How commissions work

Real estate agents operate on the principle of “procuring cause” when determining who gets the buyer’s agent’s commission.  An agent is the procuring cause if the sale "is the direct and proximate result of his efforts or services."   

It's usually easy to establish the procuring cause agent--he or she is the one who showed the home to the buyer and wrote up the offer.  But things get more complicated if, say, one agent showed the home and another wrote the offer.  Or if one agent showed the home during an open house and another returned with the buyers for a second look.  If there's a dispute, agents usually sort it out at an arbitration hearing or the courts after escrow closes.

Sometimes more than one agent will claim to have been the "procuring cause" in the sale.  They usually fight it out after escrow has closed. 

Avoid mistakes

In order to capture the commission, it's important that you not let any agent become procuring cause for your transaction while you're shopping for a home.  Be careful--a small mistake can cost you thousands of dollars. 

Mistake #1:  Letting an agent show you a house.

Once an agent shows you inside a house, however briefly, he or she has a strong claim on some or all of the buyer's agent's commission if you eventually buy it. 

Mistake #2:  Going to an open house.

The agent on duty at an open house is usually the listing agent, who represents the sellers and splits the 5 to 6% total commission with the buyer's agent.

Many listing agents won't mind if you tour their open houses and then ask a discounter to represent you. But some will object, saying that they should receive some or all of the commission since they were the first to show you the home.

Because of this, I strongly recommend that you not attend open houses, but if you must:

  • don't give your name.
  • don't sign anything.

Mistake #3:  Visiting a model home on your own

Builders normally charge set prices for homes, but many offer referral fees to real estate agents who bring them buyers. The only way you can capture part of this referral fee is to make an offer through a discount broker that's willing to share the referral fee with you.  In slow markets, these referral fees can be very large--I know of one developer who offered 6%!

Many builders, though, won't pay a referral fee at all unless the buyer is accompanied by an agent when first visiting the models.

Builders of new developments sometimes trick prospective buyers into giving them their names by hosting raffles.  Once you enter your name in a raffle, the odds that you'll capture any part of the commission go way down.

Mistake #4:  Calling the listing agent for information

Agents usually can't establish procuring cause just for giving information over the phone, but they may try to trap you.  If there's a combination lockbox on a vacant property, for example, and the agent gives you the combination, that agent may later claim to have shown you the property.

Mistake #5:  Making an offer on a traditionally listed home without an agent.

Unless a home is being sold "For Sale by Owner" (FSBO), you won't be able to capture the commission by making an offer without a licensed agent.  If you make such an offer, all of the buyer’s agent’s commission goes to the listing agent.


Next step:  How much home can you afford?

©Lori Alden, 2008.  All rights reserved.