Real Life Investing With Jason & Rachel Wagner
“Real Life Investing” with Jason and Rachel Wagner is a multifaceted podcast that blends insights from real estate, entrepreneurship, family life, and political discussions. Known for their candid and engaging style, the Wagner’s explore how their conservative values shape their approach to both business and life. They often discuss their personal journeys in real estate, offering practical tips on topics like how to buy a house or investment property while navigating a challenging housing market.
In addition to real estate, the show frequently delves into entrepreneurial lessons, highlighting the importance of mindset, perseverance, and staying focused on long-term goals. They are open about the challenges they’ve faced and provide valuable advice for anyone looking to head into entrepreneurship or seek the best version of themselves.
Dinner table conversations are central to the podcast. The Wagner’s discuss their experiences balancing various topics that families face, while often featuring guests who share similar journeys. Political conversations are explored from a conservative perspective, particularly when they touch on how these beliefs influence their business decisions and personal growth.
With a blend of relatable stories and expert advice, “Real Life Investing” is a show that appeals to a wide audience, from aspiring entrepreneurs and real estate investors, to those seeking inspiration in their personal lives.
Real Life Investing With Jason & Rachel Wagner
63. How We Defended and Won a Real Estate Commission Arbitration
Today's episode, we discuss the arbitration case over earned real estate commissions we recently found ourselves in. In a claim that was brought against brokerage, we walk through how we effectively defended our commission and ultimately prevailed as the unlikely victors.
All right, welcome back to another episode of the Real Life Investing Podcast with Jason and Rachel Wagner. We're going to go over a cool one today, because we're actually kind of still celebrating this victory. This is like a real, this is a real victory. What was the victory, rach?
Speaker 2:We won the arbitration.
Speaker 1:Yeah, so we won a arbitration case. Yeah, so we won a arbitration case. And in realtor world, an arbitration case is when you have another agent that is actually putting in a claim of the commission that you have earned, saying that no, I actually earned that commission. You did not, I was the procuring cause on this sale, you were just another agent that was able to claim it, all right. So this type of stuff in the state of Illinois it's actually is what determines who earns the commission on the buy side transaction.
Speaker 1:So, for example, a lot of times when you show a property to a client, the client likes the property and decides that they want to move forward with an offer. Now, typically what happens here is that because of that showing the showing is what caused the buyer to like the property, to then lead to an action of putting in an offer lead to an action of putting in an offer and it was whoever the agent showed the property is the one that really is entitled to. That commission, because it all started with the first showing of that property, is what starts procuring cause. And so typically, as you're working with a real estate agent, you go and tour a property with that agent, that agent goes ahead and writes the offer for you and you close the transaction. Everyone gets paid, seller gets paid, attorneys get paid and that real estate broker that helped you with that transaction is going to get paid as well.
Speaker 1:But let's just say you have an instance where you have another agent that showed the property but you another agent wrote the offer, what happens here. So this is an example of like our actual case that occurred and so we're going to go over the details of what this case was and it took. I mean, we first got notice of this we closed on the property back in february and we got notice of the, the arbitration request in may and just two weeks ago, two or three weeks ago, we finally settled that arbitration case for this commission we won.
Speaker 2:we didn't didn't settle it, we won.
Speaker 1:We finally won. That's right. That's going back to the victory stuff.
Speaker 2:There were attempts to settle, but we did not settle. We won. Yeah, so are we going to? So we had previously recorded what happened after the mediation. Are we going to publish that and then tag this on to the second half? So there's that history. Are we just going to kind?
Speaker 1:of start fresh here. We might have to listen to that, but no, I think we should just go over everything here.
Speaker 2:Okay, so the whole thing, yeah, yeah.
Speaker 1:Here's how to win an arbitration case.
Speaker 2:Well, I don't know if I want to issue that endorsement out there.
Speaker 1:Well, here's how we won an arbitration case.
Speaker 2:Okay.
Speaker 1:All right, well, because you're kind of like the legal expert, even though you are not an attorney, but you just have like this legalese that's like built up in your stomach and just spews out. It's pretty, it's pretty fabulous to uh to have in in a situation like this.
Speaker 2:Yeah, I did take a lot of pride when the mediator asked me if I was an attorney. I was just beaming. I'm like no, I'm not, but I wish I was. If I could do it all over again, I probably would. But as you've said many times, I'd be a very angry person if I was an attorney.
Speaker 1:Yeah, and so what's actually funny is that so you can get an attorney to help represent you on these arbitration cases, but the reality is is that the commission wasn't enough to have an attorney included on this, so we had to represent ourselves. Because here's the thing, it's like the commissioning question. It was like $10,000. Okay.
Speaker 2:Which is significant, for sure, yeah.
Speaker 1:But that is not enough. To pay an attorney to represent you on a case, right? It's basically I don't know what an attorney fee might be. It might be the whole commission, it might be more than that, right? So it literally makes no financial sense. We are the ones that are currently holding the commission, and then for us to say, well, we're going to hire an attorney who might charge us that same amount or more like it, literally doesn't make any sense, so it leaves us with representing ourselves in this whole process.
Speaker 1:And now this arbitration process is a full-blown trial, Like it is. You're in front of the realtor board.
Speaker 2:Right, which is essentially the jury, which is a jury.
Speaker 1:It's a panel of five people plus an alternate in case somebody gets sick or something during the middle of it. And then you have opening statements, you present your evidence, you have cross-examination.
Speaker 2:Or witnesses.
Speaker 1:No Cross-examination. First you present the evidence and then you can cross-examine the evidence and ask questions, and then you have witness and then you can cross-examine the witness and then you have closing statements. Okay, this is a full-blown trial.
Speaker 2:With no judge but.
Speaker 1:Right.
Speaker 2:Yeah.
