In his comments on Russell Shaw’s article, Jay Reifert Is Tired of NAR Hiding the Truth, Jay Reifert warns us early on that he is
spoiling to get this fight into the public eye
I suspect this may be driving his over-the-top diatribe. Too bad, because I think he makes a valid point that the practice of acknowledging procurring cause is not (always) in the client’s best interest. And in states like Arizona, agency is all about the client’s interest, which comes first, even ahead of the agent’s self interest.
Jay describes a situation that really does happen, way too often:
Buyers, though, are screwed over by Procuring Cause, PC, all the time. Here’s how it works: They go out looking at homes,willy nilly, not having any idea that they are creating bligations to any licensees. (The Secret Contract.) They find a house. Then, they begin researching their next steps.As part of their research, they discover buyer agency. Then,they start interviewing buyer agents. Then, they discover that the buyer agents are afraid to touch them, because they have already seen the home they think they want to pursue and the buyer agent doesn’t want to risk losing his/her fee to another licensee who may file a Procuring Cause claim.Hence, the buyer-due to no fault on their own part, as PC has NEVER been disclosed to them-loses their right to representation. It happens all the time. Theft of buyer rights. It’s heinous.
I would absolutely love it if home buyers always came armed with the type of agreement that Jay suggests, putting listing agents on notice that the buyer is represented. Lord knows I try to educate my own buying clients — I explain the benefit of always having me escort them even to new home builds and open houses, I explain the disadvantages to the client that can be created if they don’t have me escort them, I give them a supply of my business cards, I even give them the American Dream Home Buyer’s Passport. Still, I find myself running interference because my buyer client just happened to stop at an Open House she had noticed on the way home from the mall, or took a ride out to Surprise to look at model homes without me, because they were just exploring the possibility of moving to Surprise and didn’t want to bother me.
I agree with Russell that procurring cause snafus are not created, in general, out of real estate agents’ avarice. And certainly it’s foolish to claim that our entire industry, starting with the NAR, wants to shackle home buyers to a listing agent, when the buyer wants his own representation. The NAR represents all of us, listing brokers and buyer brokers. And most of us will wear one or the other hat in any particular transaction.
Russell’s solution, of course, is the best one — that is to educate the agent to do better:
If someone called my office and wanted to buy a house (that we had not shown them) the very FIRST question we would ask them is “how did you find out about this property?”
Maybe the reason this isn’t the first question that every listing agent asks is that so many of us entered the industry in the past two years and are still getting our routines down; or maybe because too many of those new agents don’t don’t get the type of OTJ support from their brokers that agents used to get; or maybe there is a little desperation out there (as compared to avarice) resulting in sloppy practice. This happened to me early this past summer:
I had been out shopping for houses with my pet-sitter. Over our years of working together, we have become friends and you can imagine that whenever she has a real estate question she comes to Greg or me for answers, much as my mother does. So we have nearly as firmly an established agency relationship as if I was looking for houses with my mother. One Sunday afternoon, my pet-sitter/friend/client was out with her husband and they stopped to look at an open house. This was after I had given her the speeches about procurring cause, after I had given her my business cards and a Passport, after we had figured on part of my commission going back to her to help her with closing costs. And of course, she liked the house and wanted me to write the offer. The buyer’s actions had created a procurring cause problem. I called the listing agent and explained the situation, but she stubbornly wanted to hang on to the buyer broker’s commission. Negotiation isn’t about beating up your opponent, it’s about understanding your opponent’s motivation. And during our conversation I learned that the listing agent had listed this $100,000 condo for 4%, offering 3 of those points to the buyer’s broker. An open house sale was the only hope this agent had of walking away with more than just covering her car expenses for the month. So we ended up splitting the buyer’s 3% three ways, which still gave my client the bump she needed to negotiate the rest of the terms of the offer. My guess is that even if this particular agent knew to ask the question that Russell’s agents always ask, she avoided it, hoping to earn a living that month off of the sale of this home.
