Several weeks ago I posted on the arcane real estate concept of procuring cause and how it can burn unsuspecting home buyers that fall into its many traps: Procuring Cause: How You Can Get Stuck With A Real Estate Agent. If you are not familiar with the issue and its implications you need to go back and read that post as this one won’t make any sense otherwise. As that post point outs procuring cause can be pretty sticky and it’s a big enough issue that many home buyers just keep the original agent all the way through the transaction even though it makes the whole process miserable for them.
But that is clearly not your only choice. Let’s review some things you can do to avoid the issue all together or gracefully back out of a pile you may have already stepped into. Of course, as with most things in life, there are no guarantees. You may still find yourself caught in the middle of an arbitration between two different realtors.
Be Clear With Everyone Where You Are In The Process
As you begin to look at homes you will run into realtors. Also, you probably know 3 realtors (the barrier to entry is pretty low) and they are going to get wind that you are looking and they will be all over you like…well…you get the picture. It’s important that you be clear to all these realtors as to where you are in the process and that you are not ready to select a realtor YET (until you are). This is especially true of listing agents that you encounter at open houses who will ask you if you have a realtor. If you do have one please give the listing agent their name to avoid any misunderstandings. Being totally transparent basically puts the listing agent on notice to keep you at arms length for the time being – i.e. don’t try to suck you into a dual agency situation.
Be Careful What You Sign
If you are just looking at open houses you really shouldn’t need to sign anything. As I mentioned in my previous blog post some really sleazy agents might try to get you to sign a dual agency agreement as a pre-condition to seeing a property. DON’T!!!
A listing agent might present you with some kind of Notice Of No Agency, which really doesn’t require your signature but might have a place for you to sign. This is a bit different in that it is just a formality to notify you that the listing agent is NOT working for you but rather the seller. That is totally cool and actually quite professional.
And if you start to work with a buyer’s agent they might ask you to sign a Buyer’s Agreement as a condition of working with you. There is nothing wrong with signing this when you are ready but 1) you need to make sure that you are highly confident that you want to work with this agent for the long haul and 2) you need to look over the document pretty carefully to make sure you are comfortable with the terms.
Don’t Contact Listing Agents Directly
I’ve written about this on numerous occasions before and can’t emphasize this enough but trying to set up private showings with listing agents yourself is asking for trouble. As illogical as it may sound, when you do this listing agents feel like a) your agent – even one you haven’t selected yet – is not doing their job and b) they are doing “all the work” and therefore c) they are entitled to both sides of the commission. I’m not making this up. I see it all the time.
Going to public open houses is totally cool (with one exception discussed below) as long as you conduct yourself as advised above. But trying to get private showings directly is a different kettle of fish. However, engaging in detailed discussions with the listing agent after the open house is again asking for trouble. It’s OK to provide feedback to the listing agent about the home but going beyond that is a bad idea. For example, discussing your needs and experiences in your search for a home or getting into what price you would pay for the home you saw is starting to lead on that listing agent and you could find yourself having to fend off their advances. And again, more than 5 minutes on the phone with that agent will lead them to the conclusion that they are doing “all the work”.
Oh…there is one time when you don’t want to go to an open house without your own realtor: when it’s new construction. If the developer has their own salespeople it is quite possible that they have a rule that says that your realtor needs to be at the first showing in order for them to get the commission. Strange but true. So if you show up at the development without your own realtor you now have a compensation problem.
But Suppose You Don’t Want A Realtor?
Yeah, I get it. There are all sorts of reasons some buyers don’t want to deal with a realtor. But even if you don’t want a real estate agent you could still become a procuring cause victim because there is a good chance the listing agent is going to try to pocket both sides of the commission. I’ve actually written about that before: For Home Buyers That Want The Real Estate Commission For Themselves.
Be Clear And Forceful If You Need To Fire Your Realtor
One of the stickier procuring cause situations you might encounter is when you have been working with a realtor but have decided it’s just not a good fit and you need to drop them. In that case you need to firmly, and in writing, notify that realtor that you are terminating the relationship and it will actually help the case if you can specify why you are firing them. Just to be clear, suddenly realizing that you can get a real estate commission rebate from another realtor is NOT a sufficient reason to fire a realtor and, in fact, could actually undermine your case.
In addition, be sure to sign a buyer’s agreement with your replacement realtor so as to establish in writing your formal transition.
Tell The Whole Truth To Your New Realtor
When you get a new realtor it is essential that you fully explain what transpired with your previous realtor – how long you worked with them, what properties you saw, what work they did for you, what offers they prepared, why you fired them. Everything. That way your new realtor can take any necessary precautions to avoid a procuring cause claim. For instance, the new realtor may want to document all the work they do on a transaction that might be in question, or they might want to call your old realtor to smooth things out, or maybe they want to offer a referral fee to your old real estate agent to keep them quiet if your new realtor is taking over in the middle of an offer on a property. But your new realtor needs all the information in order to make smart choices.
I hope that following my suggestions for avoiding procuring cause problems works for you but, like I said at the beginning of this post, there are no guarantees in life and you could always find yourself in the middle of a commission tussle even if you play by all the rules.
Gary Lucido is the President of Lucid Realty, the Chicago area’s full service discount real estate brokerage. If you want to keep up to date on the Chicago real estate market, get an insider’s view of the seamy underbelly of the real estate industry, or you just think he’s the next Kurt Vonnegut you can Subscribe to Getting Real by Email using the form below. Please be sure to verify your email address when you receive the verification notice.