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Realtor Representation and New Home Builders: What’s the Deal?

September 9, 2009 by · Leave a Comment 

Walk into any model home center in Arizona and you’ll see a the following phrase posted prominently on the door:
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Real Estate Myth-Understanding #1 – “It’s OK to visit an Open House without my Realtor present.”

April 18, 2008 by · Leave a Comment 

After working with hundreds of homebuyers, I’ve come to recognize that there are several common misconceptions that are widely held to be true by experienced homebuyers and first-timers alike. I refer to them as “Myth-Understandings” and I’ve seen many prospective buyers harm their own cause as a result of their misled belief in them.


Keep in mind that real estate laws very from state to state. If you have any questions about how this topic applies outside the State of Arizona, consult a local attorney in the state in which you plan to do business.


MYTH #1: “It’s OK to visit an Open House without my Realtor® present.”


TRUTH: Only if you don’t care to work with your Realtor® anymore! If you visit an open house, whether you’re represented by a Realtor® or not, the Realtor® hosting the open house becomes your only legally-recognized agent for that specific property and the only agent entitled to compensation by the Seller.


The legal notion of procuring cause states that the broker who engages in an effort which brings about the sale is the one entitled to the commission. (The Language of Real Estate, John Reilly, Fifth Edition) In this case, the “Open House” signs that guided you to that property would constitute the procuring cause, if you eventually decided to purchase the home. The Realtor® who hosted the open house would be entitled to the full commission, effectively cutting your Realtor® out of the equation. You’d be stuck working with the Realtor® representing the seller, regardless of how professionally and fairly you believe they’ll represent you.


Even worse, if you had signed a Buyer Broker Agreement with your Realtor®, which has no effect on procuring cause, you could be compelled to pay your Realtor’s® full commission yourself!


Here are a few other situations that fall under the procuring cause umbrella, where you could lose the ability to work with anyone other than the Listing Agent:


-You drive by a house for the first time and see a “For Sale” sign in the yard. Not wanting to bother your Realtor®, but motivated to see the property, you call the Listing Agent and arrange for them to meet you for a private showing without your Realtor® present. The Listing Agent’s “For Sale” sign is the procuring cause.


-You see a gorgeous property advertised in the newspaper, so you call the Listing Agent and meet him at the home for a private showing without your Realtor® present. The Listing Agent’s advertisement is the procuring cause.


-Your Realtor® is out of town for a week when, while searching on the Internet, you see that the ‘perfect’ property has just hit the market. You call the Listing Agent and notify her that you are already “working” with a Realtor®, but that you’d like to meet at the property for a showing so you can tell your Realtor® about it when he gets back in town. Since the other agent showed you the property, they would be the procuring cause.


-You visit the Sales Office at a new home subdivision that you’ve never visited before, just to take a look at the models for decorating ideas. While you are there, you fall in love with one of the homes. The next day you meet your Realtor® at the community to put an offer in on the home. Because you visited the community for the first time without your Realtor® present, the builder’s advertising is the procuring cause and the builder would not compensate your Realtor®.


Implications When Looking For Phoenix Real Estate or Scottsdale Real Estate


In a non-dual agent role, your Realtor® is your agent, your trusted advocate whose sole function is to help you find and acquire the perfect property for your needs at the most favorable terms and conditions to you. The safest thing to do is to notify your Realtor® of ANY properties that you would like to see, including “For Sale By Owner” homes, new construction, and traditional resale properties. Your agent can gather the facts for you and make arrangements for you to visit these homes, when applicable. Furthermore, an experienced agent will begin positioning you for the potential upcoming negotiations with the other Realtor® from the very first communication.