Put simply, a contract is what differentiates a customer from a client. There is a significant difference between being a customer or a client and the two terms are not interchangeable in the real estate industry.
The State of Wisconsin defines “customer” as “a party to a transaction who is provided brokerage services by a firm and any licensees associated with the firm but who is not a client.” [Wis.Stats., Real Estate Practice, Chapter 452.01 Definitions, (3s)].
Customers, as they relate to the real estate industry, purchase individual products or services from a firm or receive brokerage services from a firm such as a broker’s price opinion when working with seller customers or individual property showings for buyer customers, for example. Customers are never under contract with a firm and when they sell or purchase a property without representation, the firm and its agents are working on behalf of any clients in the transaction even if they are the clients of a completely different firm. When working with customers, the firm is not obligated to place the customer’s interest ahead of any client’s interest within the transaction. The firm cannot negotiate the best offer for the customer and cannot give professional advice or opinions. In Wisconsin, real estate firms and agents are still obligated to fulfill certain duties to customers:
- to provide brokerage services to all parties whether they are clients or customers fairly and honestly;
- to exercise reasonable skill and care in providing brokerage services to customers and clients alike;
- to provide customers and clients with accurate information about market conditions within a reasonable time if they request it unless disclosure of the information is prohibited by law;
- to disclose to all parties in writing certain Material Adverse Facts about a property, unless disclosure of the information is prohibited by law;
- to protect the confidentiality of all parties, unless the law requires it, the Firm and its Agents will not disclose confidential information of any party in the transaction to any other parties in the transaction;
- to safeguard any money and/or other valuable property held by the Firm or its Agents;
- the duty, when negotiating, to present contract proposals in an objective and unbiased manner and disclose the advantages and disadvantages of the proposals.
Clients, as they relate to the real estate industry, are under contract with the firm either by listing agreement or buyer agency agreement. Firms fulfill all of the same duties owed to customers but also fulfill additional duties to support their client’s best interests. They are:
- The Firm or one of its Agents will provide, at the client’s request, information and advice on real estate matters that affect their transaction, unless they release the Firm from this duty;
- The Firm or one of its Agents must provide clients with all material facts affecting the transaction, not just adverse facts;
- The Firm and its Agents will fulfill the Firm's obligations under the agency agreement and fulfill the client’s lawful requests as long as those requests are within the scope of the agency agreement;
- The Firm and its Agents will negotiate for their clients unless the clients release them from this duty;
- The Firm and its Agents will not place their own interests ahead of their client’s interests. The Firm and its Agents will not, unless required by law, give information or advice to other parties who are not the Firm's clients if giving the information or advice is contrary to their client’s interests.