Procuring Cause - What if you show the house, but the buyer doesn't want to work with you? Comments Updated 7/1.

Procuring Cause and Commission Disputes

Commission disputes boil down to what is referred to in the industry as "procuring cause." The agent who ultimately caused the buyer to purchase the home and earned the commission is the procuring cause agent. That procuring cause agent might not be the agent who obtained the offer from the buyer, presented the offer and successfully negotiated the seller's acceptance of that offer.

Every state Realtor association has its own guidelines that establish procuring cause, none of which are fast and hard rules.

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 The following was approved by the C.A.R. Board of Directors, in October of 2002, pending final approval by NAR.  In November 2002, NAR also approved the Procuring Cause Guidelines.  These Guidelines are intended to assist arbitration panelists in deciding which of multiple brokers is the procuring cause of a given transaction.  Use of the Guidelines by any particular local association is strictly voluntary

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FROM REALTY TIMES IN 2004

Preventing Procuring Cause Cases by Blanche Evans

When it comes to procuring cause, silence isn't golden. Most procuring cause cases can be prevented by a simple question to the buyer - "Are you represented by a real estate professional?"

In a world where procuring cause can cause ill feelings between consumers and professionals, and trump contract law in some cases, the concept is often defined by local laws as who showed the buyer the property first.

But that doesn't mean a broker sitting an open house will be able to sell a buyer that home simply because the buyer's broker didn't accompany him.

"Since most buyers don't understand brokerage concepts," explains Florida real estate attorney Hank Sorenson, "they don't 'get it' that it's not good to see a home with one broker and then bring another broker to the same house for the second showing a month later. The listing broker doesn't say anything because they don't want to jeopardize a potential sale (and it's not the list-side commission at issue anyway) and the second sell-side broker doesn't want to know about the first sell-side broker for the same reason."

But if the listing broker wants to push the issue, then a procuring cause case forms like a boil.

"In every single procuring cause case I have ever been involved in," says Sorenson, "the second broker never asked the buyers if they were working with another broker, much less, if they had already seen the same house with another broker."

Suggests Sorenson, "Brokers should be required to ask all parties, upon their initial introduction, if they are currently operating in any fashion with another broker. If the answer is yes, the broker that asked the question should be under a duty to use diligence find out the scope of the previous representation (and call the other broker, if necessary). In addition, when a listing agent is aware of a potential procuring cause issue, they should be required to disclose all facts surrounding the transaction to both selling side brokers immediately."

Sorenson believes this would avoid many arbitrations and simultaneously raise the perception of the industry,

"Nothing less is expected of lawyers under our ethics rules," explains Sorenson. "In the legal profession (in Florida), we are prohibited from talking with a potential adverse party if we know they are represented by counsel. To do so is to risk our bar license. In my experience of procuring cause realtor arbitration cases (which are always a black eye on the industry and leave everyone hating each other), half of them could have been avoided if the "second" Realtor would have simply asked if the parties were currently represented by or operating with another broker."

Brokers on both ends are to blame.

"I have sometimes accused open house brokers of playing ostrich - 'let me put my head in the sand, and if I don't see another broker, then they must not exist,'" says Sorenson, "In fact, it may be that another broker drove those same buyers up in the driveway of the home just the night before, gave them comps, assisted them in getting initial financing qualification, but the buyers had to leave because of a family emergency before they could view the house. The buyers then show up at the house the next day for the open house after they discussed their finances the night before (but without their selling-side broker). If the open house agent simply asked the question - "Are you operating with another broker?," the buyers would say "Yes, in fact we came here last night and saw the outside of the house, but had to leave because of a family emergency." The listing agent could then call the selling agent and talk to the buyers (who, at that point, would presumably have no objection to the continued representation), and the whole procuring cause issue would have been avoided. But the question is never asked."

He adds, "In the foregoing circumstance, the open house agent would, of course, still be free to represent those buyers in looking at another house. However, the primary focus should be on servicing the client, which means removing all impediments (i.e. a procuring cause dispute) to a quick sale of the property in which they are interested."

Selling side brokers often have their heads in the sand, too.

"Contract law does not fit into the procuring cause concept," warns Sorenson, "unless there is an exclusive buyer's broker agreement executed by the buyers. Then, it's not even a procuring cause issue at all really, there's just a contract dispute to address."

So how can agents protect themselves from wandering clients?

"By being better agents," says Sorenson. "Why do people stay with one stockbroker or, in my case, go to the same fishing tackle store over and over? We get quality results (or products) that are predictable and the right information the first time, when we want it. Why should this profession be any different? The quality agents will elevate themselves over the others, and they will continue to get referrals from their clients. The others will not, and they will have to spend three times as much in marketing themselves to get the same volume of sales."

Published: February 11, 2004

HOPE THIS HAS HELPED YOU!!  Katrina

Hi Lisa, Sorry to hear of this case.  When the shoe was on the other foot - for me anyway - I referred the buyer back to the original agent. He wasn't happy about it, but he had been fully informed in my case not to go to open houses without me, or to write in my name if he did.  Well, he did not heed my advice and the listing agent of the home he visited had procuring cause.

I never thought to write the offer and coach the buyer to say he'd cancel out on the house.  (Althougth I have seen that happen many times. )  I would bet my next cup of coffee that's what happened. What I see over and over again, is a buyer who feels it is their decision who they want to work with - no matter what.  They simply do not care whether or not we are paid.  I think it's time to start charging a fee before we ever leave our office with buyers. That may help stop this practice.

I would take this to arbitration. You have your facts and documentation.  That's all you need.  If this guy didn't want to do a RE/MAX to RE/MAX deal - there wasn't a thing you could do about it. Don't just let it go.  It may bother you for a long time. That's my story and I'm sticking to it. LOL

Lisa, the good part of mediation is --- it is setup to be a win-win.  In arbitration it is set up to be a win-lose situation.  You ask what I thought was a good percentage for you to ask for and in my opinion I would ask to reverse the problem to the other agent and offer to give them a referral fee.  That does not mean that hey will take it but, it is a starting point for conversation.  I would suggest that you go to the meeting with all of your documentation and let the mediator facilitate from there.  I hope this answers your question.  Good luck.

Don R.

Either way, I am happy to hear that you had so much of a paper trail.  I hope the aribitrator sees this as an open and shut case and does right by you.  Every agent should know to ask, as a professional courtesy, whether or not there is an existing relationship and what the extent of that relationship is.

If I were the other agent, just to show class, I would complete the transaction and forward you the check, just for my slip-up.

Hi Lisa - I'm not sure where to reply to your response to my blog ... but this is to thank you for contributing to my blog on Declutter! I had a chuckle at your comment about buying a larger house! Good Thinking!!

David
Victoria, BC

Hi Lisa, what was the decision on this issue.  I think you were to have a decision this month!

All right Lisa.  You stood up for what was right.  It's also a great reminder to keep that paper trail, you never know when you'll need it.  Congrats, and thanks for the update.   

Thanks Lisa,  after reading through your experience and the comments, it inspired me to pursue my own claim against an offender in my area.  We went to mediation and could not resolve the issue, so we are onto arbitration.  Friday is our 3rd time after the Buyers were subpoened and did not show up.  The buyers would rather stay out of it, because they know that there testimony will hurt the other Agent "that stole my clients"

Thanks, Ted

Marysville, WA