Dishin' Dirt with Gary Pickren

Dishin' Dirt on "Procuring Cause" with Gary Pickren

February 18, 2021 Gary Pickren Season 1 Episode 17
Dishin' Dirt with Gary Pickren
Dishin' Dirt on "Procuring Cause" with Gary Pickren
Show Notes Transcript

Do you understand procuring cause?  Honestly? Most agents and lawyers don't.  It is a very difficult concept with rarely a straight forward answer.  Most real estate agents think because they established agency first that they are the procuring cause. Others think that as long as they open the door, they as the procuring cause.  There is so much more to it than that.  This podcast will delve into the issues of procuring cause and answer many of the questions you have. This is a must listen for all real estate agents.  Also included is "What Happened While You Were Showing" and "Gary's Good News Only!"

Enjoy and PLEASE SHARE SO WE CAN MAKE OUR PROFESSION BETTER!
Gary


* Gary serves on the South Carolina Real Estate Commission as a Commissioner. The opinions expressed herein are his opinions and are not necessarily the opinions of the SC Real Estate Commission. This podcast is not to be considered legal advice. Please consult an attorney in your jurisdiction for applicable legal advice germane to your issue.

Unknown:

This is deshon dirt with Gary picker in South Carolina's only podcast dedicated to the real estate agents craft. Hey guys, welcome back to another episode of edition dirt. I am your somewhat talented host, Gary picker in here with our 18th episode. Yes, that's right. We've done 18 episodes since September. And you know, when we first started doing these episodes back in September, we felt that maybe we do one a month. And here we are doing them now once a week. And we'll continue to do once a week as long as we have relevant content that we can provide you, this is also going to be probably our 5,000th download, we are sitting right at the 5000 mark and with this episode that will push us over 5000. In fact, according to Apple, we are the 120/3 ranked how to do podcasts in the entire country right now. So that is mind blowing. So thank you very much for all of your support. If you'll help me continue to grow this show we greatly appreciate it. Now to this week's topic was something I swore I would never ever do in a podcast. And I really don't want to do it. But because I've been getting a lot of telephone calls and a lot of emails. And in fact, I've had to handle a couple of mediation cases on this recently. I feel like it's time to do this topic. And of course, I'm talking about procuring cause nobody likes procuring cause nobody understands it. So I'm going to see what I can do to try to give you the overview of procuring cause, so that you will understand what your rights and obligations are when it comes to agency. Also, we're gonna have a segment today on what happened while you were out showing and this is one that's going to definitely intrigue you. And of course, we'll finish up today's episode with Gary's good news only. Now if you'd like to show you can follow me on Instagram by going to Instagram and typing in Pickering, Gary p IC, k, r e n d a r walk. And if you'll also go to YouTube and search Blair Cato and subscribe to our YouTube page. You'll always get notices of when these shows come out as well as when our new legal tips are issued as well. So we do a little video blog once a week, little two minute video two to three minute video on a topic that is very relevant to you as well. And if you would go to those platforms and subscribe to us, we would greatly appreciate it. We're trying to get our followers up there. Alright, so let's start talking about procuring cause. Now, as I mentioned earlier, I have refused to do a podcast on broke hearing calls for the longest time, partly because I want you all to think I'm smart. And when you hear an explanation of procuring cause you might think I'm not because nobody truly understands procuring cause it's a very difficult topic. There's no bright line answer, there's no yes or no to it. And so when agents asked me questions about procuring cause, they tend to get a response that seems to be a bunch of nothingness. And that's the problem of procuring cause it is a bunch of nothingness, it's very difficult to put your finger on it and say this is procuring cause it's one of those things, I kind of know it when I see it, because every procuring cause case is extremely fact specific and falls on those facts. It's very slippery little fellow procuring cause is, and because no one understands it. And it's hard to explain. It's a topic I've always tried to avoid. But right now I feel like I have no choice but to go over it. Because in the last couple of months, as the market has gotten tighter, because of the lack of inventory, I see more and more agents getting screwed over by their buyers, when it comes to procuring cause. And my agents are reaching out looking for answers. And oftentimes we don't have answers for them. But we're trying to figure out the best answers for you. And so we'll go over some procuring cause things today. Now this is going to be at the 50,000 foot view is not going to get into the weeds because it's hard to get into the weeds because as I said earlier, every case is very fact specific. So first of all, who determines procuring cause, when parties are in disputes, it's usually either decided between the two parties, because they're going to go to a mediation, or they're gonna go to arbitration, they're go to mediation, and the two parties can decide amongst themselves, ultimately who's entitled to the money, but if they can't, and they decide to go to an arbitration, most of the time, they're going to go to the realtors Association, and