Speaker 1:But the decision at the end of this arbitration is all or nothing. So this $10,000 is either going to be retained by us or we're going to have to pay it to this other person that is claiming that they are due the commission Right. So it's a big bet. This is a big bet. There's a lot of money on the line.
Speaker 2:Yeah, for us, not the other side. So that's what was pretty interesting about this whole thing too, is because our brokerage was the closing brokerage for the deal. We retained the commission and paid it out the what would you call them a claimant. The claimant, you know, had only what? 250 dollars filed to claim or to submit this complaint, and that's all the skin they had in the game that's all the skin that they had in the game.
Speaker 2:Yeah, it's 250 bucks so they just come out and make this. You can make wild, very limited evidence.
Speaker 1:I feel you can make wild claims that you are the ones that deserve the commission. You can tie up somebody's time because, like if we were to calculate the amount of time that we put into preparation for this, because, again, it's like getting us all up to speed on what is our case, finding out all the details, talking to a witness, getting all the details from there and then being prepared multiple times, well, and we had to submit it all in writing.
Speaker 2:So you had to submit your write-up, submit all your evidence, your exhibits, far in advance, far in advance, yeah, yeah. So let's, let's go through the timeline so you mentioned, you know, property closed, or how do you want to go through like what actually happened with the clients and the broker.
Speaker 1:Yeah, yeah so. So essentially what happened is that we had a repeat client that was working with one of our agents, and when I say repeat client, there was also like even a close relationship, relative tie to that client and the agent. So this would have been their third transaction together and so they Second and third because they had sold.
Speaker 1:Yeah, second and second and third transaction because they were looking for their upgrade house. Our agent helped them buy their current house. They were looking for their upgrade house and then our agent helped them sell their their house again. Right, so, as they're looking for the upgrade house, they have already established communications with our agent. And, you know, when they saw each other at family events kind of leading up to it, they're like, hey, we're thinking about, you know, next year is going to be our time, and so, anyways, they were kind of like preliminaries to discussions that already occurred. And then, actually the morning of when the showing occurred, they reached out to our agent and said, hey, we're ready to like start looking at houses. Like we're getting really serious. You know, is there a time that we could sit down next week and talk through some things? And our agent response says, oh, that's awesome. Yeah, great to hear. We'd love to help you. I'm actually out of town right now. I'll be back next week on Monday, but happy to do that.
Speaker 2:Yeah, so this was a Friday morning.
Speaker 1:This was a Friday morning. He's just out of town for the weekend. Yeah, so he's out of town for the weekend. And so the buyers, they go ahead knowing that our agent is out of town. They really don't say anything else after that, but they just know in their heads hey, you know, let's, let's take a look at, you know, Zillow. And they found a house that they like, and so they clicked a button on Zillow that said tour this house. And so what happens? When you click that button on Zillow, you are agreeing that somebody's going to reach out to you and try to set up a time to go see the property.
Speaker 2:Somebody, as in a potential buyer's agent.
Speaker 1:It is somebody who is trying to win your business. You have no idea who that person is that's reaching out to you, but it's a licensed agent who is not listing the property in question.
Speaker 2:They are just an agent looking to hopefully earn your business. Yes, so I think there's a misconception for many people when they use Zillow and Redfin that when you click book a tour request that you're going directly to the listing agent and you're not, you're just getting paired with some random person out there who's paying Zillow or Redfin or whoever to get potential leads, so you get connected with somebody who's hoping to be your agent.
Speaker 1:Yeah, yeah, and you know that that agent that you ultimately end up meeting at that property. Some people don't even know who that person is Like, they're just. They just know that, oh okay, you're the one that I was talking to on the phone and setting up the appointment. There's been many cases where I've heard where people have met somebody and they're like you know, so, you know, tell me about the sellers, right?
Speaker 2:And then that agent has no idea about the sellers because they're not the listing agent right, because there's this misconception that you're booking the tour just with the direct person listing it and it's the exact opposite.
Speaker 1:Yep, Yep, Exactly. And so when you are the agent in that situation. So I've done this, I've done, I've done Zillow, and it's a great way to meet potential people and also just have an opportunity where you could maybe help them with this purchase. More than likely, the person is not going to buy this house, the one that you're showing them from Zillow. But I'm usually asking hey, are you already working with an agent or are you pre-approved, Like I'm just trying to like on those tours? You're just trying to find out some information about them to see if you could take it a little bit further.
Speaker 1:More than likely, what you end up doing is that you'll end up, if they're not represented and you have a good rapport with them, you can find them another house. But this first meeting is really kind of like getting to know them and like figuring out their situation. You also know at the same time that there's a potential chance that that person walking in the door is already working with an agent, that there's a potential chance that that person walking in the door is already working with an agent. You are kind of rolling the dice on hey, this may not be worth my time, but maybe it's something. I can develop a relationship with, or maybe the agent that they're working with they haven't talked to in years, but they'll say that they're working with somebody. But you might develop a better relationship with them in which there's a chance that you could earn their business, and so this is kind of like me putting myself in the claimant's shoes. Here is that that is kind of how he treated the situation.
Speaker 2:Yeah, so clients hit book tour requests. They get a tour for later that afternoon. They get the call from this other agent. We'll refer to them as the Zillow agent. That's the easiest way and they book the time and they go and view the house, spend about 15, 20 minutes walking through with this agent. The Zillow agent gives them like a marketing binder that had some things in there about his brokerage and himself, and then they part ways.
Speaker 1:Yeah, in that marketing binder they also had like hey he. He gave a preliminary estimate of what the house was. He thought it was overpriced. Yeah, that's true, so in conversation, those were good details to include here, because so, basically, that agent had tried to show that they had done some homework on the on the property and said you know, we think the house is overpriced and, you know, actually gave them an opinion on that.
