Open Houses – Buyers Beware

Many buyers start off their home search alone by finding homes on the Internet and then visiting the home at an Open House. When you do go to an Open House, the real estate agent you meet at the house will be kind, courteous and answer all your questions. What you may or may not understand is that this agent is there representing the seller’s best interests, not yours. Anything you say to that agent may be relayed to the seller, so be careful what you reveal if you are seriously interested in the home.

State of Minnesota statute requires agents to disclose Agency at first substantive contact, like when discussing your price, terms and motivation, but it can be difficult for many agents to explain Agency before you discuss personal items. See here for the Minnesota Agency Relationships in Real Estate Disclosure Form.

Walking through an Open House without an agent has another potential pitfall. If you decide that you want to purchase the home you see at the Open House and have a different agent write the offer for you, that agent may have trouble collecting their commission from the listing agent, due to a term called Procuring Cause.

Members of the National Association of Realtors participate in a local Multiple Listing Service affiliation, known generally as the MLS. In the MLS there is a published commission offered to Realtors who bring forward a buyer to purchase the listing. So when a buyer’s agent shows a home listed on the MLS to their client, they are assured of receiving a commission if the transaction closes successfully.

Where the problem of Procuring Cause comes in is when a buyer is first introduced to the property without their agent present, as in when a buyer walks through an Open House or calls the listing agent directly to schedule a private appointment. In that situation the listing agent may argue that they were responsible for the buyer making an offer on the home and that the agent that wrote the offer for the buyer had no direct influence on the resulting sale. In these cases, a buyer’s agent may receive only part of the commission normally offered, or may receive no commission at all.

The third reason to be represented by an agent when visiting homes is that an agent working in your best interests will likely point out positives and negatives of each property that you may not have noticed yourself, and can provide valuable insight into specific things to consider when evaluating each home. That consultation may help prevent you from purchasing a home that you may later regret or give you further assurance that the home you picked was the right one for you.