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Key Takeaways:
- To earn a commission, a broker must be the procuring cause of the sale.
- There is no one definitive factor to determine procuring cause but rather the interplay of many factors.
- If a procuring cause dispute is inevitable, allow the sale to close and determine resolution afterward.
It sounds simple enough: To earn a commission, a broker or agent must be the procuring cause of the sale. But misunderstandings can arise about how that term applies in some transactions. Knowing the factors that establish procuring cause can help you avoid disputes and deliver better client service.
Determining Procuring Cause
NAR’s Arbitration Guidelines, created pursuant to Article 17 of the REALTOR® Code of Ethics, define procuring cause as “the uninterrupted series of causal events which results in the successful transaction.” In practice, the broker whose efforts set off that unbroken chain of events will be regarded as procuring cause.
Which practitioner do you think is the procuring cause in this scenario?
A buyer contacted broker Jim to show her several homes over a period of weeks. The buyer liked one home, and asked broker Jim to reshow the property to her and her mom, dad, and sister. Broker Jim showed the property a third time to the buyer, her dad, and a plumbing inspector. As they were leaving the home, the buyer said she would email broker Jim to follow up. A few days later, broker Jane, who had not shown the property, called broker Jim and offered a 25% referral fee, as broker Jane wrote an offer on the property for the buyer, which the seller then accepted.
If you think broker Jim is the procuring cause, you’re falling into the common trap of believing it’s based on one definitive factor—in this case, showing a property. Many more facts, including follow-up communication with the buyer, the buyer’s motivations, and how broker Jane entered the picture, should be considered.
Like the scenario above, most procuring cause issues arise when two cooperating brokers claim they’re entitled to the buyer’s side commission. Article 17 requires REALTOR® principals to submit procuring cause disputes to mediation and arbitration. An arbitration hearing panel will consider all relevant details of the underlying transaction, guided by a number of factors to determine procuring cause. Those may include:
- The nature and status of the transaction.
- Roles and relationships of the parties.
- Initial contact with the buyer.
- Continuity and breaks in continuity.
What’s important to keep in mind is that it’s the interplay of these factors that indicates procuring cause. One factor alone will not decide a case.
Avoiding a Dispute
Being aware of the factors that affect procuring cause can assist real estate professionals in their day-to-day dealings with clients. Here are tips to help avoid a dispute:
- Ask prospective buyers if they are working with another broker and whether they signed an exclusive representation agreement.
- Always use a buyer brokerage agreement. Attend open houses and tour model homes with buyer clients, and sign in as their broker.
- Stay in contact with buyer clients, keep a communications log, and, when they’re interested in a property, ask if they want to write an offer.
- If you discover you’re writing an offer on a property that buyers saw with another broker, ask the buyers why they didn’t pursue the property with the other broker.
When a dispute is unavoidable, don’t interfere with the transaction. Allow the sale to close. Then, the cooperating broker who believes he or she is the procuring cause may request mediation and, if that is unsuccessful, may file an arbitration request with the local REALTOR® association. To learn more, visit nar.realtor and search for “procuring cause.”