Speaker 2:Yeah, and by opinion. It was a couple printouts of listings with some red marker notes on there. It wasn't anything formal or that was drawn up in like an actual analysis report and it was very informal. Just a couple scribbles, yep, and then the Zillow agent was able to obtain the client's contact information and took that as I'm going to sign you up for emails.
Speaker 1:Yep Emails from MLS to get other searches, yep. So he probably asked them on the showing, you know, oh, do you have a current house? And because he was able to obtain that address, and he set them up with the automated MLS search, and so, anyways, they do part ways after that and he set them up with the automated MLS search and so, anyways, they do part ways after that and those buyers end up calling our agent and saying, hey, I know this is out of the blue, but we just went and saw a house, we really kind of like it and we'd like to get your opinion on it, considering maybe putting in an offer. And our agent responds with, oh, wow, okay, sounds great. I mean, you guys are really moving and shaking. Let me give you a call here in a little bit.
Speaker 1:And so they discussed the property. Our agent also asked hey, you saw the house. He was actually wondering how they saw the house, and so they told him that you know that they booked it through Zillow. And you know his first question was hey, did you sign anything with this other agent? And they said, oh, no, no, you know we had full intention, like we were just going to see it and you know you were going to be our agent. And he says okay, and so they proceed to move forward on kind of next steps and really this they had just started their search and they weren't even pre-approved yet, right? So they, they had a house to sell. They weren't really sure if they could buy the next house without selling that, and so they you know our agent ended up introducing them to a lender just to get them pre-approved and kind of figure out their their situation. So that was that night. This is still like Friday night, the day of the showing.
Speaker 2:Yeah, and our agent also made contact with the co-listing agent that first night just to see what was going on with the property and the co-listing agent said well, I'll definitely let you know, you know, if we end up asking for highest and best.
Speaker 1:Yep, but they at the time they didn't have any offers.
Speaker 2:They did not. At the time they didn't have any offers on the property, so he just called the check status.
Speaker 1:Yep, so that's an important piece there. And so a couple of days go by. Now we get to Sunday and the buyers now have a pre-approval. The buyers have sat on it. The buyers had talked to our agent and said we'd like to go see it with you when you come back. And our agent is coming back on Monday, and they were going to originally do that.
Speaker 1:However, our agent wanted to check in again and just figure out, because he had that first initial phone call. He had found out that, oh, actually, the seller has received another offer and now they're requesting highest and best by Sunday, and our agent relays that information to the buyer, letting them know hey, actually, you know, we can't wait until Monday. They're asking for highest and best because now they have multiple offers and if you really like this house, like we need to, we need to submit. And so that caused our buyers to then all of a sudden be motivated to submit the offer. Okay, they felt confident from that first showing, from what they saw, to submit the offer. And so we came up with a pricing strategy and a way to win, using escalation clauses and just more of a sophisticated way to write the offer, ultimately, end up winning, ultimately end up doing the inspection, moving forward closing on the transaction.
Speaker 2:Okay so and well, let's just also add in here. So about eight days after that initial Zillow request they hear back from the Zillow agent for the first time and the Zillow agent emails them a generic email and just says hey, you guys went radio silent on me. Is there anything else I can be helping you with? You got any questions? Let me know. Send a real generic email. Two days later the clients respond to him and just say sorry, we've put our search on hold and no longer need any help. And then they were unsubscribed from the searches, the MLS search that they set up, and that was all the communication. That was it. So in between that, eight days, no follow-up phone call, no text messages, no email specific to that property, no communication. Just eight days until that generic email. And then that was it. That was all the communication they had with that agent.
Speaker 1:Yeah. And so as we get into three months post closing, I receive an email from the competing brokerage here, from that Zillow agent, saying we saw that this property closed with one of your agents. We were actually the one that showed the property first and we're filing a procuring cause claim on it. And so when you file a procuring cause claim, you have to submit your evidence.
Speaker 2:And so that evidence didn't they ask you like a question, Like do you have anything to yeah, yeah At first at first.
Speaker 1:they reached out to me and I and I responded back with him and just said I don't agree with the claim. This is a repeat client and that was it.
Speaker 2:So you said, and their family, I think.
Speaker 1:Yes, repeat client and their family of our, of our agent, and so super short response. Okay, well, that led into them providing all of the evidence that they had.
Speaker 1:Well, actually submitting the and submitting the submitting the arbitration request, and so you don't have to directly go to arbitration, where you're in front of a panel. You have an opportunity where you can go to mediation. Mediation is where it's really more of an informal practice, but it's led by a mediator who you have an opportunity to kind of present both sides of the case and both sides will be there discuss. So we went, the other parties were there as well, and during that mediation we actually kind of learned a lot. We learned about it from our perspective is that the mediator defined what procuring cause is, and why don't you just read over that definition real quick?
Speaker 2:well, he actually didn't define what procuring causes.
Speaker 1:He asked us to define it but he asked us to define it. But he ended up going into the procuring cause definition.
Speaker 2:Yeah. So it says a broker will be regarded as the procuring cause of a sale, so as to be entitled to the commission, if his efforts are the foundation on which the negotiations resulting in a sale are begun, a cause originating a series of events which, without break in their continuity, results in the accomplishment of the prime objective of the employment of the broker, who is producing a purchaser who's ready, willing and able to buy real estate on the owner's terms. So some key things I'll just point out in there is that the efforts have to be the foundation on which the transaction started. So what actually caused the series of events to begin? And there was no break in the continuity of the series events. So that is very critical. We'll get to that. And then also the broker has to be producing a purchaser who's ready, willing and able to buy real estate on the client's own terms.
Speaker 1:So all of those things are key things we'll get into here in a minute yeah, I think you know from the other perspective you may be hearing this and you're like Jason. I have no idea how you won this.
