Charleston Real Estate Site
Most homebuyers are not real estate agents. Most homebuyers shop for homes with some natural, but potentially expensive assumptions. Buyers usually think that it makes no difference if they began their property search on their own, looking at a few homes in person, or if they begin their property search by hiring an agent.
Often, buyers like to avoid wasting an agent's time by looking at homes too far in advance or hiring an agent before they have become comfortable with what they see in the marketplace. It is natural that buyers want to be out on their own, unencumbered as much as possible. Driving around and looking at homes to get a feel for the market – visiting new home communities and open houses - just seems to make sense to most people.
Previewing properties without an agent can cost you and your agent money.
What most homebuyers do not recognize, because there has been no real reason that they should, is that previewing properties in advance of working with a buyer's agent could literally cost the services of their own agent by barring their own agent from receiving a commission. Why? It’s all about procuring cause.
So what is procuring cause? According to Black’s Law Dictionary, procuring cause as " a series of events which, without break in their continuity, result in accomplishment of the prime objective". A simple way to think about this is that, when a person helps you locate a property initially and continues to help you until closing, that person is entitled to a commission via the procuring cause concept. Note: the definition of procuring cause does not include that, "if you have signed a buyers agency representation agreement, your agent is automatically entitled to a commission and you are automatically entitled to a rebate." The fact that you have a signed agreement with your agent does not prevent the procuring cause issue from being a problem if you do not follow the appropriate steps.
Until recently, concerns over procuring cause seldom involved any gains or losses by buyers. Most buyers had never heard of the term nor had any reason to have heard of it. Today, procuring cause issues no longer impact only agents but have the potential of costing buyers directly. Looking at homes without your own agent (not a site agent, a listing agent, or an agent holding an open house, etc.) could subvert later claims that your own agent’s actions were the procuring cause of the sale. It is critical that you understand procuring cause if you plan to have an agent representing you – unless you plan to pay the agent out of your own pocket!
In order for an agent to qualify to receive a commission (from the seller) , that agent needs to be the person who first introduced a property to a particular buyer – the procuring cause. If someone else introduces that buyer, or if that buyer was previously looking at that property without assistance, it is a likely that the agent who subsequently takes that buyer to the property will not be entitled to receive a commission from the seller. If the seller refuses to pay the commission, you may be required to depending on the sort of agreement you have with your agent.
"… 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." (International Real Estate Digest).
In order for Realtors to provide representation to buyers at no charge, they must be in a position to receive a commission from the seller, whether that seller is an individual or that seller is the builder.
The concept of procuring cause is deceptively simple; yet, it is often the basis for disputes among real estate agents. Commissions are gained or lost over this concept in every city of the country every day. Determining procuring cause can be complicated. The National Association of Realtors provides guidelines to direct arbitration boards in determining procuring cause. Suffice it to say for this discussion, that the outcome of procuring cause arbitration proceedings among agents often surprises all parties involved. It's extremely important that all parties, prior to the closing and at all times during the home search, fully understand who is represented by whom.
Plus, most people who receive assistance from a real estate agent do want that real estate agent to receive compensation. That’s fair. Still, it is not uncommon for an agent to provide extensive services and receive no commission. This is most often a result of a procuring cause dispute.
Why wouldn't the listing agent just be willing to pay the commission anyway, procuring cause or not? The answer is simple. The listing agent will receive 100% commission rather than 50% of the commission if the listing agent can show that the agent for the buyer was not the procuring cause or reason for the sale. The listing agent has a strong motivation not to look the other way if the buyer and the buyer’s agent fail to follow the correct procedures.
Chris DeLoach, ABR
Charleston Real Estate Site
The bottom line: hire an agent before you begin looking for homes. That way, you receive the representation you deserve and your agent gets a paycheck from the seller for helping you.