Procuring cause/dual agency question

[D-FENS]

My wife and I are currently in an interesting situation. We found a property on realtor.com we wished to see. It was listed using a flat rate service, basically $249 to list the property on MLS, but it would be FSBO.

I should note we weren’t working with any agents at this point and were just casually looking at properties on our own.

My wife made an appointment using the contact info on the realtor.com ad. It was the listing agent that did the flat rate MLS listing for the seller.

He showed us the property and a few days later we decided to make an offer.

My wife contacted the listing agent. The e-mail exchange went like this:

Wife: “We want to make an offer on the property. Can you tell us how to submit the contract and earnest money?”

Agent: “Why don’t we meet and I will put the contract together with you?”

Wife: “We feel like you've already gone out of your way to assist us! We really don't want to cause any unecessary work for you as the sellers agent. Please just let us know the best way to submit our offer and earnest money.”

Agent: “Thank you for your concern, but it's not a problem. This is what I am paid to do and what my/any seller would expect out of me. Please let me know when and where you would like to meet.”

Wife: “If that is the case and we will not be bound by any buyer's agent agreements then we can meet at our house. We are free until about 4pm today.”

Agent: “Sounds good, I will look forward to seeing you around about 1-1:30.”

Notice my wife explicitly stated she didn’t want any buyer’s agreements. The agent didn’t respond to this and just said: “Sounds good. I’ll be there around 1-1:30.”

At the meeting, the first thing the agent does is pull out a dual agency agreement for us to sign. My wife and refused to sign it, stating it was our understanding from our e-mail communications there wouldn’t be any buyer’s agreements and, besides that, we were uncomfortable with dual agency.

He claimed he has procurring cause because he showed us the property and is entitled to the 2.5% buyer’s commission.

My wife told him she felt deceived because she specifically told him she didn’t want any buyer’s agreements, and yet the first thing he does try to make us sign a dual agency agreement. We refused to sign anything and he left and no offer was prepared.

My wife and I were shocked that he would get procurring cause and be entitled to a $7,000 buyer’s commission simply by showing us one property for ten minutes. After all, he was representing the seller, not us. At least that’s what we thought at the time.

What can my wife and I do at this point? Can we not pursue the property directly with the owner? Does the agent, in fact, have procurring cause? (This is in Illinois)

Can my wife and I find a different buyer’s agent since we are uncomfortable with dual agency?

This all so confusing. Our original intent was to go directly through the owner as a FSBO so there would be no commissions. I didn’t realize simply meeting with an agent somehow bound us to him. At least now we know for the future.

[RonnieG]

Your initial reluctance to use a buyer agent was misguided. As a buyer, you generally don't pay any commissions, because both listing agent and buyer agent commissions are paid out of seller's proceeds. The listing agent is probably correct that they could establish procuring cause, especially since they not only showed you the house, but also met with you when you called to indicate your interest in making an offer. If you had seen the property at an owner-run open house, or responded to an ad placed by the owner, or found the property on a FSBO website instead of Realtor .com, then you and the owner could have negotiated an offer directly between you. However, negotiating and writing real estate contracts is not for the novice. That's why we get extensive training and are licensed by the state to be real estate agents. When you respond to an ad placed by the listing agent, even in Realtor .com, or when you have a buyer agent, the seller is obligated to pay a commission to someone on the buyer side. That's exactly why listing agents do the flat rate MLS entry only kind of listings. They hope that buyers will call them directly, so they can handle the buyer side and get that commission.

[Micheal Pannell Realtor]

I would think with out a buyers rep you can use anyone you would liek to write and offer. I have made a few sellers agent mad in the past because a buyer would call me just to write an offer. If i was a buyer i would never call off the listing.

[D-FENS]

As a buyer, you generally don't pay any commissions, because both listing agent and buyer agent commissions are paid out of seller's proceeds.

Yes, we realize that, but with no commissions, we can negotiate a lower sale price. Would you rather sell a house for $325K and have to pay a 2.5% commission, or sell a house for $320K and pay no commission?

Also, the agent willingly met with us after my wife specifically said "no buyer's agreements." He should have addressed this before wasting everyone's time.

