Buyer’s Choice Realty blog

As an active Realtor for over 20 years and a member of Professional Standards I have been on Procuring Cause Hearing Panels and have also had the responsibility to chair the hearings for the Realtor Association.  While the primary participants are Realtors, it is also possible that you as a consumer may be asked to participate and the results certainly would concern both you and your buyer’s agent.

It’s a little known fact among consumers, but many times when you contact a real estate agent they assume you are “their buyer” because you contacted them.  This sets up an expectation that they will receive a commission from the transaction when you close on a property whether or not it is their listing.  In fact, if it’s their listing, they may be looking for a double commission. That can get very sticky when a buyer purchases a property through their buyer’s agent and another Realtor believes you are “their buyer” and therefore they deserve the commission offered in the MLS.  They can then file a complaint against your buyer’s agent claiming they are the Procuring Cause because you are “their buyer”.

Procuring Cause is the sequence of events that leads to a sale.  That is how a hearing panel determines the real estate agent or broker who, by their actions in producing a buyer, brought about the sale of a property.  It can be a rather long process and even though your buyer’s agent may very well win, it could delay the agent’s compensation and if your buyer’s agent loses it could have financial repercussions for you as well.

Many times before a buyer engages a buyer’s agent they make contact with a number of real estate agents during the early stages of their home search.  Many times these agents later will call back or email you after you have already decided upon and officially engaged a buyer’s agent.  So rather than run the risk of making a transaction sticky and complicated, I recommend you simply notify them that you are now working with a buyer’s agent and all future communication should go through him or her.

It’s unfortunate that real estate can seem so consumer “unfriendly” in situations like this, so I like to make sure my friends and clients are aware of the issues involved in Procuring Cause.  The more communication and activity that goes on between the buyer and a real estate agent, the stronger their case at a Procuring Cause arbitration.  The sad thing is that most consumers have no idea of this underlying friction within our industry.

Here are some things you can do as a buyer to avoid a Procuring Cause problem.

* Always let other agents know you are working with a buyer’s agent. The agent should have asked you; but if not, be proactive and tell them.
* Sign a licensee/consumer relationship disclosure with your buyer’s agent.
* Sign a buyer agency agreement with your buyer’s agent. (make sure you can terminate if dissatisfied)
* Do not ask another agent to show you property.
* Do not call listing agents or other agents for property information.
* Make sure to leave your buyers agent’s cards or info at Open Houses.
* Always work through your buyer’s agent; you are not “bothering them”.

Have you as a consumer had any problem with Procuring Cause?

Ronn@BuyersChoiceRealty.com 800 252-8937

In a recent field visit by the Consumer Affairs Office 200 offices were visited and only 12 presented the mandatory licensee/consumer relationship disclosure.

The specific disclosure required was modified in 2005 but has been required by state law since 1993. The disclosure is to inform consumers of the potential relationships available to consumers of real estate and the specific relationship between the consumer, and both the firm and agent with whom they could decide to work.

In the past all real estate agents worked for the seller of real estate and buyers were on their own. All real estate agents from the listing company and the selling companies had the obligation to get the highest price and best terms for the seller. Thus all sellers were clients and all buyers were customers.

After a survey by the Federal Trade Commission released in 1983 buyers started to wonder why they couldn’t be represented the same way as sellers. This gave rise to the buyer agency movement which has taken on different faces across the country. Firms like ours, Buyer’s Choice Realty, sprung up and started representing buyers exclusively in a real estate transaction.

Initially firms were representing buyers only, but soon traditional real estate companies decided “we can represent both sellers and buyers”. Dual Agency emerged but liability and control issues moved the real estate industry to adopt a modified dual agency practice called Designated Agency, the current practice of the majority of real estate firms in Massachusetts.

Most consumers never realized that the agent driving them around looking at property was actually working for the seller. The pressure was on real estate companies to let consumer know what their representation policy actually is. The first official mandated written Massachusetts disclosure was instituted in 1993.

So for 17 years this disclosure has been in place and required to be presented at the first meeting with a buyer to discuss a specific property.

So why do you think there is such a failure on the part of 94% of real estate licensees to disclose?

In the Western part of Massachusetts I understand that some local newspapers actually printed the name of the offenders. What do you think. Was exposing them to the public too strong or was that an appropriate response?

Kathleen M. Howley wrote an interesting article recently. Check it out on Bloomberg.com. Howley’s thesis, built in large part upon interviews with Nobel laureate economist Joseph Stiglitz and co-creator of the widely used Case-Shiller housing index Robert Shiller, submits that speculators are largely to blame for the current housing recession and these same flippers/professional investors will keep prices down for some time to come.

