Since we are in an age of 'disclosure, disclosure, disclosure' in the real estate industry, it may come as a surprise to homebuyers that there is a still a potentially nasty problem out there, ready to trap them, called 'procuring cause.'
Most homebuyers aren't told about procuring cause and how industry rules, unfamiliar to them, can affect their home purchase. Why not? Because of the possibility of the 'chilling effect' it may have on a potential relationship between the homebuyer and the real estate agent.
What is 'procuring cause' and why don't agents like to talk about it?
The ten words or less answer is:
"the uninterrupted series of causal events which results in the successful transaction."
A real estate agent who is considered the 'procuring cause' of the sale is entitled to the real estate commission and this is where the money secret comes into play. Homebuyers naively assume that they can talk to many different real estate agents without being obligated to them for any fees. And, for the most part, that is true. Agents working "traditionally" will look to a seller for their commissions which gives the homebuyer the impression that it doesn't really cost anything to use a real estate agent to buy a home.
If homebuyers see a home, however, and later decide that they need advice about the value and writing an offer, they may be surprised to learn that they cannot retain an agent especially trained to work for buyers (a buyer's agent) without the 'procuring cause' issue rearing its ugly head. With two 'sides' to a commission -- one for listing and one for selling -- there generally isn't room for a third commission.
And listing agents love to collect a 'double dip' commission, an affectionate term for listing the property and finding the buyer. Some agents like this income so much that they will game the system to make it happen..... did you ever wonder why an agent will bring buyers to a new listing before it appears on the MLS (Multiple Listing System) or why they will try to bait homebuyers with "I can show you houses before they get listed so you can beat the competition"? Ethical listing agents would want their seller clients to have the broadest possible exposure on the MLS and not limit the sale to their own "customer" just to collect the double dip, right?
So, homebuyers generally aren't told about 'procuring cause' and may be further led astray by well-meaning advisors who tell them to go out and learn about the market before they get ready to buy a house -- Open Houses, New Construction, homes magazines. But they don't tell you what to do if you happen to find the perfect home right away!
Smart homebuyers choose their agent BEFORE they choose their house. Unfortunately, it will probably be many years before homebuyers can resist the temptation to check out houses before they get serious about finding a competent and ethical real estate agent to look out for their best interests. So, the homebuyer cannot 'test drive' an agent without the risk of having to go through a transaction with the agent if the house turns out to be the right house.
If the homebuyer goes into a car dealership to test drive a particular car model, he is under no obligation to use the same salesperson if he decides to buy that model. The same scenario is just not true of homes regardless of how much an agent downplays his or her role in just showing you homes.
So, fearful homebuyer, head out to look at new construction on Sunday at your own risk! If the builder or agent hired by the builder to represent the new subdivision greets you and takes your name and telephone number - kaaa..ching! - the cash register rings and step one of claiming procuring cause has been placed into effect.
It doesn't matter that on Monday you decide to read Alan and Denise Fields' book, YOUR NEW HOUSE, and realize that you should have retained a buyer's agent to look our for your interests instead of letting the agent who works for the builder handle the whole transaction.
The procuring cause topic is not in danger of being revealed to homebuyers anytime soon. It is the exception, not the rule, to address the topic on most real estate web sites. Microsoft's Homeadvisor, however, does address it by answering the question 'Why do agents get so upset with "procuring-cause" issues?' in this way:
"Agents care because most work on commission and only get paid when a sale closes. They don't get paid for showing property or holding open houses. If you are touring Sunday open houses and don't have an agent, take care not to lead agents into thinking you are working with them unless you actually plan to work with them. Most of the time, procuring-cause disputes are agent-agent problems, not yours."
And one real estate site for a buyer's broker office coaches homebuyers on what to say at Open Houses and Model Homes. The Home Buyers Inc. suggests that homebuyers always say they are being represented by an agent, was told about the property by their agent and ask if it would be okay to walk through.
But the best thing you can do is CHOOSE YOUR AGENT BEFORE YOU CHOOSE YOUR HOUSE.
REALTORS® who work as Buyer's Agents and want to get some additional insight on 'procuring cause' may be interested in a new publication by Tom Wemett, "A Professional Buyer Agent's Guide to Procuring Cause and REALTOR® Arbitration 2000."
Related Links:
Buyer Agent's Guide to Procuring Cause
