Procuring Cause Dirty Secret: Realtors Get Paid Not For Quality Services But For Sale Of Other People's Real Estate

By
Real Estate Agent with Local-n-Global Realty, Cleveland and International Real Estate Solution BRK 2007000844

Realtors get paid not for quality services but for sale of other people's Real Estate. Real Estate agents get paid neither for doing their job well nor for representing the clients. We get paid only if we assist in sale of other people's property.

In one of my old posts about the Agency relationship we already discussed that buyer's agents in most cases get compensated by the seller of the property, only if the agent presented the property to a buyer and created the procuring cause. In most cases buyers agent's right to get a commission is obvious and doubtless. However it happens that agents start disputing over commission, which may be frustrating, painful and not beneficial for consumers.

Commission dispute

Lenn Harley started a very important conversation here on Active Rain about the procuring cause and how to avoid unnecessary disputes.

What is the definition of procuring cause?

"The uninterrupted series of causal events which results in the successful transaction."

In most cases all the confusions and problems start from the buyers' initial contact with the listing agent, either via Open Houses or by calling to show the house.

Procuring cause problems happen between the agents who may be disputing over the "buyer's" side of the commission. Listing agents are in a better position than buyer's agents because they are protected and are entitled to their portion of commission by Exclusive right to sell Real Estate agreement, which they sign with the sellers.

Disputes over Buyer's portion of commission happen mainly because not all the agents do really understand the true meaning of procuring cause. Needless to say that consumers may be ignorant or confused. After all, you want to buy a home, not to become a professional Real Estate salesperson!

Here in Ohio, Real Estate agents have a duty to explain the agency relationship to the consumers at first substantial contact, which usually is a showing of the property.

Buyers Beware: Simple explanation and agency disclosure does not create client-agent relationship and a duty by the agent to protect your interests but can create a procuring cause if the agent showed you the property, which you'd like to buy, even if you are not happy with this agent and don't want to hire him or her.

Usualy, Real Estate agents' commission is embedded in the price of the house, so Buyers have the right to be protected and guided by their own representative and have a privilege not to pay additionally for this representation. It's wise to chose and hire your own agent. You have a good chance to utilize quality services, knowledge of neighborhood , market and the process, negotiation skills and support provided by your Real Estate agent.

Few simple rules:

  • Make an agreement with your agent
  • Set the rules of communications, finding information about the listings, showings and Open Houses
  • Do not initiate any contacts with other agents if you are satisfied by your agent's actions
  • Do not volunteer with visiting Open Houses without your agent. Showing the properties is your agent's job, which eventually will be rewarded by commission when you buy the home. You do not help your agent. You may harm your bargaining position and jeopardize your agent's earning.
  • Most of procuring cause disputes are easily avoidable by setting these or similar simple rules
  • Tell your agent about all your contacts with other agents
  • In Ohio, even if your agent wrote a contract for you and guided you through the transaction after you communicated directly and repeatedly with listing agent, his or her commission may be successfully contested by the listing agent. If this is the case, and if you signed an Exclusive Buyer's agency agreement with your agent, you may be obligated to pay a commission to your agent out of your pocket  after completion of sale.
  • If you feel that you are strong and experienced enough to represent yourself, do not sign Exclusive agreements with anyone. 
  • If you know that good representation by professional, knowledgeable, skilled Real Estate agent is necessary to secure your best interests in the transaction, please interview few agents, google your local Real Estate professionals, ask for recommendations from your friends and family and work exclusively with the one, who is the best for you.
  • Don't jeopardize negotiations and purchase of the property which you love, by your own activity!

It's a lot of great Real Estate professionals in your area. Chose wisely! Real Estate consumers are not protected from greed, ignorance or neglect by the agents who may be accidentally entitled to transaction money by procuring cause. Real Estate agents get paid not for the quality of our services but for the fact that we caused a sale of the particular property, which owner agreed to pay a commission.

I don't know how to help those frustrated buyers who in some cases have no chance to use their legs and fire their negligent representatives. Usually it happens when the buyers want to buy a specific property but are unhappy with their agent's actions or lack of actions. In these cases buyer can not change the agent and still use the seller's money to pay for agent's services.

Personally, thanks God, I have never had any issues with procuring cause disputes. I totally agree that buyers are not anyone property and that buyers have legs. If one is a real expert and diligently works with the buyers and for the buyers, there is no way to become a party of procuring cause arbitration.

Chose the right agent and buy a great home!

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Marty and Laurie Gale 04/01/2010 10:45 AM
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Fernando Herboso - Broker for Maxus Realty Group
Maxus Realty Group - Broker 301-246-0001 - Gaithersburg, MD
301-246-0001 Serving Maryland, DC and Northern VA

"Don't jeopardize negotiations and purchase of the property which you love, by your own activity!"

That is the best advice for buyers today. . 

Mar 24, 2010 12:03 AM #1
Rainmaker
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Svetlana Stolyarova
Local-n-Global Realty, Cleveland and International Real Estate Solution - Mayfield Heights, OH
Local-n-Global Realty, Broker 216-548-4663

Fernando - Thank you for commenting. Our job is to educate the buyers. Knowledge is power, in Real Estate it's more than true.

Mar 24, 2010 02:30 AM #2
Rainmaker
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Martin Kalisker
Greater Boston Association of REALTORS - Boston, MA
Professional Standards & Legal Assistant

good luck with this.  if your mls rules are similar to others across the nation, a listing agent cannot base the level of compensation based upon the performance of a buyer's agent.  Simply said, the person who writes up the contract on behalf of the buyer is the person that the listing agent needs to pay - and to pay them exactly what the unilateral offer of compensation states in the MLS listing. 

We have realtors that try to say that they will only pay the buyer agent a commission if they accompany the buyer on the first showing - - this is a no go with the MLS and the local grievance committee.

Should another buyer's agent argue that she was the procuring cause of the sale, she would need to demonstrate why there was not "an uninterrupted flow of events" or why she did not "abandon or estrange" the buyer - - when all the circumstances would point to this since she did not write up the offer.

Apr 05, 2010 01:24 AM #3
Rainmaker
567,918
Svetlana Stolyarova
Local-n-Global Realty, Cleveland and International Real Estate Solution - Mayfield Heights, OH
Local-n-Global Realty, Broker 216-548-4663

Martin - Thanks a lot for your thoughtful comment. I would say that this approach which you described would be the most fair but procuring cause in Ohio does not automaticaly grant all the credits to the buyer agent who wrote a purchase agreement for her client. 

That's why I suggest to all our buyers to be more accurate in communication with Real Estate agents. It is possible to jeopardize your agent's compensation by simply visiting Open houses and by following direct communication with the listing agent.

Most of the agents are cooperative and reasonable and act in the best interests of their clients. Any disputes may be resolved peacefully and without involving the Board and the clients.

Apr 05, 2010 05:42 AM #4
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Svetlana Stolyarova

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