you're gonna have a panel of five realtors who are going to sit on arbitration board, we're going to bring their own feelings, their own belief, their own anger, their own experiences, and and or interject that into their rulings. And sometimes it's very valid and their points are very well taken. Sometimes it's not because they're angry about a situation that they have experienced themselves rather. And so you understand to understand whenever you sit before a panel of five realtors who want to come up with a idea of what procuring causes, you're at their mercy, and each one of them have had their own experiences with agents that have stolen their their clients or their clients that have abandoned them. And so they bring their own anger and confusion about procuring cause to the hearing of themselves. Now, the cases I hear mainly from my clients fallen under three scenarios. One is where a builder's agent shows the house to the consumer gets the consumer interested in buying the house, the consumer leaves and then shows up the next day with a contract and an agent from an agent's never even been on the property. And now the agent wants their commission and this happens quite a bit. The second one is a buyer is shown a house with one agent but then goes back with Another agent and writes a contract with a second agent. So the question is, who is the procuring? Cause? Was it the first agent who introduced? Or is it the second agent who wrote the contract. And then of course, the third one is you have a buyer that's under agency with one agent, that agents working carefully with that buyer, keeping them engaged. And for some reason, that buyer abandons the agent and goes to another agent, oftentimes, just because they didn't realize or forgot a friend was an agent, or they think that this second agent has some inside knowledge that the first agent does, and they abandon them. Now, it's happening more and more in this market. And the reason in my opinion is happening more today than it has in the past, is that we have a lack of inventory. And so a lot of buyers think that if they've been working with an agent for a couple of weeks, and their agent has been unable to find a house for them, it's on the agent. Now you and I know that's not the case, because all agents have access to exactly the same information. And so what they think is that some other agent might have some pocket listing or hidden information. Well, we know in our our MLS and Columbia and Greenville, as I understand it, pocket listings are not allowed. So that shouldn't be the case. But these buyers truly believe that if they find the right agent, they'll have secret information and they can get a house or they may meet somebody who says they have a house or getting ready to put on the market. And so they think if they bring in their agent to this listing, that somehow it's going to cost them money or cost them the ability to get the deal done, which is typically not the case. So with each of these scenarios, each one of them has their own issues. And the outcome can vary in all three of these scenarios, depending on specific facts. And that's the problem with procuring cause is that when a real estate agent will call and say who's the procuring cause? It's not a simple answer. And the reason it's not a simple answer is so many facts go into what happened and who might be entitled to that money. And it really doesn't matter what the attorney you speak to says who's procuring cause, because ultimately, it's going to come down to one of two things, what you could convince the other agent of, or if you're unable to convince him in some type of mediation or a settlement agreement, what you're able to convince five realtors on a panel to believe and so it's very difficult to get a good read on it. So what is the definition of procuring cause? Well, before I define it, I want everybody to remember that all the contracts belong to the broker and not the real estate agent. Real Estate Agents don't have contracts, brokers have contracts, all your buyers are represented technically, by your broker, all your salaries belong to your broker. So technically, when you have a procuring cause case, it is a dispute between brokers and not a dispute between agents. Ultimately, the brokers are the ones who decide that now the Nars Professional Standards Committee has come up with what's called the professional standards procedures. And they have inter issued an introduction to procuring cause that can be found on the internet by typing in NARS professional standards of procuring cause and you'll find that there's a lot of information in that document is not dispositive. It doesn't have everything you need to know about procuring cause, because as I mentioned earlier, you could write a book on procuring cause and still not cover everything. But the information is very good, nor is there an excellent job of getting the information out there. And a lot of what I'm going to talk about today is actually going to come from this information and I rely on ours because no ours is often the Trier of these cases, whether it's through a mediation or an arbitration. So NARS defines procuring calls using Black's Law Dictionary is a dictionary that we use as lawyers all the time and we cite it in court court cited and their documents as well in their orders. And what they define procuring cause is a series of events, unbroken in their continuity that results in the desired objective Generally, the sell the property, they father say that proximate cause is the calls originating a series of events which without break in their continuity result and the accomplishment of the prime objective, the inducing calls the direct or proximate