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Procuring cause- who gets the money?

By Christopher Bonta

Real Estate Agent with The Bean Group

March 08, 2008 10:52 AM

I would like to put a situation that occurred to me a year ago out to you AR members and get your feedback. One reason I am doing this is because I just finished a Standards of Practice class where the last thing we did was discuss procuring cause. The situation given mirrored what happened to me and the resolution to the situation in the example given was not what happened to me.

My situation involved me doing an open house for my office, we have a lot of new construction, I was there when a couple came in to view the property and stated to me that they were not working with anyone (house listed in MA and they were looking with their Realtor in MA but weren't working with anyone in NH). I did all the proper disclosures, showed the property and asked if they would mind if I kept in touch, they said they were just looking and left. The following weekend, they appeared again, took another look around at the model and another house and left. The third weekend they returned (alone) looked again, asked lots of questions and this time took my card and said it would be okay to follow up. On Tuesday we spoke (they called me) I answered questions and faxed them some things they wanted to look at and I asked if they wanted to put in an offer etc.. They said they would look at the paper work I sent and speak with each other.

The following day an offer came in from "their Broker" to the listing agent on the property, he informed me of the offer and of-course I was upset. I spoke to My GM who said she felt I was procuring cause, but she would discuss the issue and get back to me. Of course nothing was said to the Buyer or Seller and the offer went together, my GM informed me later that after speaking with an Attorney and one of NH's State licensing people she was told I was not procuring cause, since I was at the open house as a sellers agent and the house was open to all to visit, the buyer had the right to leave and get whoever they wanted to represent them and put an offer in.

Now in the situation at the Standards of Practice class, the agent who did the showings (just like my situation) was found to be procuring cause, the reason was that he (like me) was the one who "shook the tree and caused the nuts to fall" the other agent for the buyer "swooped in and picked the nuts up". These were direct quotes used in the class to help explain procuring cause.

What I was told, afterwards, was that had my company and I gone to arbitration after the closing for the selling portion of the commission, we most likely would have won and that the buyers agent would then have had to pursue his clients for his fee citing his contract with them and the clause guaranteeing his fee. I was told that a buyer can go out and get whoever they want to represent them, but that does not mean they may not owe their agent money.

It was up to the other agent to inform his "clients" that they could end up owing a fee to him if after the closing our agency was to pursue procuring cause. It did not matter when the buyer signed a contract the fact was he had one and if it was signed weeks or months prior to the showing then his buyers should have known about the consequences of going out alone without him and if they went out and got an agent after the Tuesday they spoke to me the agent should have informed them of the potential for procuring cause.

I'm curious as to what you all think.

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Richard Weisser

Richard Weisser Realty - Newnan, GA

Richard Weisser Retired Real Estate Professional

Open houses are NOT treated like other showings. As mentioned, you were actually acting on behalf of the seller. If you were truly there to represent buyers, you should have had an agency agreement signed before you showed the houses.

There is no such thing as a threshold rule, did you get the buyer prequalified, run comps, assist in the negotiations? Procuring cause is never cut and dry, it's always best to get some king of commitment. I think you would NOT prevail in arbitration.

Mar 08, 2008 11:02 AM

Monika McGillicuddy

Prudential Verani Realty - Atkinson, NH

NH Real Estate Broker

You should post this in the Ethics and the REALTOR group.

Mar 08, 2008 11:05 AM

June Piper-Brandon

Coldwell Banker Realty - Columbia, MD

Creating Generational Wealth Through Homeownership

In Maryland what would happen is you would have gotten a share of the listing agents commission because you were in the house at the time the buyers looked at it. In Maryland you would likely have received 25% of the listing agents commission because if you sit an open house you are representing the seller, not the buyer and therefore you would share in the listing agents fee.

Mar 08, 2008 11:09 AM

Debi Ernst

St. Charles County, Missouri - Prudential Alliance Realtors - O'Fallon, MO

GRI, e-PRO, Broker/Sales Associate

In Missouri, I think you would've had a case to at least get a portion of the commission. Tricky situation...

Mar 08, 2008 11:18 AM

Jim Albano

Prudential Damiano Realty - Little Falls, NJ

Team - Jean-Marie Vantuno / Realtors North Jersey Real Estate

I don't know what the answer is, but it drives me nuts that an agent who never showed a property to his clients can write the contract and "earn" the commission after you showed the homes 3 times and followed up with answering all of their questions. Where was their agent the 2nd and 3rd time they came back and why wasn't he calling to get the answers his clients needed?