Speaker 2:Right, because, well, we were certainly concerned at the beginning too, because we're like, well, technically, the Zillow agent showed the property and the showing of the property is what led them to submit an offer. And, of course, the claimant's argument was we did the work, we showed a comparative market analysis and we showed the property and your agent just wrote up the offer. And from the surface and from high level and from afar, that's definitely what it looks like.
Speaker 1:When we first got that we were shaken in our boots.
Speaker 1:We thought we were totally done. We thought that we were going to lose this in our boots. We thought we were totally done. We thought that we were going to lose this. Although, as you start, what we learned during that mediation was that there were holes, and this is when the expertise of Ms Rachel over here was able to really kind of pinpoint some things that look, when you start saying what started the series of events without interruption, it could be the showing yeah, and I think that's what in most transactions, you're going to argue what started the series of events of a transaction showing the property showing the property yeah, when I saw the property then I decided I wanted to move on it right super simple, high level right.
Speaker 1:Well, you could say well, people make, you know it't necessarily. That couldn't necessarily happen, because sometimes people make blind offers on properties, right. So part of me was like well, I'm taking that angle was that there was no follow-up from that Zillow agent after he showed the property for eight days?
Speaker 2:Right, which created a break.
Speaker 1:Which created a break which created an opportunity for our agent to do actions to create a new chain of events. And really what we proved during this arbitration case was that the chain of events did not start with the showing. The chain of events started once our agent found out there were multiple offers on the property, which then caused our buyers to be motivated to submit the offer. Without that notification of multiple offers, they would have went and saw the property on that Monday with our agent and then there would have been no procuring cause claim at all.
Speaker 2:He would have already lost it right.
Speaker 1:Yeah, he would have totally lost it right, Because then they showed the property again then, which led to the offer and eventually closing the transaction.
Speaker 2:And some things that helped us prove that were there were still text message communications that our broker still had record of. That clearly showed that, okay, we're gonna sit on it for the weekend, we'll connect with you on Monday. So there was clear communication that showed we weren't ready to submit an offer Friday night. We also weren't ready to submit an offer Saturday. We weren't even pre-approved. It was not until the broker made that phone call to the listing agent and then back to the client and said, hey, you guys are going to have to make a decision or you're going to lose it, right. And so having that written documentation of text messages um was key because otherwise it would have been hearsay really, which maybe still would have won. But I think it would have been harder for people to believe that, especially knowing, like the relationship and stuff.
Speaker 2:I think yeah, yeah, so like hold up before you go any further, I wanted to go into um, relationship and stuff. I think yeah, yeah. So, like I also hold up, before you go any further, I wanted to go into um. So, as you go through the quote of ethics and arbitration manual, there's it's like what is this? Like 10 pages, it goes into what defines a break in the series of events, and so this is what the argument really came down to is whether or not there was abandonment from the agent. So in this case, the Zillow agent. Did the Zillow agent abandon the client? And so, because he waited eight days to reach out and his reaching out didn't even consist of a follow-up of that specific property, we were able to prove that he, or argue that he abandoned the client. He didn't make any effort and we argued you know, in a spring market in February, what are you doing? Waiting eight days to follow up with somebody who went to see a property on a Friday?
Speaker 2:We were also able to prove that, like he didn't even contact the listing agent to find out information about that property, to know that there were multiple offers.
Speaker 1:And I want to add to this too, because the mediation is really where we learned a lot about these guys and the way the confidence that was shown during that mediation proved that this was more of a scheme and this wasn't necessarily them trying to do good faith effort here, and this was, this was a total scheme.
Speaker 2:No, because had he actually reached out to the clients, we probably would have lost. Right, Honestly had he just made a phone call or a text message, it would have been a lot harder for us to win, and how do I know it was a scheme.
Speaker 1:Okay, so here's what he stated during the mediation. Is that, well, the client showed that they had extreme interest in the property and we kind of immediately questioned and said, well, if they had extreme interest, why didn't you reach out to them?
Speaker 2:I asked that question right away and he's like well, I probably did. I got to sit here and search in my text messages. And then he starts scrolling his phone for five minutes.
Speaker 1:He thinks that he reached out to the client again after the showing. In reality, all he did was set up an MLS search. He didn't ask them anything about that current property that they just saw.
Speaker 2:He didn't ask them if they wanted to see other properties.
Speaker 1:No, he just sent them MLS searches.
Speaker 2:Here's more properties for you to look at Automated MLS searches.
Speaker 1:Automated which is different, not hand-selected Automated and then sent a follow-up email eight days later saying hey, you guys went radio silent on me. Any questions for me in the arbitration is that well, I'll cross-reference after public record showing who now owns those properties. Compare that to who I've shown the properties and then file a procuring cause, claim and you know what the amount of confidence.
Speaker 2:I can't say this for a fact, but my hunch is the amount of confidence that these guys showed during the first mediation was that they had been in this situation before and they had won and he's a real estate agent, and then the two agents on the opposing side, you and our agent, and then me and I actually did the presenting, which was probably really good because both both Jason and this other guy were definitely heated. Even the mediator at one point said, wow, both sides are quite confident. It was kind of funny. But seriously, within like two minutes this guy, like his physical body language, was just throwing arms up in the air and making you know obnoxious gestures and just trying to find like the right word to describe I would say arrogant. I wouldn't have said confidence.
Speaker 1:I would have said arrogance.
Speaker 2:He was very aggressive to the point where, seriously, within two minutes of me talking, showing our case and then asking him a follow-up question, the mediator had to tell him to calm down.
Speaker 1:Right, I mean, he was just so crazy. That's the type of hothead we were dealing with on the other side.
Speaker 2:That's a great way to put it.
Speaker 1:Yeah, he was very.
Speaker 2:He could not control his emotions around this. And it's crazy because, again, it would have been a much stronger argument had he tried to win that business but he didn't. So to have that level of arrogance, knowing you never even followed up with these clients, they never followed up with you and now you think you can claim $10,000 of commission, was just like. What kind of person are you? Yeah, it was just crazy.