As with offering buyers a share of the buyer’s broker commission, buyers really don’t pay attention to our business. The buyer’s focus is on the house and how he’s going to pay for it. Maybe if our industry pays attention to Jay, this issue will trickle down and capture the buying client’s interest, too. Maybe, hopefully…
I’m with Russell when he explains
If it was you sitting on that Procuring Cause panel – would you vote to reward a poacher? Some other agent got them to the house or showed it to them and now “here is Jay to give them a discount if they would only use him”. What – really – is the difference between that and shoplifting? In both cases you are taking something that does not belong to you. You can say, “Well I am offering the consumer a discount – I’ll give them part of the commission back”. Only it would be a commission you did not earn. If you had your way there would be Realtors running ads that said, “After you find what you want with some other agent, call me and I’ll write it up for you – but I’ll give you some of the commission back”.
Actually, that old cowbird Redfin is running those ads in Seattle and San Francisco.
According to Jay,
Until buyers are mirandized…letting them know, upfront, before any obligation is secretly created by thieves like you and your ilk, procuring cause has no place in the modern world.
It is about a buyer’s right to representation. It is about a buyer’s right to know that they must do their homework-and decide whether they want representation, and from whom-before they are obligated by thieves like you.
Yes, I know this is blustering, but maybe this is what’s needed to grab our attention. Not my personal style, but now Jay has been covered in two Bloodhound posts…
Now that you have our attention, Jay, why don’t you share your solution with us? Would you just do away with using procuring cause as a means to understand who has earned the buyer’s broker commission? Just how do we get home buyers to protect their rights to chose their own representation?
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Joe The Consumer says:
This all seems like Realtor bullshit politics to me. If a listing agent is holding an open house, isn’t he doing it in order to attract a buyer for his client’s property? Isn’t the listing agent’s first obligation to his seller? Why does a listing agent think he’s entitled to collect the selling office commission notwithstanding how the buyer wants and feels comfortable in proceeding? If the buyer wants their own agent, why doesn’t the listing agent think “Terrific! The property is going to be sold!”, and let sleeping dogs lie? This procurring cause nonsense seems like a bunch of crap designed to increase the odds that the listing agent capture the buying side of the commission split.
November 28, 2006 — 2:42 pm
Trevor Smith says:
Cathleen,
Greg and Russell both add the spunk to this blog, but I really appreciate you balanced, methodical, and thought out post.
I agree with Joe the Consumer here. If you’re a listing agent – be a listing agent, don’t expect to get the buyer too. If you’re a buyers agent be a buyers agent. Ethical people don’t need petty rules. Ethical people use common sense. If a buyer says he wants to be represented by Jane Realtor, then let Jane Realtor represent him and give Jane Realtor the commission. Don’t bicker about who showed the house first, or “procured cause.” Just do the right thing.
November 28, 2006 — 6:05 pm
Jay Reifert says:
Cathleen asked, regarding my Procuring Cause crusade, “Now that you have our attention, Jay, why don’t you share your solution with us?”
The solution is very simple: It must become mandatory that procuring cause–and it’s impact–be disclosed to all buyers, in writing, prior to procuring cause being claimed in any arbitration that would involve that particular buyer.
In other words, no admission to arbitration could occur, absent written proof that the buyer knew s/he was creating an obligation to use the licensee who might eventually claim rights in such an arbitration.
Once this is true, then word will spread far and wide about the concept, making it so buyers realize that there are consequences to viewing homes without first deciding whether they want to be able to choose their own representation.
It continues to be obvious to me that even you, Cathleen, don’t understand that the reason this is a problem, is because consumers don’t know about it.
And, the reason they don’t know about it, is because it is a trap that would no longer be effective, once it does become known.
In closing out this message, I’d like to make another thing clear, as I can see from the two comments which precede mine, that it may be believed that listing agents make up the bulk of the problem under procuring cause.
Here are two more common examples:
1) Listing agent is a mega producer, who cannot possibly sit all of his/her open houses. An associate from the office covers, at no charge, for the mega producer. Why? Because all of the unrepresented buyer leads are his/hers to solicit.
And, if it turns out that one of those buyers decides to purchase the home that was held open, that associate will–except under very limited circumstances–be able to assert procuring cause, and most likely win, against any subsequent licensee who might offer that buyer representation.