Mar 08, 2008 11:25 AM

Christopher Bonta

The Bean Group - Londonderry, NH

Realtor, Integrity and Honesty

I appreciate the comments and procuring cause is a very very tricky situation. I do disagree though with Rich's assessment, since Fiduciary has nothing to do with procuring cause. It did not matter that I was there representing the Seller, the point is the other agent never procured the transaction.

Procuring cause is who caused the actions to take place (who shook the tree and who collected the nuts) and should not be mixed up with Fiduciary responsibility. At the Standards of Practice class that's the main point we were all told. The threshold rule is not a question here, I clearly was the Sellers rep and I did the job I was suppose to do and as I said it was up to the agent to have either informed his buyers that they can owe a fee to him if they don't let him do his job, or if the agent met them after they had received all information and viewed the house did he have a responsibility to have informed them that they might end up owing a fee, If they signed a contract and then he lost at arbitration with me? Lots of questions and a very murky area.

I guess the reason I brought this up is to make us all think about what's going on out their and if we have Buyers that are our clients, then we probably should be explaining what might happen if they don't let us do our jobs etc.. Remember in the case senerio the Agent was found in the right and won the arbitration case, that's why I was told that I should have gone forward.

Mar 08, 2008 12:25 PM

Stephen Graham

Inactive - Atlanta, GA

This is interesting; this process of procuring cause seems to focus on agents and not consumers. Since the buyer bears some of the burden for real estate commissions through the sales price, why should he/she be denied representation if so desired? If your answer is "the buyer has to pay out of his/her own pocket for representation", then I would reply by saying "he/she would be paying twice".

If this is going to be our method of doing business, then it should be clearly spelled out to the consumer well before contract-signing; most buyers are focused on finding a home, not procuring cause and agency relationships until they are ready to do business.

At it stands, I could make the argument that if a buyer first sees a home on my website and buys it without me, I would be the procuring cause. I could use a tracker to determine the date & time the home was seen. It was my website that prompted the buyer to go look at it -- and there it your procuring cause.

Jun 18, 2008 04:18 AM

Christopher Bonta

The Bean Group - Londonderry, NH

Realtor, Integrity and Honesty

Steve thanks for the comment but I have to disagree with most of what you said. The only thing a agreed with was your first line and you are right, procurring cause has everything to do with Agents and nothing to do with the Buyer. Procurring cause is about who should get paid for making the sale or another way of saying it is,"who generated the energy around the sale occuring and who collected the money."

In years past (say about 20yrs ago) before Agency came about would you say that I was procurring cause? Back in the 80's you bet I would have been procurring cause, remember back then every Realtor worked for the Seller. So what has changed in 20yrs regarding who gets the money and the answer is, nothing. Procurring cause has nothing to do with Agency and I think that's where you mix things up.

You make the point of implying that I am trying to deny a buyer representation if they desire it, and I am not doing that at all. All buyers are paying for part of the commission in the price of the property. After all the seller sets the fee, but its the buyers money that pays it at closing. What I am stating is that a Buyer who hires an Agency for representation has obligations under their contract and one of the major obligations is to allow the Agent to due their job and if they don't the Agent and their Agency have the right to enforce their contract.

In my situation, the Buyer was going out and looking at property without the knowledge of their Agent and talking with another Realtor about property and even calling me up to get information etc.. The Buyer was obligated under their contract to inform their Agent about all properties that come to the Buyers attention and they are suppose to allow the Agent to do their job. This did not happen in this case the Agent did nothing in the transaction except write up the contract, where is procurring cause on this Agents part? The answer is no where they did nothing to procure the sale.

Steve, you also make the point of saying that if this is our method for doing business then we should be spelling this out better to the buyer since " most buyers are focused on finding a home, not procurring cause and agency relationships until they are ready to do business". I do not know about Georgia law, but NH and MA law state clearly that as Agents we have to not only explain about Agency Relationships prior to going out with a consumer, but when we sign our Contracts with the consumer, they need to understand their obligations. If as Agents we are not explaining to a buyer that if they do not let us do our job, they could possibly end up owing a fee out of their own pocket, then in my opinion we are not doing our job. I always explain the ups and downs of the Agency contracts I sign so that the Buyer/Seller understands that they have to let me do my job, otherwise they could end up owing me a fee. Contracts are two way streets, not just one way in favor of the Consumer.

