Is “Procuring Cause” Cause for Trouble?
Categories: About Realtors, For Buyers, Hoboken Condos, Legal Matters
Going To Look at Some Open Houses This Weekend? Beware!
We all know the drill. You’re not ready to commit to really start house hunting but you want to get a feel for the Hoboken condo market, so you decide to go to some open houses. As you walk in, the hosting agent asks you to “sign in”. Not wanting to give your info for fear of being hounded by the agent and inundated with emails, you make up a name or email or just scribble illegibly. No problem with any of that, but what happens when you see a place you really like?
On several occasions recently, I’ve had a potential buyer contact me because they found a property at an open house they were thinking about buying. You might think that, as a real estate agent, such a call would make me happy. Wrong. Too often, the buyer went to an open house, spoke at length with the hosting or listing agent, and maybe even told that agent that they wanted to make an offer. Sometimes the buyer mentions that they have their own agent, sometimes they don’t. Then the buyer calls me. So what’s the problem? It’s called procuring cause.
Reasonable people can disagree about what is the procuring cause of a sale. Would the buyers not have made an offer had they not seen the property at the open house? Or did the buyers’ own agent convince them by providing advice, comps and/or by showing them other similar-but-inferior properties that the property was a good deal and worthy of making an actual offer? The answer may be “it depends.”
Procuring cause is the sine qua non of the sale. But for the efforts of the procuring agent, the sale would not have happened. Whether an agent is the procuring cause of a sale must be factually determined on a case-by-case basis. Many factors impact a determination of procuring cause, but no one factor is by itself determinative.
Not surprisingly, the listing agent wants to sell her own listing (and get both halfs of the commission) so she is going to claim that the buyer is “her customer” and that she the procuring cause. The other agent will say that the buyers walked into the open house on their own (or may even have been sent by their agent) but he or she did the groundwork, showings and educating that led to the offer.
There is also a very valid debate whether it is a conflict of interest to be a seller’s agent and also work with the buyer (that’s worthy of a post of its own). Nonetheless, doing both sides of a deal is allowed and legal in New Jersey. So what should a buyer do if the buyer sees a nice property but does not want to deal with the seller’s agent? Here are a few suggestions:
- When you go to an open house, tell whomever is hosting it “I have a realtor that I am already working with“. You need not give a name. You need not even be telling the truth. But stating it upfront and clearly protects you from having the host (who is the seller’s agent) “claim you are theirs”. In fact, when they ask you to sign in, write “I HAVE MY OWN AGENT WITH WHOM I AM WORKING” on the sign in sheet right next to your name.
- If you have questions about the property after seeing it, do not call the listing agent directly. Find an agent you like and with whom you want to work, if you don’t already have one, and let your agent call the listing agent for you. (Remember, the listing belongs to the agency so the agent has to be from another agency entirely).
- If you think you might be in the market for a property, shop for an agent first. Call and talk to a few, or ask for recommendations from happy customers. You can still go to open houses on your own, you can still scour the internet, but when you see something that catches your interest, you’ll have your own agent to call the listing agent on your behalf.
Recently, a buyer went to an open house and had some conversations with the listing agent. The buyer then called me to make an offer on the property. He had learned that the property was owned by the listing agent’s spouse. The buyer felt that the listing agent couldn’t really represent him especially given the ownership issue, (which should have been disclosed in the listing, but wasn’t). After asking many questions and explaining the procuring cause issue to the buyer, I guess the buyer went back to the listing agent to tell him he didn’t want to make the offer through him. The listing agent told the buyer he would sue and that buyer would not get the property if he used a different agent. I ran quickly in the other direction wanting nothing to do with the deal.
As a buyer, if you wish to keep your options open and want to be able to use what ever agent you choose, take my advice – be very careful when you go to open houses or call about an ad or something you see on the internet. You may find yourself working with an agent who is not in the best position to represent you since they work for the seller.
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