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As you might expect, builders look at selling a home from a very different perspective than that of individual home sellers. Builders are business people and selling is a full time business - not an occasional necessity. Builders recognize that agents are important to selling their product. They are willing to pay for the services agents’ offer – if it is earned.
Procuring cause issues frequently involve new construction. This is because it is so easy for buyers to locate new home communities on their own. It is easy for buyers to just drop by to preview models and to speak with site agents about the community and the offerings.
In most circumstances, the listing agent (site agent) receives equal compensation whether a buyer comes with a buyer’s agent or not. That is to say, that just because a buyer comes with an agent does not mean that the site agent is paid less. And, conversely, when a buyer purchases a home from new home community without an agent, the site agent is typically compensated the same amount as if the buyer had an agent. Most builders employ this equivalent compensation to the site agent to promote cooperation among site agents and buyers’ agents.
Why would a builder be concerned about procuring cause? Money retained = improved profit margins. These are business people.
Any money not paid out to the buyer's agent remains with the builder as profit. If you are looking at new construction, you have seen builders advertise. You may have heard builders’ advertisements on the radio. You may have seen numerous promotions conducted by builders such as specials that are being run for particular weekend to draw in buyers. These and other promotions cost a lot of money.
While builders look favorably at paying commissions to buyers agents who promote their properties, builders avoid paying commissions when the buyer is generated, not by the effort of their real estate agent, but as the result of other promotional activities. In essence, buyers consider real estate agents commissions as an advertising expense. They're happy to pay for this advertising expense as long as they can track that the advertising expense generated the resulting sale. So for builders, as well as for listing agents, procuring cause is critical.
One way that many builders handle this concern is through a registration process. If you register with a builder, you will be asked to verify that you have a real estate agent representing you or to verify that you are unrepresented at the time of registration. If you are unrepresented at the time of registration, in all likelihood, you will be barred from receiving any rebate from an agent. Also, your agent will be barred from receiving a commission.
Builders do hope to foster a cooperative relationship with agents. The registration process is one way to eliminate friction between builders and agents because everyone understands the expectations. Registration creates clarity as to procuring cause. Everyone understands that an unrepresented buyer cannot justifiably claim that their agent was the procuring cause of discovering a particular community or a particular home within that community. This registration process also prevents a buyer from bringing in an agent after the fact just to claim a commission.
1. Selected your buyer's agent before you begin previewing any properties
2. Avoid house hunting without your agent by your side
3. Once you have hired an agent, if you decide to view property without your agent present, inform anyone who needs to know, such as an on-site agent or an agent conducting an open house, that you are already represented by your own agent. Ask your agent to provide you with a few of his or her business card to offer to agents that you meet.
4. Do not register on line with any builder. Do not register in person with any builder without your agent present even if you are already represented by an agent.
5. Sign a buyers agency agreement with your agent
Chris DeLoach, ABR
Charleston Real Estate Search