Did the buyer know she just gave up her rights? No. In fact, there have been numerous buyers who have come to me in just such a situation. They saw a home they liked at open house, and then started to research their options.
2) A buyer phones into a real estate company and asks about a particular home. There happens to be an astute licensee, who knows the marketplace, manning the phones.
This licensee suggests that, if the buyer currently has time, she would be happy to meet her in half an hour to show her not only that home, but two more which are listed by other firms, just around the corner.
Again…the consumer has no idea that there is any kind of obligation being created and the procuring cause trap will apply not just to the home listed by her firm…but by the homes listed by the other firms, too. (In fact, most of the time, it is another firm’s listing that gives rise to an eventual procuring cause arbitration.)
Undisclosed procuring cause MUST stop, under all circumstances. The answer is, mandatory, written, disclosure. The penalty for non-disclosure would be, no admittance to Procuring Cause land.
It’s that simple. Once that is the standard, the problem is cured, either way. If no disclosure, no problem, as the licensee will have forfeited any ability to claim procuring cause later. With widespread disclosure, no problem, as consumers will know that they need to decide, before ever viewing properties, whether they want/need to have a buyer’s agent.
The only possible reason for not doing this, is to preserve the trap. Period.
Jay Reifert, Broker/Owner
Excel-Exclusive Buyer Agency
Madison, Wisconsin
true-agents@true-agent.com
November 28, 2006 — 8:30 pm
Jay Reifert says:
In rereading Cathleen’s article, it occurs to me that there is actually some misunderstanding about the procuring cause brochure, itself.
The brochure has nothing to do with telling a listing agent, or any other agent, that the buyer is represented. Oh no, quite the contrary. The brochure, including the form, are to help buyers understand and avoid the trap and to maintain their freedom to choose.
Read the brochure and consider all of the recommendations within.
Most buyers have never heard of procuring cause, until it is set to become a problem. Most buyers truly do not believe that such a trap is even possible. C’mon…think about it! What sane buyer would expect that such a concept exists! The brochure is to open their eyes. To prove the existence of the trap.
The form that’s in the brochure isn’t likely to be signed by any licensee, which will just further prove to the buyer that the trap exists, if any further proof is necessary. (And, if the form is signed, the buyer doesn’t have to worry about losing the right to representation, as the licensee who set the procuring cause trap will make the buyer agent whole, if that licensee’s broker asserts and wins a procuring cause case against the buyer broker.)
Truth be told, Cathleen, the crusade is to shame NAR into doing what is right. If they move to mandatory written disclosure of procuring cause–and its implications–they will avoid the embarrassment of seeing it come out from other sources.
There is simply no way that any consumer, or consumer advocate, would accept that it is ethical and/or right, for buyers to lose their right to representation, without their knowledge.
And, as I see from your post that this is a matter of confusion, too…I’m not talking about those who are ALREADY represented. Buyer agency contracts–and client education–can make sure those buyers understand their obligations in that regard.
I’m talking about all the unrepresented buyers who simply do not know they are creating obligations, by looking at property, which will make it so they can’t obtain representation, later on, when they finally become aware of buyer agency, and what true buyer agents have to offer.
If I made it sound like this was about buyers who already had representation, losing that representation, I apologize. That’s not the purpose behind the crusade.
This is about the buyers who have not yet discovered buyer agency, or who believe–erroneously–that they are free to look around with as many different agents as they want, with no continuing obligations as a result.
That’s the issue! No more silent theft of buyer rights!
Jay Reifert, Broker/Owner
Excel-Exclusive Buyer Agency
Madison, Wisconsin
true-agents@true-agent.com
November 28, 2006 — 11:12 pm
Jay Reifert says:
A big, big, big by the way…
I do not approve of the Redfin model. I do believe that buyer agents who have buyers under agency contract should not be using listing agents to show their clients properties.
How can a buyer agent fulfill his fiduciary duties to his clients if he’s not actively involved in seeing the properties and knowing the marketplace?
When I go out to see properties with my clientele, we will see up to twenty five homes in one day. Of the homes we see, I may actually recommend against half of them, for one vital resale reason, or another.
How can I keep a client from falling in love with a home that will likely do them harm, if I’m insisting that they see property with a potentially charming listing agent who has a knack for minimizing property weaknesses and selling the good old sizzle?
