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Legally speaking: Who’s entitled to the commission? Figuring out procuring cause

By Peg Ritenour, OAR Vice President of Legal Services/Administration

The OAR Legal Assistance Hotline receives an array of real estate-related legal questions — including license law issues, disclosure, contract law, ethics and commission problems, among others. In an effort to help you work within the law, our “Legally Speaking” series spotlights some of the timely questions that are being asked by REALTORS. The following addresses the issue of procuring cause…  

Q: I showed a property to buyers that I had been working with for over a week. When I followed up with the buyers, I found out that they had just made an offer to purchase the property through the listing agent. I immediately called the listing agent, who told me the offer had been accepted and that because he had written the contract, his broker said that I wasn’t entitled to the compensation that was offered in the MLS. My broker said I am the procuring cause because I showed the buyer the property first and that he will file for arbitration at the Board if we aren’t paid. Will we win?  

A: In order for a broker to be entitled to the offer of compensation made in the MLS, that broker must be the procuring cause of the sale. Procuring cause is generally defined as “the cause originating a series of events which, without break in their continuity, results in the accomplishment of the prime objective.” Of course the prime objective is to procure a ready, willing and able buyer on the terms set by the seller. Although this definition may appear simple, as anyone who has been involved in an arbitration or served on a Professional Standards Committee will tell you, its application to real life situations is not. That is because the question of which REALTOR was the procuring cause of a sale is not answered by any single, definitive rule; instead it depends on several factors and the unique facts and circumstances of each situation.

Each broker in this scenario has a mistaken belief regarding procuring cause. The buyer’s broker believes that the REALTOR who showed the property first is always the procuring cause, while the listing broker contends that the only factor that matters is which REALTOR wrote the contract. Neither is correct. While each of these are factors are certainly important, they do not solely resolve the issue of which brokerage is entitled to the compensation offered in the MLS. Instead the arbitration panel must look at the entire series of events that took place in the transaction to determine which REALTOR “procured” the buyer.

In this situation there are several important “blanks” that have to be filled in to enable an arbitration panel to determine who was the procuring cause. These include:

  • After the initial showing, did the buyers indicate to the buyer’s agent that they were interested in the property?
  • Did the buyers need further information about the property or financing? Did the agent provide them with that information?
  • How much time elapsed between when the buyer’s agent showed the property and when he called to follow up with the buyer?
  • If there was a delay, what was the cause of the delay?
  • Did the buyers feel the buyer agent wasn’t following up with them soon enough and was it reasonable for the buyers to feel that way?
  • How did the buyers end up working with the listing agent directly? Did they contact the listing agent or did he contact them?
  • Did the listing agent know that the buyers had already seen the property with another agent? Did the listing agent also show them the property?
  • Why did the buyer choose to work with the listing agent instead of their buyer’s agent?
  • Did the buyer’s agent do something that alienated the buyer to the degree that the buyers no longer wanted to work with him? Was that reasonable for the buyer to feel that way?
  • When did the buyers make the decision to make an offer to purchase? Which agent helped them arrive at that decision?

As you can see there are many facts that have to be ascertained  beyond who showed the property and who wrote the contract. Looking at the entire course of events is crucial in order for an arbitration panel to arrive at a well-reasoned decision as to which REALTOR was the procuring cause of this sale and is therefore entitled to the compensation offered in the MLS.

More information can be found in OAR’S White Paper on Procuring Cause or in this short video.

 

Legal articles provided in the OAR Daily Buzz are intended to provide broad, general information about the law and is not intended to be legal advice. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney. 

Tags: legal, Legally Speaking