Profile picture for user2514089

Exclusive buyer agreement and open houses

If you first see a house at an open house, and then submit an offer through a realtor other than the listing agent, who gets the commission? Does the answer change if the buyer was under an Exclusive Buyers Agent prior to the open house?
  • August 06 2012 - US
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Answers (19)

Profile picture for user2514089
Thank you for all the comments. I had no idea this was such a controversial question! It was just something that I started thinking about after the fact. The buyers' agent did show the house and write the contract.
  • August 07 2012
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since procuring cause seems to be so confusing for so many agents....here is a definition from the NAR

"Procuring cause is a complex issue, and no one action ensures that you're entitled to compensation after a sale.
Appendix II to Part 10 of the Code of Ethics and Arbitration Manual gives a basic definition of procuring cause as "the uninterrupted series of causal events which results in the successful transaction." Neither showing the property nor having a buyer's representation agreement with the purchaser automatically demonstrates procuring cause."

  • August 06 2012
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When you sign an Exclusive Buyer's Agency, you are agreeing that that agent will represent you (write the offer) when you purchase a property. In that contract may be a section on the agent's commission. It often says something to the effect that the agents company receives a minimum of, say, 3%(or whatever) of the purchase price when you purchase a property within the timeframe stipulated in the contract .
When someone lists a property for sale, the contract will stipulate the amount the seller will pay towards commissions. Let's say that amount is 6%.  The listing agent will put the listing in the MLS and probably offer 3% to any agent who brings the buyer to them. When the sale closes, The listing agents company receives 3% and the buyers agents company gets 3%. The respective companies and agents then split this commission amongst themselves in pre-agreed percentages. 

Now, let's say that a seller only agreed to 5% with their listing agent and 2.5% is offered to the buyer's agent in the MLS. Now, if the buyer with the Buyer's Exclusive contract bought that home, they would need to pay .5% of purchase price to make the 3% for their agents company.

When an agent holds an open house, it could be their listing or another agent's listing. Open house is a popular way for agents to find clients. It is rare that the person coming through the door buys that particular property. For this reason, it is important when you go to an open house to tell the agent that you have an Exclusive Buyer's Agent. If you want to buy the open house and write an offer with the agent at the open house, you could very well owe your Exclusive Buyer's Agent 3% (or whatever agreed to) of the purchase price to fulfill your contractual obligations with them.

Whatever agent writes the purchase contract that you sign is the one who gets the commission.

  • August 06 2012
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Profile picture for blub blub blub
Hpvanc a buyer would only be liable for a commission if they signed a buyers agreement stating that they would compensate the buyers agent if the agent was not compensated accordingly. If a buyer was denied a commission, it would then become a procuring cause case. If the buyers agent lost the procuring cause, the buyer is not responsible for paying their commission unless they agreed to pay it as previously stated.
  • August 06 2012
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Profile picture for hpvanc
The buyer may be on the hook for his/her buyers agent commission if the listing agent claims they or the agent that hosted the open house on their behalf is procuring cause keeping the entire commission or paying the agent that hosted the open house.  If the listing agent doesn't pay the "buyers" agent the "buyers" agent agreement may leave the buyer on the hook for the commission.

Cindy pointed out an example where "buyers" agent did not get the commission in this exact situation, Blub implied the buyer and agent need to dot all of their i's and cross their t's with their "buyers" agent agreement and intentions, and Debbie intimated that the "buyers" agent needs to show it to the buyer after the house to try to establish the procuring cause of the buyers agent.

Bottom line, it is a delicate situation because "buyers" agents don't really work for the buyer (the reason "buyers" agents are usually free or at no cost to buyers).  I know it is not the original question, but the answer no matter how you spin it is indicative of the broken system.
  • August 06 2012
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Profile picture for TopNJAgent
Open Houses are public events and your attendance does not obligate you to work witht the hosting agent, who may or may not be the listing agent.  I do agree with Debbie as well ....would be good for you to visit the home with your agent as an additional step.
  • August 06 2012
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Profile picture for blub blub blub
I would agree with Debbie on this. Based on the original post, if the buyers agreement is with the agent that wrote the offer, then most likely that agent will receive the commission. Just an FYI hpvanc, the buyer is not on the hook for anything. The commission will come from the listing agent no matter who gets it.
  • August 06 2012
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ps
Hpvanc.......huh??.........your answer only served to confuse me more (and I'm an agent)..........rather than clarifying anything!

User - let's keep it simple........you went to an open house......another agent then  wrote up your offer...right?

well......the open house agent is not entitled to anything
(it would be prudent, however, if your agent took the time to show you the home prior to presenting your offer).
  • August 06 2012
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Profile picture for blub blub blub
Sitting an open house is not the same as "showing" the property. In most cases its considered a "ministerial act" done as a benefit for the seller. If the agent sitting the open house wants to get credit for the sale, then they better get their buyers agreement in order and make it very clear to the potential buyer what their intentions are at the time of the open house.
  • August 06 2012
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In PA, the Realtor that first shows you the house typically is entitled to the commission as the person with "procurring cause".

as an aside, and as a point of information - - I just took (online)  the NAR mandated (every 4 yrs) Ethics course put out by NAR.....and it specifically states that simply showing a home does NOT mean there is a case of procuring cause and does not mean an agent is automatically entitled to a commission.