cause substantially synonymous with efficient cause. So what we're getting at here is what got the series event started, what brought it to a conclusion and was there any break in their continuity, a broker is regarded as a procuring cause of a sale. So to be entitled to the commission if his or her efforts are the foundation of the negotiation, which result in the big sale begin, it is the calls originating a series of events which without breaking their continuity results in the accomplishment of the prime objective of the employment of the broker who produces a willing ready and able purchaser to buy real estate on their own terms. So what NARS is getting at here is the broker who's entitled to compensation is the one who began the foundation who sets the foundation I typically introduce the property shows the property has the person enter the property provides the information about the property, and that begins the process. And that throughout the process, there's no break in the continuity. They're constantly working with their kids. tumor. And that results in the prime objective, which is getting the house under contract and ready to close. But it's very, very important here to understand that there is no pre determined rule, or rule of thumb as to who wins in a case is this very fact specific. So there's no predetermine rule. In fact, their material say there are no threshold rules. There's no contract in hand rolls those no agency rules, and we're gonna talk about that in a minute because I don't like that aspect of it. But it's all very important. And ours is very specific to say that all wards must be based on facts and circumstances related to the particular transaction. Now, NARS itself has recognized the difficulty in procuring calls, because its membership on several occasions, has actually questioned raised the question of what is procuring cause. And so NARS has tried to develop a consensus opinion to a single role or determining factor which would clearly establish who's entitled to commission in the cases of procuring cause and five times since 1976. They've had subcommittees that have worked with professional standards committees to actually study this question on procuring cause. And as a result, most recently, they've come up with this code of ethics and arbitration manual, they've also come up with which I think is very effective, an arbitration worksheet that has been developed to assist hearing panels, and identifying relevant issues and determining these fact questions and who would be entitled to any disputed funds. And you can find this worksheet. And I would encourage you to go look at this worksheet when you think you have a procuring cause case. And it can be found easily on Google just type in NARS arbitration worksheet for procuring cause. And what you'll find in this worksheet, which will go over, you know, give you some more information on it, it's few minutes, is that most people believe they have a slam dunk arbitration case, until they start working this, this worksheet, and they realize that while they may be the person who had the agency and started with a client and stayed in constant contact, they weren't the person who introduced they weren't the person who created the interest in the property. And so their case may have some warts to it. And what I think you'll see pretty much in every procuring cause case, or almost all of them is it's not as clear cut as most people think it is, in fact, I think is muddied water in most cases. Now, let me expand for a minute also on the no pre determined rule. So every arbitration hearing on procuring cause is always considered in light of all the relevant facts and circumstances, as presented by the party and their witnesses. And the rule of thumb, prior decisions by other panels are to be completely disregarded. So what your happened to another agent in your office, or how they've ruled in the past is completely irrelevant. It's 100% going to be based on relevant facts and circumstances. So it's going to be a heavy fact specific matter. So what that means is, if you do get to an arbitration hearing, you are truly going to have to make sure that you present all of your facts and that you hit 100% of your facts, and you do it very sustained succinctly, in a manner which the panel can truly understand what you're arguing now, agency, while a lot of people will argue to me, Well, I have agency outside agency, I'm 100%. under contract, that's great. You follow state law, but unfortunately, agency doesn't control. I disagree with this. But I'm not the one who sets the rules, I believe agency is 100%, what should matter, because if you don't have agency, then you violated the law, and you shouldn't be able to get paid, because under state law, if you don't have some written agreement, whether it's agency or transaction brokerage agreement with the consumer, you can't get paid, you're not supposed to get paid, you don't have any any argument for pay, in fact, you violated the law. So I don't know how if you don't have agency, you win, I wish NARS would just come out and say the rule is who establish agency first and who has valid agency, then that would help us a lot. But that is not something that they can they consider. They do not consider ethical matters as to who is entitled to the money. And so that's something that you have to understand. So there's five factors I think are very important, you understand that the panel is going to look at many of these disputes will turn on the relationship between the agent and the prospective buyer. And they're going to consider all the circumstances around it and what efforts you've made to develop and maintain an ongoing relationship with