Procuring cause: Is there any topic in our industry more misunderstood?
Procuring cause disputes (between members of the National Association of REALTORS) are resolved using some basic rules. Let’s consider them:
1. Contract Required: To be paid a co-broke fee by a listing agent, the selling licensee must show that the listing agent offered to compensate and that the selling licensee accepted the offer by bringing the buyer who closed on the property. In other words, there must be an agreement.
Example: On a brand new listing, not yet in the multiple listing service, the listing agent posts a for sale sign. A selling licensee with buyers sees the sign and immediately calls for an appointment. There is a showing, an offer, a contract and a closing. But there is NO agreement by the listing agent to share its fee. The property was not advertised in the multiple listing service whose function is to “offer to cooperate and compensate” selling licensees. No contract translates into no basis for the selling licensee to make a claim.
Selling licensees should always be sure that there is an offer of cooperation and compensation before taking their buyers to a property if they are looking for the listing agent for compensation.
2. No prior rule of entitlement: Have you seen this situation? Buyers attend an open house hosted by the listing agent. When the listing licensee offers to prepare an offer, the buyers insist on separate representation. The buyers sign a buyer representation agreement who calls the listing agent to follow up. The listing agent announces, “Well, I’m procuring cause, you know! After all, I showed the property.”
Wait a minute. Not so fast. We need to know more. Does a listing agent become “procuring cause” just by showing the property?
No. There is NO one rule of entitlement. Entitlement to a fee does not arisejust because a licensee showed a property. Similarly, just because a licensee prepares an offer does not automatically translate into procuring cause. There is NO rule of entitlement.
3. Relationship Issues: Since agency is about relationships, there are relationship issues to be explored in a hearing for procuring cause.
Example: A selling licensee has been showing properties to buyers for several weeks. There is a property the buyers want to see; the buyer agent shows it but then leaves town for a week, on vacation. The buyers want to write an offer and the buyer agent says he will do so when he gets back. The buyers are so upset that they terminate their buyer agency agreement and find another licensee who writes up the offer and takes them to the closing. Which buyer agent is procuring cause? The second licensee has a better shot because the first agent either abandoned the buyers, or was alienated from them. The first agent was not able to bring the buyers as he was off on vacation.
4. Facts and Precedent: Each case of procuring cause dispute involves different facts; no two situations are factually identical. In addition, each REALTOR panel that decides procuring cause cases is composed of different volunteers. What these two points mean is that the arbitration decision in one case is NOT a precedent for a later case that seems similar. Facts will be more or less different; the deciders will be more or less different.
Tip: if you are involved in a procuring cause dispute, it pays to do your research. Talk to people who have had experience with prior disputes; read the REALTOR guidebook on the process and the criteria by which decisions will be made. Please do not go into an arbitration hearing without doing this research. An hour of research may save you many hours preparing for a hearing.
Knowing how unpredictable the outcome may be, you and the other party may decide that a negotiated settlement is preferable.