Procuring Cause & Buyer Agency
Posted on March 27, 2012 by Alice Martin
The Scene: You meet Buyer Betty at a party and she tells you that she’s getting ready to write an offer on a house she saw last weekend. You ask her if she’s represented by an agent and she says the only one she talked to was the listing agent. You tell her that it would be a good idea for her to be represented and you offer to write the offer for her.
Question: Will you be guaranteed to be paid the MLS cooperating commission by the listing broker because you’ll be the buyer’s agent?
What was your answer? Did you think that establishing a buyer agency relationship with Buyer Betty would ensure that you’d get paid because of all the good representation you would give her by writing the contract and seeing her through the escrow? Or were you one of those who said you wouldn’t get a commission from the listing broker as the procuring cause of the sale because you weren’t responsible for Betty’s choosing to write an offer on this property?
This scenario is happening more and more these days. The issue is whether an agency relationship with Betty, in and of itself, would guarantee that you’d be determined to be the procuring cause of the sale of the property Betty mentioned at the party. There are many factors to be considered when the procuring cause of a sale is in dispute. One that should not be the sole determining factor is whether one of the disputing parties is the buyer’s agent. Many other factors should considered, such as:
- Who introduced the buyer to the property?
- Who provided the details about the property to the buyer?
- Which broker began a series of events that led to the sale without a break in continuity?
- Which broker could be left out of the transaction and have it still go together?
Wouldn’t all of the answers to these questions in the example above be the listing broker Betty had talked to before she met you? Hadn’t Betty already decided to write an offer on that property before she met you?
There is rarely just one factor that’s the determining one in a procuring cause case. I think it’s clear, based on the facts in the Betty scenario and absent any new developments, that the first broker — not you — would be the procuring cause of this sale. Representation and entitlement to compensation are separate issues.
You say, “how can that be? I would be the buyer’s exclusive agent and I would write the contract? I would take care of Betty!”
Yes, you would take care of her, but in this scenario, you wouldn’t be responsible for causing Betty to buy that property; she was ready to buy it when she met you. Now, if Betty wanted to pay you to represent her in this transaction, that’s another matter. But that kind of arrangement still wouldn’t make you the procuring cause of this sale and entitle you to be paid the cooperating commission from the listing broker. [Note: The MLS rules state that the listing broker must pay the compensation offered in an MLS listing to the procuring cause of the sale. [See NAR MLS Policy, Part 1, Section 1.2].
Got your interest piqued? Take a look at other potential procuring cause scenarios developed by the NATIONAL ASSOCIATION OF REALTORS® in the Code of Ethics and Arbitration Manual. These examples and other articles are available on the AAR website, #tk, under REALTOR® CENTER, Ethics, Arbitration, & Mediation.