There are other variables that factor into a case for  "procuring cause".......


(Mack - the listing agent didn't write up the offer - another agent did)
  • August 06 2012
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Profile picture for hpvanc
If I am interpreting correctly "buyers" agent commission paid out as a sub-agent of the listing agent may have absolutely nothing to do with professional services rendered by the "buyers" agent.  MLS rules have, coupled with badly misguided state laws intended to "protect" the consumer against agent sales tactics have had the unintended consequence of codifying and protecting the tactics of the worst of the worst. 

Bottom line, the listing agent may be entitled to the full commission agreed to by the seller or paying the selling agents portion to the agent that hosted the open house, if the listing agent sub-contracted the open house to another agent.  You as the buyer may still be fully liable for the agreed upon "buyers" agent commission.

Is it any wonder people try to avoid agents (state laws enacted to 'protect" consumers have made it far worse and wind up protected agent commissions), and that open housed don't work?  All I can say is ugh and how can we turn at least the buyers side of real estate agency into a professional services situation instead of putting up with salespeople that "say" they can represent a buyer.  Why the heck have buyers a allowed agents to treat the "buyers" agent compensation as a sales commission instead of an allowance for buyers representative services (other than misguided laws that protect the opposite party from what they were intended)?
  • August 06 2012
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No, the answer does not change.

The Listing Agent who first showed the property to you AND wrote up the offer will be entitled to the entire commission that the Seller has contracted to pay.

HOWEVER. Depending on the terms of your Exclusive Buyer Agency Agreement, you - YOU - may owe a commission to that broker. Read carefully.

All the best,
  • August 06 2012
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We recently had a case in this area where an agent had shown his sister-in-law multiple properties. She dropped into an open house, and loved it. She called her brother-in-law-agent and they wrote it up.

They waited until it was closed and refused to pay the comission. Said the agent doing the open (not the listing agent) had procuring cause. The open house agent won the commission, mostly due to the fact that the buyer's agent didn't show the house.
  • August 06 2012
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Profile picture for CCarron
In Virginia, if the seller, through the listing agent (usually via the multiple listings), has offered compensation to a buyer's agent who procures the sale, then the buyer's agent would be entitled to the compensation if and only if the buyer's agent was the procuring cause of the sale. Sometimes there is a dispute between the listing agent's broker and the buyer's agent's broker about whether the buyer's agent was in fact the procuring cause.  The fact that the buyer first saw the home at an open house hosted by the listing agent is not controlling.  Did the buyer's agent do a comparative market analysis to advise the buyer on whether the home was a good value, and/or give the buyer advice on the price and terms of the offer?  Did the buyer agent negotiate with the listing agent? Procuring cause is determined by all the facts and circumstances.  If there is a dispute, the brokers/agents go to mediation. The fact that the buyer has signed a buyer agency agreement--even an exclusive right to represent the buyer--does not change the rule on procuring cause. However, if the buyer's agent is found not to be the procuring cause of the sale, depending on the wording of the buyer agency agreement, the buyer may be obligated to pay a fee to the buyer agent's broker. So, a buyer who has signed such an exclusive agreement and then attends open houses should make it clear to the listing agent who is holding an open house that the buyer is represented by the buyer agent. By the way, as of July 1st, in Virginia, a buyer agent cannot provide any real estate services to a prospective buyer unless they have a written agreement.  I am not permitted to show a property, or even have a substantive discussion with a prospective buyer about a property, unless we have a written agreement. As this is a new law, some prospective buyers don't believe that they need to sign an agreement before obtaining buyer agency services. 
  • August 06 2012
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In Texas, when you submit the offer through an agent it would be included in the offer that the seller agrees to pay your realtor a certain amount for bringing forth the buyer.
  • August 06 2012
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Profile picture for user2514089
Thanks. This is in Virginia.
  • August 06 2012
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Looks like another "Real Estate Is Local" situation. Practices do vary from state to state.

Just because you walk into an open house where the listing agent is present, the fact that this agent walks you through the house does not give them the right to represent you as a buyer. They can suggest it of course (hopefully having established that you do not already have an agent you are working with) but it is up to you to decide who will represent you.
  • August 06 2012
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Profile picture for B Mike West
If you are working with a buyer's agent, they should have given you some of their business cards.  That way, if you go to an open house you can explain that you are already working with an agent, give them a card and check the place out.  You will not have a problem.  If you have signed an exclusive buyer's agent agreement, your agent should have gone over all that with you, and if you are not careful you could end up owing two different agents a commission.
  • August 06 2012
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In PA, the Realtor that first shows you the house typically is entitled to the commission as the person with "procurring cause".

  • August 06 2012
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