that purchaser. That's factor number one, factor number two, is there going to look and see if you've actually actively maintained ongoing contact with the purchaser. Or if you're ever inactive, what was the cause of that inactivity and there's the person the purchaser reasonably conclude from your inactivity that you've lost interest if you're disengaged or you're not going to assist them anymore, have you abandoned your representation. Next factor they can look at is written despite your reasonable efforts to maintain that contact has the buyer sought the assistance of another broker? And if so why? Why have they abandoned that first broker what actions of the broker calls into abandon them, the fourth factor they may look at is there may not be a question as to the ongoing relationship, the issue may come down to the brokers conduct or the brokers failure to act when necessary, and that causes the purchaser to terminate. So, for instance, if you haven't been in contact with your client over new listings and things like that, that could be a factor they'll look at, and finally the next factor a month, then these are just five of the main ones. But the panel will look to consider what conduct or lack thereof cause any break in the series event that led to the transaction, whether the successful transaction was actually brought through by the initial broker or a subsequent broker what events have occurred. So those are some of the main factors we're going to look at. Now, if you have a dispute, and you want to resolve this matter, there's really only two formats that I've seen that have been effective one is mediation. This is where you go to the association, and ask today facilitate mediation where you and the other party come together between before a move to a neutral mediator, and that mediator will not make a decision for you, but he will help you or try to decide between yourselves, who's going to get what amount of money. And the great thing about mediation is that you craft your own settlement, you are 100% in charge of it, you decide whether you want to settle or not settle, and you decide whether or not you're going to accept whatever amount of money the other side is offering. And it's a great way to try to resolve it. And most of the cases that I've mediated have resolved that way. The other way is arbitration. This is where the parties just cannot decide amongst themselves how to take care of it. And so they need somebody to make the ruling for them. And this is where you'll go before a realtor panel of five realtors, who will make the decision you will present your case the other side will present their case, you'll have witnesses, you'll enter in evidence. And at the end of the hearing, the five panel members will make the decision as to who gets the money. Oftentimes they like just to split the baby because a lot of times these things just are not 100% clear. So even if you think you have a slam dunk case, remember and realize you don't if you are before the arbitration panel, they're going to have this arbitration worksheet arbitration worksheet is four pages, there are 16 sections. And each section has multiple questions. And it literally is a scorecard. Does it favor the complainant? Or does it favor the respondent? And some of the questions they ask or what's the nature of the buyer representation agreement? Who was the first to introduce the property that was sold? Did the buyer find the property or own on their own was introduced by one or two of the other agents? was the introduction merely a mention of the property? Or did they show it to me to open house? Did they show them the property? Did they enter the house with the client? Was it instrumental in creating the desire to purchase the property? What efforts subsequent to the first introduction to the broker take to get the property under contract? Did the broker who make the initial introduction to the property engaged in some contract have failed to do some conduct, which made the first made the buyer abandon them? Did the seller act in bad faith and to try to deprive the broker the commission to deny or act in bad faith to try to deprive the broker of the commission? So there's a lot of factors that they will look at on that sheet and they will use that to help them make a decision. So ultimately, I think you need to try to avoid claims. Because once you have a procuring cause claim, that is where your issue. So what is it you can do as an agent to avoid procuring cause claims, versus you have to have hard and truthful conversations with your client. A lot of clients will claim they don't understand what they're signing, they didn't know they saw an agency. So when you go over agency, you need to make sure that your consumer understands that you have now entered into a contract where I am your only real estate agents. And you are not to talk to other agents solicit information from other agents, you let me handle that that's what I do, and make sure they understand that they have signed agency. And if another agent ask them, if they are working with another agent, they have a duty to tell that other agent, yes, I'm already working with the agent and provide that name. And they can't go behind your back. So you have to have those hard and truthful conversations. Now I will leave that up to you the professional to determine the best way to counsel those conversations. But if you're not having hard and truthful conversations, and making sure that your consumer truly understands that they have entered into a contract with you, and they are bound to you and that they are responsible for your commission. If the selling listing agent does not pay you, you're going to have problems. So make