Speaker 1:to me it was a scheme right, and so again, let's describe what the scheme is here. So the scheme is here. So the scheme is is that I show the property. I'm a Zillow agent. I get connected with buyers, you know, maybe five to six a month or something like that. It could be more Okay and so I will go and meet those buyers and show the properties.
Speaker 1:Okay, I'll do my best, you know, try to set a rapport, get them on an MLS search. Maybe they'll reach out again. But I won't actually do any follow-up with them. You know that's all my follow-up because I know chances are the people aren't going to buy that house. They're going to buy a house. You know from me, you know that's down the road and so part of my process is going to be.
Speaker 1:Well, maybe once a year or twice a year I'm going to go back and I'm going to check what are all the houses that I showed through Zillow, who were those clients and do they own any of the houses that I showed, right? And if they do, and how do I find out of the houses? Because it's all public record, right? And so the moment that you close on a property now, three months later, the county records who is the owner of that property. And if you don't have it in an llc, it's going to go in your personal name and that personal name is going to be shown.
Speaker 1:If you just do a little digging, go out to the county site, you can see who owns that property. You can also check in the MLS to see that, oh, it was done through this agent. And now, oh, I see that John and Susie bought that house over there. I was actually the one showing it, but Sally, the real estate agent in that brokerage, they're the one that closed down in the MLS. So now I can tell my managing broker over here hey, I was actually the procuring cause and I could show them that I showed that property, show them the work that I did. And now my managing broker thinks that I'm the one that did all the work and he's going to file the claim against that other brokerage. And that's exactly what happened.
Speaker 2:Yeah, so I wanted to go back. We were going through the definitions of how you prove a break in the chain of events. So the first one was proving abandonment, which I think we've already said several times. He abandoned the clients by not following up the listing agent, not following up the client specifically on that property, and he waited eight days for any communication at all. The second piece is estrangement, and that would be the opposite side, that the clients chose to estrange themselves from the agent, and then you have to say why, that there had to have been a reason, something that the agent did that they didn't like, and in our situation it was fit. And the analysis of the property that the agent gave you know he gave them an argument I think we said this in our first write-up that he said oh, I actually know the listing agent here and they have a history of listing the property low, so I think you could get this for 20,000 below listing price, which is laughable.
Speaker 1:I have a history of listing at high.
Speaker 2:Oh, that's yes. That's what I meant to say, nice.
Speaker 2:Okay, so he suggested to them that they could get it 20,000 below. And the clients are like, no, no way that that's accurate, you know so they were very polite with this agent but that was enough for us to show and we had that in the write up that he gave for his comparative market analysis. That showed that. That was enough to show that. You know that the clients estranged from him. So we had both abandonment and estrangement to show the break in the chain of events.
Speaker 1:Yeah, Right. So ultimately it comes down to yeah, the showing did a lot, but was it the procuring cause of the sale? And that's where it takes a well-crafted argument to prove that procuring cause did not start with the showing. Prove that procuring cause did not start with the showing.
Speaker 1:It started with actions that came after that. And the actions that came after that were from our broker, who informed them through follow-up from across the country, through a few phone calls. Those actions were what caused the sale and so notifying the buyers. Hey, there's multiple offers, we can't wait any longer. As much as you want me to get eyes on this, I can't, but if you want it, we have to submit an offer now.
Speaker 2:Right, because, like you said early on in this episode, had the agent not made that phone call to the listing agent you know they they were on vacation, so they certainly didn't need to do any work. But had they not made that phone call, the agent, our agent and the clients would have never known that that property was requesting highest and best offers and if they waited till Monday they would have missed out. And then I think at one point we even argued had they gone with the Zillow agent, they also wouldn't have known because he didn't follow up. And had they submitted an offer that was arguably $20,000 below listing price, they wouldn't have been close in the competitive range because they had multiple offers. So all of these scenarios would have resulted in no commission in question.
Speaker 2:So it really came down solely to our agent's actions and then the client becoming ready, willing and able to buy real estate. So that was the other piece of this, and the definition is that the client had to be ready, willing and able to buy real estate on their terms and at the time that they show saw the property on Friday, they were not pre-approved and they also had not made a decision to want to put in an offer. It was not until Sunday that they were then pre-approved and they had made the decision to move forward on the property. So all three of those things, I think, is what won this.
Speaker 1:Yeah, totally. What's really funny is so we brought in a witness in this arbitration case and the witness was the buyer. Before, before the buyer comes in, you know, the opposing party says in his opening remarks he says you know, you're going to hear, as he's presenting to the panel, you're going to hear the other side parade their witness in and their witness is going to lie about all kinds of things. And I just thought it was just so fascinating that you would start with letting you know that this buyer is going to lie, in which, just five minutes prior to that, we had all raised our right hand and said we swear to tell the truth, the whole truth and nothing but the truth, which is really funny. But you know, we swear to tell the truth, the whole truth and nothing but the truth, which is really funny. It's so like it is a very serious setting.
Speaker 2:And he opens his opening remarks with saying well, the witness is going to lie and so, anyways, we had just obnoxious, especially when you're trying to argue that you earn the commission from that person's transaction.
Speaker 1:Right, right. Yeah, it's not a good approach to take if you're trying to win over a panel, in my opinion, from that person's transaction. Right, you've got some serious balls, man. Yeah, it's not a good approach to take if you're trying to win over a panel, in my opinion, because you haven't really you don't insult the client.
Speaker 1:No, and you certainly didn't prove that he lied about anything, so that was another price. But so each side does have an opportunity to ask the witness questions, and so we all know that the witness is coming in. You have to give at least 15-day notice that there's going to be a witness there, and we gave plenty of notice. Honestly, this arbitration was supposed to be scheduled like a month and a half in advance of when it actually took place, but it ended up getting canceled by the other side because of scheduling conflicts, in which really grinded our gears, because it got canceled the week of, so we were already preparing to be ready to go, and then it got canceled, and then it got delayed for like another month and a half. So then we had to re-prepare again.