Anyway, my wife and I knocked on the owner's door and spoke directly with them. We negotiated an offer directly with them, and agreed on a close date and sale price.

Now it's just a matter of dealing with this agency crap.

If my wife and I go with a different buyer's agent, will the listing agent have any recourse? How much will this complicate things?

[webmaster]

You have no agreement with this listings agent, and you are always entitled to use your own buyers agent (At least I think that is the way it works) - check with a Broker in your local area (Preferably not the listing agents broker) and see what they say.

[Ryan Ward]

O.K. - you may think this is a bit harsh, but, this is what you need to hear.

Perhaps you should rethink the notion that you don't need to pay an agent to help you with this real estate transaction. You certainly have not started out on the right foot representing yourself. There are lots of reasons agents get paid. This is just the first example and you haven't even written an offer yet.

To answer your question, it will depend on how hard the listing agent wants to pursue the buyer side commission. He advertised it. You found it through him. Commissions are pre-negotiated to avoid this conflict.

Your best recourse at this point may be to just go find another house.

Perhaps you should rethink the no agent thing first.

Don't be so cheap. You get what you pay for in this world and your representation is not likely to provide you with the ability to make a good offer based on real information. Nor will you have the ability to stay objective.

I could go on and on about this but hopefully you have begun to see why you need to have someone who knows what they are doing represent you.

[RonnieG]

Given your last post, get an attorney. You will probably need one.

The seller will be in contact with the listing agent, and will have to disclose who they are negotiating with, at which point procuring cause comes into play, and they may still have to pay the buyer side commission to the listing agent, even if you think you have gone around him, and especially if you did not fully disclose your past dealings with the listing agent to the seller.

There is also much more to getting a real estate transaction successfully closed than you may think. Did you execute and sign a formal contract, on whatever state / local forms needed to be used? Did you get whatever seller property disclosures were required? Did you also negotiate inspections, appraisals, title review and all applicable deadline dates and contingencies on those? If the deal requires financing, did you negotiate what happens to your earnest money if the financing falls through, be it for low appraisal, title issues or other lender underwriting problems?

According to statistics I have seen, FSBO real estate deals without a licensed agent involved constitute 90% of all residential real estate related lawsuits, so good luck!

[D-FENS]

We went straight to the owner's house and told them what happened with the agent and why they didn't get an offer from him.

We then prepared the contract (using the same generic form we used the last time we bought a house, and yes, it is still current) and presented it directly to the owner, along with an earnest money check. All subsequent negotiations were done verbally, and we have now agreed on a price and closing date (nothing is in writing yet so nothing is official).

Everything regarding earnest money/inspections was in there, although I don't think it's still valid because we put a 48 hour expiration on it.

We will most likely fill out another contract to put our verbal agreements in writing.

We realize the listing agent has procuring cause (common sense would dictate he doesn't, but the real estate universe doesn't make any sense) and to proceed we need to work with an agent.

We are hoping since we are uncomfortable with dual agency, and we think the listing agent is a douchebag, we can use a different agent without any legal hassles.

I appreciate all the advice.

[Dan Connolly]

Well, I think if you have presented a written offer and negoitiated verbally it may be a little late to bring in another agent. The procuring cause issues don't really affect you since you never signed any agreement with the listing agent, they affect the Seller and his agreement with the listing agent. He may be required to pay him anyway and why do you care? He isn't giving you that money and if he doesn't have to pay it to the listing agent the Seller plans to keep it for himself, not give it to you! Since his agreement requires that he pay the listing agent if he is the procuring cause, that is water under the bridge as HE WAS THE PROCURING CAUSE. So go ahead and get an agent to represent you and don't be suprised when the price of the house goes up.

[D-FENS]

The listing agent's deal was a flat rate listing for $249. The agreement with the seller also stipulated the listing agent may be entitled to the 2.5% buyer's commission, which is the point of these flat-rate deals in the first place. List the property for cheap, and hope to rope the buyer into a dual agency agreement. Now that my wife and I know what establishes this procuring cause bullcrap, we know how to proceed on future purchases.

We will probably just end up going with the listing agent anyway, even though we don't like him and don't want him to get any money. It will just be easier that way.

Also, we are in the process of negotiating a rebate on the buyer's commission, so yeah, we are going to get some of that money.