sure that they understand truly what they're signing and what this means and what it means to you. Be sure to always get agencies on besides it being required by law, you're not you can't work for free. And while this is not a determinant factor, it is a factor in the situation where you can prove agency will certainly help you in your case, be upfront, as I mentioned earlier and tell your clients not to talk to other agents. If an agent calls in or to tell them already working with another agent. If they meet an agent who says he has a property they need to say I'll have my agent call you get the information, tell him who your agent is and have them call. Make sure your agent understands how you're getting compensated that you get compensated from the listing agent But if the listing agent doesn't pay you, then you have a right to come to them for payment. If you're on the other side of the situation where you're not sure if the buyer is already represented, it's incumbent upon you to ask the consumer, are you currently working with another agent? Have you worked with another agent? Have you ever signed a contract for sale that is falling through? Because what you will typically find out when you ask this question, Have you recently signed a contract to purchase a house is that if they've done that, then they probably signed an agency agreement, and they're already working with somebody else. If ever in doubt, ask them who the agent is. And then pick up the phone and call that agent or call the broker and say, Hey, I'm sitting here with john doe, who says they worked with you. But you're not they didn't say agency with you? Are you under agency with them? If they say yes, and kindly ask them for a copy of the agency agreement, they should want to provide you this copy, because you're trying to prevent a procuring cause case, if they say I'm not providing you that I don't have to say I understand that. But they're asking me to work with them now. And I want to make sure that we avoid a dispute. If you have a signed agency agreement, then I will back away. If you don't, then I'm gonna work with this client. So always be sure to ask those questions. I think that will help you if you are more forceful upfront with your consumer to let them know what you are doing for them and what their obligations are for you and how you are entitled to compensation. As well as when a consumer comes to you asking if they're already working with an agent. And reaching out to that agent, I think you will avoid most of the pro hearing calls. What you may find out in the end of all of this is very important is that your claim may be against the other agent, because they may have truly interfered in your agency agreement. And we're not the procuring cause. But you may also find out in the end of this, that your claim is not against the other agent, because the other agent was told by the consumer, they weren't working with another agent who have never worked with another agent, and basically lied because consumers will unfortunately do that. So when you find a situation where the other agent truly had no knowledge of what was going on, then your claim may be against the buyer under your agency agreement, your buyer representation agreement, where your buyer may be entitled may be liable for that commission to you. Now, you may also find out arbitration might not be the proper venue for you. Because we may also, as I mentioned earlier, find out that your lawsuit may be against the client for the commission, or it may be a grievance against the agent where the agent may be the procuring cause, but the agent may have interfered with your agency agreement, which is a violation of 40 dash 57, which is the code that protects you. So bringing this back to full circle as we end this is if I was a builder agent. And because I'm showing a consumer the property, I would go ahead and get them to sign an agency disclosure form. And let them understand that they have not presented you an agent that if they want to sign a contract, you'll be happy to sign the contract, you know, to do the contract with them. But if they bring an agent with them, that their agent will probably not be compensated, and that they need to let the agent know that. So you need to have this strong conversation with your consumer. Now before you do that, you need to check with your builder to make sure your builder is okay with that because I do know some builders have told their agents we don't care, you're paying that buyer's agent. We want these deals to close. If you're an agent, you need to make sure your buyer understands the risk is on them if they go and cheat on you with another agent. And that's essentially what they're doing. They're cheating on you with another agent because they think that new agent has a better way of finding them a house Make sure your buyer understands the ramifications of cheating on you. And I think that will help you in your procuring cause cases. And now what happened while you were out show. So by now most of you have already heard that Zillow has been showing Tom for half a billion dollars. And this is after Zillow just announced they had an earnings decline of $789 million last quarter, but a net income of $46 million. This is also after they announced they lost $100 million in quarter four of 2019. So what is showing Tom as most of you know, showing Tom is the platform that most agents use through their MLS to schedule showings for their clients. It's real easy process. It has made things a lot easier. This eliminates a lot of phone calls and emails back and forth to schedule showings it can be done on this platform. And as I understand it, most MLS is in South Carolina use that. So why