Speaker 2:Well, and what's so frustrating about this is like so we had done the mediation and then we're waiting for the arbitration to get scheduled.
Speaker 2:Well, when you do that, you have to submit in writing your entire write-up, all your documented evidence and who you're calling as your witness. So you've got to put all of this effort and work up front. So that's when you're most prepared to go in and do this argument right. And then each side gets the opposing party's write-up. So they then get our write-up and then they request this extension. So then they get even more time. Like you said, it was like a month and a half where they got even more time with our written argument to review and prepare, and then a month and a half later, like we haven't been sitting here every day reviewing the details, preparing to go into this and the whole, the whole key to winning any argument, I feel like in any trial, is being prepared. Like you need to know the case in and out. You need to know every detail, because the second they say something you need to be ready to clarify or question or prove wrong.
Speaker 1:You're so right. You're so right Because, actually, as I called our attorney, Kathleen, and I told her, I said you won't believe this, but we won, we won baby. And she's like oh my God, I'm so happy for you. And she's like she's like, oh my god, I'm so happy for you she's like she was like she was honestly shocked. She's like, honestly, I thought that you guys were going to split.
Speaker 2:Well, that was her recommendation in the beginning when we talked to her is just offer something, and we did in the mediation. So that's what was interesting when we talked about the confidence and the arrogance is initially we offered like a showing fee. That was our kind of insulting, like yeah, we'll give you 250 bucks for showing the property or whatever, and that was a no and then eventually we came back to 50 50 50 we were gonna. We offered him 50 of the commission.
Speaker 1:He still said no yeah, I, I that was. I couldn't believe. Like you're sitting there, you can't find any communication with the client that was the confidence and the arrogance from the other side and it just that, that type of denial, they said that they would settle at 75.
Speaker 2:Yeah, they wanted 75% of the commission and they couldn't find a single communication with the client.
Speaker 1:That type of arrogance and confidence. Just it really proved to me that they had been there before.
Speaker 2:Right yeah, and probably had won, and so that was scary for us.
Speaker 1:It was totally scary.
Speaker 2:What are we missing? Why are these guys this confident and they kept saying this in the mediation is what started the chain of events was the showing. The showing started the chain of events. It doesn't matter that you were already established with an agent, it doesn't matter that he did the work afterwards. We started the chain of events. So we won the commission and we're sitting there just like crap. Yeah, because in reality.
Speaker 1:Like you know, we know the rules, but we don't know them in that fine detail.
Speaker 2:Yeah, we were not.
Speaker 1:And so are we missing something? And so sure again, like when we first started this episode, we were saying like, in reality, I thought we were totally toast, I thought we were totally toast, I thought we did something wrong, I thought we did it wrong.
Speaker 2:In which I'm not going to lie we, we certainly had a fault here.
Speaker 1:Right, we did not reach out to the agent and say hey, I know that you, you know, show the property, but I've actually been working with these guys and you know, unfortunately, courtesy call again yeah, and so, and so we, we recognize that we had a fault there, um, and we weren't perfect, and so we recognized that we had a fault there and we weren't perfect, and so, but at the same time, you know, and that was kind of our offering during the mediation hey, okay, we recognize you did some work. Here's a showing fee.
Speaker 2:Right, it was also kind of like a backhanded offer.
Speaker 1:Well, yeah, you know, 250 bucks I mean for an hour's worth of work.
Speaker 2:It was like 15 minutes, Like it wasn't even an hour.
Speaker 1:Well, a little preparation driving there. Okay, you know $250, not bad, right Okay?
Speaker 2:Literally very fair. You printed the slides from the MLS. You didn't even do your own analysis.
Speaker 1:But sure yeah, sure Right, but sure I get yeah sure, right even a 50, 50, five thousand dollars is an insane offer.
Speaker 2:Yeah, I was shocked. It's an insane offer. The broker was willing to offer that.
Speaker 1:You and I were kind of like, okay, yes, well, let's see, it's your money so so once we both parted, once we parted ways from that mediation, we're like we're gonna win this and we're find a way to win, and we really kind of figured it out. I don't know what it was, but we fit, I think, what we figured out. I read an article.
Speaker 2:Well, you read an article an article that went into the abandonment and the estrangement.
Speaker 1:Okay and that and that's really good, and I think we also, and then we also just remembered everything that we learned from about these guys during that mediation. This guy did not have proof of follow-up and he didn't submit it as part of his evidence. He also didn't submit it as part of his final evidence.
Speaker 2:Yeah, so we were waiting for that. So what we had from the initial arbitration was their initial write-up. They have the burden of initial proof or whatever, but as we were sitting there in the mediation, he's scrolling through his phone. He's like, oh, I know, I've got it, I know, I've got it in here. Like I know, I followed up with them.
Speaker 1:And I think you asked again like did you find it?
Speaker 2:Yeah, I asked several times in there because I knew if he had that we lost. Yeah, and so we said that the whole time scheduled we each had to submit our packets or whatever. And I'm looking through their submittal. I'm like they changed nothing, not a single word on their submittal. They didn't. I'm like they have nothing. They have nothing else. Like they should have made their write-up so much stronger but they literally had nothing else to add.
Speaker 1:yeah, they had nothing else.
Speaker 2:They had nothing and he finally admitted in the actual arbitration. When you questioned, you know, did you follow up with him? So in the mediationiation he's like, oh yeah, I did. You know he's scrolling his phone. But then in the arbitration you asked and he's like no, well, why not? What did he say? I didn't have time or something.
Speaker 1:He said he didn't have an opportunity.