Jun 18, 2008 01:55 PM

Stephen Graham

Inactive - Atlanta, GA

Christopher - we obviously disagree. I feel that since the buyer bears some of the burden for commissions through the sales price, then they should receive representation regardless of trying to determine procuring cause -- which is ambiguous at best. If the consumer sees no benefits of a buyer's agent, then so be it -- but they should be given a choice.

This is a good article on procuring cause.

Jun 24, 2008 04:23 AM

Anonymous

Steve, its okay to disagree thats whats great about AR and I respect your position. I also read the article and I agree with virtually everything they say. My point still remains that Agents must inform/educate buyers that procuring cause can occur and having a Buyer Agent Contract doesn't protect them 100% from this happening. Buyers must understand the contractual obligations the Realtor has to them and their obligation to the Realtor, in my I still believe I fit the procuring cause definition of "uninterupted chain of events" and their Agent swooped in and collected the fee.

The Buyer should have been educated as to what can happen if they don't allow their Agent to do their job. If they were educated and still did what they did,then they voilated their contract. If they were not educated or their Agent can be show to have abandonded them (by not going to NH to show them property) then they could argue their Agent voilated their contract etc.

As I stated before this is a complicated area and the intention of my Post was to have a constructive discussion around the topic.

Thanks for your input.

Jun 24, 2008 04:52 AM

#10

Christopher Bonta

The Bean Group - Londonderry, NH

Realtor, Integrity and Honesty

Sorry I was not logged in when I made my last comment.

Jun 24, 2008 04:53 AM

Stephen Graham

Inactive - Atlanta, GA

Absolutely. ActiveRain allows for free dialogue amongst practitioners and consumers.

I guess my main problem with procuring cause is when a buyer has seen a community or a particular home and is simply unaware of buyer agency. Often times, a home buyer will research the details of a transaction after shopping around a little. As the article suggests, the buyer is then put at a disadvantage at this point because of the ambiguity of procuring cause.

Best!

Jun 24, 2008 06:10 AM

Anonymous

I am not a realtor, i called the # on the for sale sign outside of a house, asked to see the property, they obliged, then was told they needed my signature, and that it was not a contract, as is written on the form in capitol letters, i signed it thinking it was a formality to see a foreclosure, i called that evening and requested via voice mail clariifcation on what i signed, provided all of my #s to reachme. a month later and without any response from the listing group i asked my realtor to show me the property and give me a tour etc, I put an offer on it, the listing groupo halted it, saying procuring clause, and said they would not file my offer until it was resolved.

Jan 28, 2009 12:11 PM

#13

Christopher Bonta

The Bean Group - Londonderry, NH

Realtor, Integrity and Honesty

Hi,in my opinion the listing agency has no procuring cause. There is no "chain of events", you saw the home once with them, then brought your Realtor into the picture who showed you the property again and wrote the contract.

Procuring cause does not happen just because an Agent shows you a house once.They could possibly claim it after you saw the house that 1st time, if you went back to your Agent told them about the house and then your Agent wrote up a contract (without ever taking you to see the home). Or if you continued to see the property with someone from the Listing Agency again and again, then put an offer with your Agent (who again did not due anything). From your explanation (and I don't know the other side) there appears to be no procurring cause on the part of the Listing Agency.

My story was about my showing a house to buyers during several Open Houses that I did over the course of several weeks and they viewed the house with me, they called me for information regarding the house and even asked me to fax them things. All of this time there was no sign of their Agent nor was I told that they were working with one ( they gave me the impression that they did not have one in NH).

You seem to have several issues going on with this property and I wish you and your Agent the best of luck, hopefully with guidance and luck all will work out for you.

Jan 28, 2009 01:10 PM

Anonymous

Thanks for the reply, after some discussion the listing agent backed down once he understood what had and had not transpired. we await the reply on our offer this week.

Feb 01, 2009 01:37 PM

#15

Christopher Bonta

The Bean Group - Londonderry, NH

Realtor, Integrity and Honesty

Glad to hear your offer finally got presented, hopefully all will work out for you.

Feb 01, 2009 01:42 PM