How did this happen? Flippers bought more than they could afford thanks to no-documentation loans and other risky mortgage products during the housing market bubble in the late 1990s and early 2000s. When many of these loans ultimately went into default and the homes were foreclosed on, the bubble burst. This has been happening for four years now, and prices are still rapidly dropping.

These same speculators have been buying up foreclosures at auction and directly from lenders, which has prevented the housing market from collapsing completely, but Professor Stiglitz contends that speculators may cause a double housing recession. He said, “We’re creating a shadow inventory of homes that will be right back on the market as soon as the economy and the housing market begin to improve.”

The problem is huge, and banks (who own at least $11.5 billion of homes, according to the FDIC) also continue to contribute to it. How do you feel about banks, Professor Stiglitz? “…the same banks that created the problems by mismanaging their risk are mismanaging the disposal of their assets.”

There is no easy solution to this murky issue, but states will soon receive money allocated from the Housing and Economic Recovery Act of 2008 to purchase & renovate foreclosed homes, then sell them to families who intend to occupy the homes. States have 18 months to use their money or they will lose it. Hopefully this program will be run well by states and community groups so that potential buyers, mostly low-income, can occupy their own home, which will improve communities and settle the housing market. I have seen no indication that this money has been sent to states yet, but it is likely to be soon. Florida, Nevada, California, and Michigan, those most widely affected by foreclosure, need to act quickly and rationally.

What’s your view? We would love to hear from you. Call 800.25.BUYER (ask for John) or email me.

House Hunters has a fairly simple premise — a salesperson shows a buyer three homes, they make a decision to put in an offer, and we check in with them a few months later.

As part of HGTV’s first-time home buyers’ week, we meet recent graduate Lindsay who is looking for a condo closer to her job, and enlists local practitioner J.J. Love to help. She has a price range up to $160,000. Lindsay tours three condos in the Nashville, Tenn. area, ranging from a bargain-priced two-bedroom townhouse listed for $125,000 to a brand new unit with an asking price of $162,000.

Lindsay ends up choosing the place at the top of her price range. She explains that she loves the fact that she would be the first owner, that the unit has a garage, plenty of closet space and that her parents both like it — always helpful, especially since they are providing the down payment.

But a few questions need to be raised about House Hunters. Why is the buyer only shown three places? Most buyers would look at many more before choosing. Sure, it’s only a half-hour show, but would you want to have to commit to placing an offer on a home when you have only seen three? How much did Lindsay end up paying for her new condo? We never find out, so we don’t know if Ms. Love is a skilled negotiator and is truly working on behalf of Lindsay in order to find her the best deal possible. It appears that her agent has picked out each unit to show her. Were they her listings, or listings from her office? This issue is not addressed either.

As an agent who works exclusively for buyers, I would love to see a show that portrays how a knowledgeable real estate practitioner puts clients’ best interests first. This means consulting with potential buyers at length about their goals, while also educating them about market conditions — rather than merely focusing on selling them a home.

In this era of escalating foreclosures and short sales, consumers should occasionally be able to see what is involved in the process of buying “distressed” properties, not just cute, new-construction condominiums. The final verdict: entertainment first, reality second, if at all.

What do you do with all the junk mail you get? Or, for that matter, any mail? Shred anything with personal information on it and keep it along with all discarded paper, and drop it at one of the many bins all over Massachusetts to be recycled. Even better, change every bill you have to electronic statements. Most companies save at least a year of statements to view online, and you can just save the statements on your computer for easy access. Can’t beat it - less paper mail also helps those of us who tend to be ‘organizationally challenged’.

Recycling is easy to do, and is becoming mandatory in cities and towns around the commonwealth.

My second tip involves saving money. All those plastic bottles of water we buy and drink and toss out? Buy a durable water bottle, wash it fairly often, and use a faucet-mounted water filter or a pitcher to put in the fridge if you don’t enjoy drinking regular tap water. Replacement filters are cheap and each filter lasts several months depending how much you use, but most estimates state the price for the unit and filters amounts to about a nickel per gallon. How much did you pay for your last bottle of water at the gas station?

The folks at Buyer’s Resource in Ohio wrote about this topic and mentioned a great resource that is available online. It’s called the The Home Energy Saver. If you are concerned about the environment, or just interested in saving money each month, you should utilize this free tool. One of the most useful features I found on their website was a page full of links to ways we as people - owners/renters/lessors/lessees etc. can make our home or business more energy efficient, either for free or at low cost. These are the types of resources that can make a difference, since so many have access to them. Even if you are not in the market to buy a home right now, I encourage you to check this site out.