The increasing popularity of Buyer Agency, whether promoted by real estate agents in their marketing efforts or demanded by consumers in their selection of service options, may introduce more opportunities for agents to clash over real estate commissions in the future.
The days of telling homebuyers that they don't pay any commissions and that they can see homes without any financial obligations may be coming to an end. The real estate industry will have to focus on the role Buyer Agents play in meeting the new demands from educated homebuyers who are questioning the traditional ways that service has been provided in the past -- ways that many of them considered outdated -- in today's technology-oriented environment.
Tom Wemett, author of "A Professional Buyer Agent's Guide to Procuring Cause and REALTOR® Arbitration 2000" believes that consumers are still in the dark about 'procuring cause' and that agents cling to myths that further exacerbate a potentially contentious situation when more than one party is seeking payment of a commission. Some of the 9 myths he highlights in his book include:
- If my buyer client pays my fee directly or I am paid through the transaction, my fee is protected.
- If I write the contract and follow through to closing, I am entitled to a commission.
- If another agent was unethical or failed to meet my state's agency disclosure law, that agent can't bring an arbitration action against me or receive an award.
- The best time for me to seek help with a procuring cause problem is after I have an arbitration hearing decision.
Many agents are not familiar with the most recent changes in procuring cause procedures. Many of the practitioners who are familiar with hearings and arbitration procedures cite inconsistency in how panels interpret the guidelines promulgated by the National Association of REALTORS® throughout the country.
Buyer agents have complained, long and loudly, about recent changes in the NAR Code of Ethics that they feel have put them at a disadvantage and keep them from being on equal footing with listing agents in regard to how their contracts are honored and their relationships with buyers respected.
Buyer agents say that they do not procure buyers for an owner/seller but rather procure property for a buyer. And they are not the cooperating broker nor a selling agent, terms commonly used in the MLS system and REALTOR® associations. The differences translate into a focus on a seller-oriented system that continues to put buyers and their agents at a disadvantage.
Michael Somers,Esq. summarizes the changes in the business over time:
"This has been a system which has not been particularly hospitable to real estate licensees who want to dedicate themselves to exclusive buyer brokerage. The outcomes in procuring cause disputes over entitlement to commissions have not generally been favorable to buyer agents who had the courage, skill, and professionalism to generate an exclusive fiduciary relationship and a written buyer broker contract with a buyer client. However, we have seen a shift in the last decade, toward a more even handedness in treating buyers and buyer's agents, with changes in NAR's philosophy toward the need for buyer representation."
Wemett explains that although the courts rely on the definition of procuring cause in Black's Law Dictionary, Fifth Edition, the NAR Code of Ethics and Arbitration Manual definition is different and no Board of a Multiple Listing Service (MLS) is free to establish a rule or regulation which purports to predetermine entitlement to any awards in a real estate transaction.
Wemett advises that a professional buyer's agent needs to minimize risk by becoming thoroughly familiar with procuring cause. Other recommendations include questioning buyer prospects about previous house hunting efforts, using contracts, having the fee included in the purchase and sale agreement, and advising buyers to always acknowledge that they under contract with an agent at Open Houses or during any contact with real estate agents.
Without changes to the current procuring cause guidelines and procedures, homebuyers, particularly first-time homebuyers, will remain at a disadvantage if they do not have procuring cause explained to them as they begin their home search.
The seemingly benign action of "just looking at a few homes" with an agent can force them into a precarious financial situation which prevents them from seeking advice and counsel from an agent who can ultimately protect their interests in the transaction.
Contact: for an order form to purchase the manual ($40.00)
:
E-mail Tom Wemett at buyronly@frontiernet.net
Phone: 716.272.7283
P.O. Box 20138
Rochester, NY 14602