Speaker 2:He didn't have an opportunity to yeah Within Because they had already submitted of followup. Yeah yeah, you didn't create an opportunity cause you didn't follow up with the listing agent to find out the timeframe. I mean just basic, basic agent tasks, right, like even before you go to the show. I want you to reach out to the listing agency. What's going on?
Speaker 1:Yeah, what I want to go back to was that when you have this witness is so you have an opportunity to be prepared, and what you said was it all comes down to who is the most prepared in these cases. It's exactly what Kathleen said Whenever she's one, she says it all comes down to who is most prepared in any type of any type of trial case, not just arbitrations between realtor commissions, but like she also litigatesates and we had 45 questions for our witness 45 the amount of questions that the other side presented was just five yeah, and we had questions prepared for for the zillow agent as well, which we weren't even totally sure you were going to be able to question him, but we had them prepared anyway, just in case.
Speaker 1:Right, yeah. Yeah, we weren't totally clear on what the whole process was.
Speaker 2:Yeah, it was like walking in blind.
Speaker 1:But at the same time. That's just our over preparation here was that we were prepared for a number of different scenarios If we had a chance to actually question the other side. We had a list of like 20 questions that were available. I didn't give them all 20, but I, yeah, I gave them a number of them and and, honestly, as I I kind of went off, I went off script too because I was so sharp, right?
Speaker 2:that's why you have to be prepared, so you can go off script.
Speaker 1:Yeah, I was so sharp in the details because you're going to get all of these questions from the panel and if you can't give a response that is very coherent, confident, and ties to your argument. Yeah, and be quick with it, Right? It doesn't help your argument. And so you just have to know the facts. And we were just way more prepared. And so what do we say? Like going into it and then coming out of it. God, we're going to crush these guys.
Speaker 2:Yeah.
Speaker 1:Like we actually wanted to crush them.
Speaker 2:Well, after, after the behavior at the mediation, like I had told you after this, I said you know, had he not behaved the way he did at the mediation, I didn't know that my drive would have been as strong to come out and literally say I wanted to crush him. But because of how he acted and how he treated me, I was just like this guy cannot win, this guy doesn't deserve to win. He didn't even do the work, you know. And then to be that arrogant and disrespectful in that setting, I was like you're going to lose. We are literally going to show you and you're going to lose.
Speaker 1:Yeah, yeah, so we had our prepared remarks. It took me about 10 minutes to present my first initial evidence, and then I had about a five minute closer too, and really one of the closers was, you know, just kind of outlying the scheme.
Speaker 2:Yeah, it went into ethics which. I don't know if that helped or didn't, but it was kind of like a okay panel. You're all real estate agents yourself, and is this the type of scheme you want going Like? Is this really the intent of procuring cause?
Speaker 1:Right? Is it Right? No, is it the intent of having Zillow agents not follow up with anybody, not show really any fiduciary duty, just be there to open a door, not?
Speaker 2:show really any fiduciary duty, just be there to open a door. Well, we even went as far as to go into. You know what is disclosed to the client when they click book a tour on Zillow, because it clearly says that they're under no obligation to work with the agent that they get paired with and then also showing the terms and conditions of being a Zillow agent. It clearly says you do not have an exclusive right to this agent or to this client. Clearly says you do not have an exclusive right to this agent or to this client and in order to represent them, you have to get written. What's it called? Exclusive, whatever?
Speaker 2:exclusive agreement or whatever, but basically have an agreement with them that says you're representing them, so like this guy agrees to this as being part of a Zillow agent, and then it's like ask you what I'm going to go after this commission even though I didn't do anything Except show the property.
Speaker 1:He showed the property, yeah. And so we questioned them at the end and just said you know, we don't agree that a favorable ruling in their favor is the idea behind procuring cause, because it's totally replicable.
Speaker 2:Right. And then you went as far to say and if it is, I've got a bunch of procuring cause claims myself.
Speaker 1:Totally, totally, because I could set up the exact same thing and I could say well, I'm going to go back of all those Zillow tours that I showed and I'm going to cross-reference with now who owns a property.
Speaker 2:And some of them did happen, because you did get phone calls a couple of times from agents who's like hey, like we said hey, you showed a property to my clients, just reaching out to let you know they're my clients, yeah, right.
Speaker 1:And you're like, all right, yeah, whatever, and you walk away and that's happened, that has totally happened, and you know it is what it is and I've never filed any type of procuring cause, no, but again, if we would have lost this, it would have set up an opportunity. Well, now I could totally exploit procuring cause because we just lost that, so now I could go do it to somebody else. Right, it just sets up a terrible precedent.
Speaker 2:Well, and I think so. One thing we were concerned about is some of the panel members and being agents before services like Zillow and Redfin existed. Right before services like Zillow and Redfin existed, right Like historically, it was kind of the showing that was the basis for procuring cause, because historically clients couldn't just go out there and book tours. They had to go to a brokerage's website and get truly connected with an. They either had to have an agent themselves or they had to reach out to the listing brokerage website and get a tour. These services that allow clients to just see a property on the same day didn't exist before and so there was a little bit of concern about anybody on the panel who may not be able to get past the mindset of the showing is procuring cause.
Speaker 2:The showing is procuring cause. Whoever presented the property to the client wins, but you have to go and look Well. The Zillow agent didn't present the property. The client wins, but you have to go and look Well. The Zillow agent didn't present the property. The client presented the property right Like. The Zillow agent didn't do anything to find that property, to present it to the client. The client actually did it themselves and they did it under the notion that they were just booking a tour. They weren't looking to find an agent.
Speaker 1:So the Zillow and the Redfin have kind of created a little bit of a I don't know what the word is, but they've changed how you can't say Redfin because they have a different model. So Redfin does it totally different. You would get connected to an actual Redfin agent, I believe.
Speaker 2:Yeah but that's the same thing.
