafe wiring the buyer can't see | Mere proximity to a sex offender (use registry) |
Trap: Wisconsin's 452.23 stigma statute says a death on the property, a prior occupant's HIV/AIDS status, or registered-offender proximity are NOT material adverse facts and need not be disclosed. Disclosing protected-class health info could itself violate law.
Confidentiality Lasts
The duty to keep confidences continues after the transaction or relationship ends. Confidential info includes a party's motivation, top price/bottom line, financial condition, and anything given in confidence. The firm may break confidentiality only when law requires disclosure (for example, a known material adverse fact must still be disclosed).
Timing and the Inspection Standard
The duty to disclose material adverse facts is ongoing: if the firm learns of a defect after listing but before closing, it must disclose it in a timely manner. The firm's inspection obligation is limited to a reasonably competent and diligent inspection of accessible areas — the firm need not move furniture, open walls, or hire an engineer, but must report what a careful licensee would observe (water stains, foundation cracks, mold, obvious roof damage).
Additional Duties Owed ONLY to Clients — Wis. Stat. 452.133(2)
A client (someone with a written agency agreement) is owed everything above PLUS the heightened fiduciary-style duties below. A customer receives the 452.133(1) baseline but none of these.
| Client-only duty | What it requires | Limit |
|---|---|---|
| Loyalty | Act in the client's best interest, place client above firm's own interest | Limited/suspended in multiple representation |
| Obedience | Follow the client's lawful instructions | Cannot follow unlawful or discriminatory instructions |
| Full disclosure | Disclose all information material to the transaction to the client | Subject to fair-housing limits |
| Negotiate as the client directs | Advance the client's negotiating position, advise on price/terms | Not owed to a customer |
Loyalty plus full disclosure are why a client gets price advice and strategy while a customer does not. On the exam, if a question gives a duty like "advise the buyer how much to offer," the firm may do this only for a client.
Client vs. Customer — Master Comparison
| Duty | Client | Customer |
|---|---|---|
| Honest and fair service | Yes | Yes |
| Reasonable skill and care | Yes | Yes |
| Written disclosure of material adverse facts | Yes | Yes |
| Confidentiality (baseline) | Yes | Yes |
| Accurate market info on request | Yes | Yes |
| Account for / safeguard trust funds | Yes | Yes |
| Loyalty | Yes | No |
| Obedience to lawful instructions | Yes | No |
| Full disclosure of all material info | Yes | No |
| Negotiation advice / advocacy | Yes | No |
Worked Scenario
A listing firm learns the home has a chronically failing POWTS (private septic system) the buyer cannot see. The seller (client) says "don't tell anyone." The firm must still disclose the failing septic in writing to the buyer — it is a material adverse fact, and obedience does NOT extend to unlawful instructions. By contrast, if the seller confides a willingness to accept far less than list price, that is confidential and the firm must NOT reveal it to the buyer. Disclose defects; protect negotiating position.
Trap: Candidates conflate the two. Material adverse FACTS about the property must be disclosed to everyone; confidential NEGOTIATING information must be protected. A single scenario often tests both at once.
Which duty does a Wisconsin firm owe to ALL parties, including customers?
A seller-client tells the listing firm to conceal a chronically failing private septic system the buyer cannot detect. What must the firm do?
Under Wisconsin's stigma statute (Wis. Stat. 452.23), which of the following is NOT a material adverse fact a firm must disclose?