is Zillow getting into Showtime? Well, they've already have an our buyer that competes against you. They already have Zillow homes, which steals your leads and tries to convert them themselves, or they sell them back to you or one of your competitor. They have already have a loan company that competes with your lender, they have a title company that tries to compete with your attorneys. So they're just trying to get another technical into our market. And this all started years ago when the MLS has decided to start sharing their information. And at the time a lot of members of MLS were saying hey, this is bad because these people are gonna eventually take our information and try to use it as again use it against us and they have because we know statistically when you represented somebody and they decided to sell their house later. Most times they came back to you in the past. Since Zillow has creeped up most times now they don't come back to you they go to another agent. So effectively what's happening is Zillow is taking your previous clients, stealing them and then either selling them back to you or selling them to somebody else. So Zillow is not your friend in this market. I hope you all understand that. So why is this bad news to you? Well, it's very simple. If you're not the consumer, you're the product. And congratulations, you become the product once again of Zillow. So what Zillow is buying showing Tom for is not that it makes a lot of money is it the, the information they can mined from it. So when your client has a house for sale, they will know how many times that door was opened. And they can compare that to how many times doors are opened in other neighborhoods. And so they can determine which neighborhoods are selling quicker than others and have all of this information for targeting for marketing. They also will now have every time you open a door in any neighborhood, so they will know how many times you're actively showing real estate versus your competiting real estate agent. And they'll be using that information. So just understand the Zillow getting this information because you're now the product. And that's what happened while you were out show. And now to Gary's good news only just a week ago, we were at 92,000 cases a day in the United States. Yesterday, we were 55,000 cases, that is down from a heart just a month ago of 300,000 cases. So think of that in less than a month, we were averaging around 300,000 cases a day in the United States, and now are around 55,000. So that's what a 75% reduction in the number of cases of COVID. In South Carolina, we've had a remarkably similar decrease in cases just a month ago, we were around 5000 cases and today we're at 1700 cases and those numbers continue to plummet as well. other good news on the COVID front is that South Carolina ranks 11th in vaccinations of people over the age of 65. There are 937,023 South Carolinians over the age of 65 344,275 of them have already received a vaccine. That is a 36.7% vaccination, which ranks us number 11. Now 518,520 total vaccines have been issued to our population of 5.1 million, which is about 10.1% er visitations are also weighed down and this is something that has always been mis portrayed in the mass media is that the ers were overrun with people with COVID. And they basically made you believe they were stacked up in the hallways, at the height of the COVID crisis, which was 8% of all ER visits were COVID like symptoms just 8% if you listen to media thought it was thought it was 92%. Today we are less than 4% of our ER visits relate to COVID virus symptom. And that's it goes back to the kind of numbers we had post summer. Also there's a great report out of the overall numbers now the detected cases of COVID down 64.7% from its peak across the country, positivity rates are down 58.8% from its peak, that is only 1.6 points from the lowest number ever since COVID came around, hospitalizations are down 50.6% from its peak and ICU stays are down 42.3% from its peak, those are all fantastic numbers and they all go back to numbers that are around the April 2020 timeframe. So it's getting back to where it was when it first came out, which is fantastic news. Now on the financial front, more homes are going under contract and less than two weeks is the headline for the National Mortgage professionals. Limited housing inventory has seriously caused serious issues for buyers looking for the right home. But now buyers are looking to take advantage of low interest rates and they're scooping everything up on the market. Redfin reported that a record 52% of homes went under contract within two weeks. We know that to be the case here in our market as well. Now the Columbia multiple listing service as reported that while ongoing Unemployment Claims remain elevated due to COVID-19. They are substantially lower than what were during the peak. And if had little to no effect on the buyer demand so far, for a 12 month period from February of 2020 through January 2021 pending sales and a CML see MLS region were up 11.8% overall, the price range for the largest gain was the 200 to $300,000 price range, and they saw an increase of 36.1%. And while that is only the Columbia market, I believe those numbers would be similar in the Greenville and Charleston and other markets and our community as well. And that's just about does it for our show this week. I hope everybody enjoyed it. If you would like us subscribe to us and share us we would greatly appreciate when we get those numbers up. Also, don't forget to subscribe to us on YouTube by typing in Blair Cato in the search bar for YouTube. hope everybody has a good weekend and y'all come back and listen to us again next week. Take care