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Procuring Cause and Commission Disputes

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Procuring Cause Creates Commission Disputes

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You don't have to hop from agent to agent to end up causing commission disputes among real estate agents. In case you're thinking, "What difference does it make since the seller pays the commission," be aware that today's buyers typically sign buyer's broker agreements, making the buyer responsible for payment of the commission, even though that fee is paid from the seller's proceeds.

Commission disputes boil down to what is referred to in the industry as "procuring cause." The agent who ultimately caused the buyer to purchase the home and earned the commission is generally the procuring cause agent. That procuring cause agent might not be the agent who obtained the offer from the buyer, presented the offer and successfully negotiated the seller's acceptance of that offer. But it's often not the agent who simply first showed the home.

Every state Realtor association has its own guidelines that establish procuring cause, none of which are fast and hard rules. Some facts carry more weight than other facts. A buyer could sign an exclusive buyer's broker agreement with one agent but the second agent who closes the transaction, depending on circumstances, could end up earning the commission. Procuring cause is complicated and the outcome is not always predictable.

Realize that when you speak to an agent at an open house, call an agent for information from a newspaper ad or ask an agent to show you a home, you might be opening a can of worms for yourself if you don't intend to buy a home through any of these agents. Your best bet to avoid procuring cause disputes is to be upfront with each real estate agent you interview and hire the best qualified to help you find a home. But the road that takes you there can be long and dusty. Along the way, you are likely to encounter other agents. But once you find an agent, use these tips to help your agent establish procuring cause:

  • Say you are working with another agent.
    If agents don't ask you if you're working with another agent, then promptly volunteer that information. Agents are supposed to ask you this question but sometimes they don't: they forget, are afraid to hear the answer, become distracted. Set them straight immediately.

  • Sign a buyer's broker agreement with your agent.
    Buyer's broker agreements will clearly describe the relationships, compensation and duties.

  • Sign an agency disclosure with your agent.
    Agency disclosures describe the various capacities under which an agent can operate. Since the agent doesn't know the specific capacity until a property is located, all capacities are described to you.

  • Do not ask another agent to show you property.
    Your agent is eager to help you. Part of your agent's duties is to show you homes for sale, even if those are homes that you have located yourself. Let your agent earn her commission.

  • Do not directly call listing agents for information.
    Your agent will probably get more detailed information from the listing agent than you will get, anyway. There will be no confusion if your agent calls the listing agent.

  • Follow Open House protocol if you go unescorted.
    If you attend Open Houses without your agent, hand your agent's business card to the agent hosting the Open. Sign guest books with your agent's name next to your own. Not only will this help protect you, the open house agent won't try to corral you or request personal information.

At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.

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