Speaker 1:No, no, no, no, no. Redfin actually has agents. Redfin is a brokerage. Zillow is not a brokerage.
Speaker 2:Oh, I see, because Redfin is a brokerage that makes the difference. But even still they're getting connected with somebody who wants to represent the client as an agent.
Speaker 1:No, Redfin actually has their own agents.
Speaker 2:Yes, and those agents want to represent the client.
Speaker 1:Well, yes, All right, sorry. Yes, you're right. Yeah, they want to represent the client Ultimately at the end of the day, like you know, the question that should have been asked is are you working with another agent right now, Because our buyers probably would have said, yes, we are.
Speaker 2:Yes, yeah.
Speaker 1:And we've been working with him on our last transaction and we intend to work with him on, you know, moving forward.
Speaker 2:And, in fairness, the clients couldn't remember if that question was asked. But as we talked with them, my take on that was you would have remembered Because it was never asked. You would have remembered because it would have made you uncomfortable.
Speaker 1:We asked the other side if they had asked the buyers are you working with another agent? He said no.
Speaker 2:He said no, he didn't ask that question because in the mediation he didn't remember right, yeah, well, he didn't ask that question yeah, so anyways, and so yeah yeah, ultimately that was a big, that was a big victory it was worth the work
Speaker 1:yeah, yeah, I really kind of look at this as like boy. That was like, yeah, like, when you do business, when you do a lot of transactions, the reality is that you're going to open yourself up to potential lawsuits, and that's just what business is. Is that there is a like you're always going to have something that you know may not go perfect. You know you put in your best practices to make sure that you you mitigate that risk, and you know we've we've certainly put in more. You know additional practices in which we, we knew, like when I first heard about this like ah, shoot, we should have, we should have followed up, and our agent knows that.
Speaker 1:But at the same, at the same time, you have to be ready to fight and we totally could have just laid down here and we almost did. We offered 50%. But the fact is is that you can win these things if you just get the details. Just get the details and you really learn. What is the ruling, what are the outlines here that they have for you, what's the evidence? And when we put it all together, we had a way, stronger argument going into arbitration than we did mediation and from that perspective, that was just insanely refreshing. It's one of my in my opinion, one of our best career things to hang our hats on, because, again, we're not lawyers, realtors. I'm a realtor.
Speaker 2:If I could offer any advice to anybody who has a procuring cause claim, it would be read the procuring cause section of the code of ethics and arbitration manual and all of the questions on the arbitration worksheet. That was really helpful because in theory, the panel is sitting there with the worksheet answering those questions yes or no and that gives you an idea of where your evidence falls as far as which way things are going to tilt, and it helps you formulate your argument. So then the questions are answered in your favor.
Speaker 1:Yeah, yeah and just be favor.
Speaker 2:Yeah.
Speaker 1:Yeah, and just be prepared. Know the facts, know all the facts and ask a ton of questions.
Speaker 2:Ask a ton of questions and make sure to like, when you're responding to questions or your witnesses are responding to questions, they're actually responding to the question asked and not like the bigger picture, Like because when they are making the argument of you know well, the showing is what started the chain of events and blah, blah, blah, blah, and it's like, well, hold on, let's dive a little bit deeper. When did your desire to purchase the property exist? It wasn't after the showing, it was after you heard that it was competitive and you had to make a decision, Right. So, like it's just like really diving into those, those details and listening exactly to the question, Right.
Speaker 1:Right. Yeah, it's really funny because, as I you know, I have a real estate coach and, as I presented this to him in the beginning, he's like, yeah, you guys are totally screwed. He's like there's a lot of times the panels will get it wrong.
Speaker 2:Yeah, cause he thought we should win but said the panel is going to no he thought we were going to lose to begin with.
Speaker 1:And then, as I told him more of the details, he's like, well, you might have an opportunity. Oh, yeah, no. And then ultimately he came in our favor. He's like, oh no, yeah, you should win. And so it was kind of again as you, as you first think about the whole situation, we should have totally lost that thing. But we realized there was a hole and we went after the hole and ultimately we crushed them. Coming out of it it was like I knew it. I knew it coming out of that arbitration, that we were going to win.
Speaker 2:Well, we knew if we lost we were going to appeal because we knew we were right. No-transcript. Yeah, it was not going to happen.
Speaker 1:We weren't going to allow it to have the board be wrong.
Speaker 2:Yeah.
Speaker 1:We were totally going to appeal and anyways, justice was served on the realtor side. That was fun, and what's really funny is that dude, I couldn't get over this my happiness meter meter was just like through the roof I was just like so excited for days. We ended up making? We ended up making a uh an ai meme. That was the three of us, as called us the arbitrators.
Speaker 2:Yeah if you follow jason, you probably saw it and you're probably like what is he talking about? I did a I'll just add to that context. He posted that as he was like three quarters of the way deep in a bottle of wine.
Speaker 1:Yeah, I mean just so high on life yeah, it was, yeah, it was a good victory to drink for. And then, oh, I did the Trump dance too.
Speaker 2:Oh yeah, yeah, you did the Trump dance, came up with a meme, told the whole world that we won Da-da-da-da-da-da-da-da-da-da-da. This was a long time coming, you know. As we said, we got the initial documentation in May. Yeah, so it was certainly a career highlight, and it was November that it closed.
Speaker 1:I'm so glad we just didn't lay down and we went after it. So, Rach, thanks for your work.
Speaker 2:Nice job. Thanks for letting me tackle it with you.
Speaker 1:Yeah, it was fun, all right, if you found any value in the show. If you're a real estate agent or if you are a managing broker, share this episode with a fellow agent who might be going through some type of trouble with their commissions. Hopefully, this gives you confidence to fight if somebody tries to claim they are due the commission that you earned. And yeah, share the show, appreciate it. You can also find us on YouTube. Like and subscribe and we'll catch you on the next episode.