Redfin is absent during one of the most crucial phases of all, and if they are simply stepping up to write a contract for the buyer–without knowing the marketplace and/or without properly advising the client on the home choices available to them–then those buyers are getting what they are paying for, and less.
You know what, though…? Mandatory disclosure of procuring cause would also do away with the listing agent abuse under the Redfin model. Once disclosure is required, and the buyer is aware that going to see property with an agent effectively creates an obligation for them to use that agent then, if Redfin sends their buyers off to look at property with ANY agent from outside their firm, it will be with the awareness that they have sacrificed any claim to the cooperative fee.
So, how’s that? We eliminate the trapping of buyers and stop the abuse of listing agents (a problem of lesser importance than preservation of buyer rights) all in one fell swoop…
Jay Reifert, Broker/Owner
Excel-Exclusive Buyer Agency
Madison, Wisconsin
true-agents@true-agent.com
http://www.real-reform.org/pcnoneba.pdf
November 28, 2006 — 11:52 pm
Trevor Smith says:
Something that many agents don’t recognize is that consumers are much more educated and knowledgable about real estate now then they were 10 years ago. This is due to news coverage from the housing boom, greater access to information, and internet tools (online tax records, maps, valuations). There are some consumers (like first time homebuyers) who should not use Redfin. They need someone to hold their hand and walk them through the process every step of the way. However, seasoned hombuyers can use Redfin’s outstanding tools to make just as informed of decisions (maybe better?) as many REALTORS. Lets quit giving ourselves so much credit. This job isn’t brain science, and probably half our clients could do it just as well as us.
Before, everyone freaks out… I am not saying do away with REALTORS, and I am not saying we don’t have a purpose. I am saying their are allot of smart buyers and sellers out there, so lets give credit where credit is due. In my opinion, Redfin is empowering these savvy consumers, by rewarding them for doing work that they are capable of doing.
November 29, 2006 — 9:06 am
Jay Reifert says:
Trevor,
This isn’t about hand-holding. Sure some smart consumers may be every bit as capable of handling things as the AVERAGE licensee…but, I can tell you right now, most consumers are not well served by hooking up with an AVERAGE licensee.
My value in the process is not from any one thing, but from the entirety of everything I offer. I’m a professional home buyer. I see upwards of a thousand homes each year. I know home values intimately and am an expert negotiator.
You speak of access to assessed values as if that means something. I can show you almost twenty years worth of comparable books which show there is absolutely no relationship, or ratio, that can be established between what a property is worth–fair market value–and the assessed value.
Having the tools does not mean that you know how to use the tools.
Do you honestly think that someone who is emotionally invested in buying a home is, normally, capable of being detached enough from those emotions to see the resale related problems of the homes they are considering?
Don’t get me wrong, I don’t want Redfin to disappear. I just feel that they are both abusing listing agents and failing to adequately represent their clientele. They are closer to facilitators than to agents and–as one who is all about true agency–those abuses, perpetuated under the banner of buyer agency, bother me.
They are not true buyer agents.
Care to get a feel for what buyers get with true buyer agency? If you have functional speakers hooked up to your computer, Click Here and then click on the link titled, “Chapter 6: Condos — Danger-Danger-Danger”.
In fact, much–but not all–of what I do for my buyer clients is laid out amidst the audio links on the page above. It’s just that the link to the condo expose probably shows, better than anything else, the kind of knowledge that I employ on behalf of my clientele, along with the fact that I won’t put dollars to me ahead of the best interests of my clientele.
Here are some supporting links that are related to the information at the condo link…
http://www.true-agent.com/madison_has_too_many_condos.pdf
http://www.channel3000.com/news/5391833/detail.html
http://www.true-agent.com/letter_to_condo_client.pdf
I’m not interested in having average buyers for clients. I’m interested in working for buyers who are smart enough to recognize that it makes no sense to be stepping over dollars, in order to pick up shiny pennies.
Jay Reifert, Broker/Owner
Excel-Exclusive Buyer Agency
Madison, Wisconsin
true-agents@true-agent.com
November 29, 2006 — 10:36 am