Picture the scene: you put your home on the market and an estate agent brings a potential buyer to view it. The buyer likes what he sees, but wants to put in a lower offer. You aren't interested in accepting the lower price and reject the offer. The buyer goes away to lick his wounds and then a couple of months later approaches you again and offers to buy the property privately. Realising that you can save a fair sum of money because you won't be liable for the agent’s commission you go ahead and accept the lower offer.
In a different scenario, a loving daughter views a property for her ageing parents. She likes what she sees and urges them to take a look. The parents contact the seller directly, arrange to view the home and subsequently make a private offer on the property. The seller, realising that he can save a great deal of money by concluding the sale himself, decides to cut the estate agent out of the loop. He concludes the deal on his own – after all, the estate agent concerned had nothing to do with the fact that the home was sold as he doesn't know the buyers and never showed them the property.
Some more scenarios
Or perhaps a buyer deals with a number of agents and views the same property twice, with two different agents. He doesn't inform agent one that he has previously viewed the home and ends up buying the property through agent two.
And then, a buyer views a home with agent A, but realises that although he loves the property he can’t afford the purchase price. A year or so later, he sees the property advertised by another agency at a lower price and views the home with agent B. He buys the home at the lower price.
All four of these scenarios involve something called “the effective cause of sale” and thousands of cases like these have ended up in a court of law because the agent who introduced the buyer to the home in the first instance believes that he is owed the commission from the sale.
In all the cases above, an estate agent introduced the buyer to the property. It could of course be argued that where the daughter viewed a property and then referred her parents to the home, the agent had nothing to do with the subsequent sale. However, the question that needs to be answered is, would the daughter have known about the property if the agent hadn’t shown her the home in the first place?
Don’t cut the agent out!
It’s a complex topic and not all agents have won their cases. However, in cases where the courts have found that the agent who initially introduced the property to the buyer was the “effective cause of sale”, sellers have been forced to pay a double commission.
Sellers need to keep their wits about them and keep tabs on who is viewing their homes. It would be wise for those selling their homes (particularly those who are selling a second home in another area) to ask for the names of those who have viewed the property. It is also highly recommended that those who are approached by buyers who have previously viewed the home and who now want to conclude a private deal, think long and hard before accepting the offer.
Under-the-table deals may save money in the short-term; however, the costs associated with a drawn-out court case, plus the double commission that could be due if two agents are involved, could prove to be financially devastating.
