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Procuring Cause.....

Have you been in this situation...

A buyer who recently signed an Exclusive Buyer Agency form continues to look at homes but seems unsatisfied with the selection. She keeps thinking about a house she saw and liked, but in another neighborhood, and may want to put an offer on it in the near future. Great!

Problem is, before she signed the agreement with you, this same buyer put an offer on "dream house" with the listing agent. There was no agreement signed to represent them as a buyer's, or a dual agent, so they were represented by the seller. They obviously did not come to terms at that time.

The buyer wants you to write the purchase agreement, hoping you can negotiate a bit better on their behalf; now they see what the market is, and that the house is listed closer to value than what they thought.

Your dilemma is apparent. You've done a lot of work for this buyer to earn your commission! But the listing agent of the dream house has done her share of work...

The house is still on the market. What would or did you do?

Would you offer a referral fee to the listing agent? Talk to them about the situation? Submit the offer and hope it flies under the radar?

If the buyer is reticent, remind them of your agreement, and demand at closing for full compensation? Let the buyers go?

I am curious about your opinion.

Posted by Angela Lucaj on 06/11/2008 11:52 PM

Comments (31)

buyers, buyer agency, listing, listing agency, representation, procuring cause, purchases

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31 Comments on Procuring Cause.....

JUN

2008

No.. I would represent them. The original offer is dead and you deserve the new time and energy you put in to write a new offer.

Angela,

Yup Kim is on point.

Put in the offer, acknowledge the facts to the other and stress your desire to make it a win win for both sides.

Take care!

RJH

Per NAR guidelines, there is to be no predeterminate for earning a commission through procuring cause.

With that said, it is entirely the buyer's decision as to who they want to represent them -- whether you showed the home or not. In my opinion, you will be the procuring cause, inasmuch as the buyer is looking to you for guidance to successfully navigate the transaction.

It has been listing agents and/or builders who have made up their own rules regarding procuring cause.

Do your research on this issue.

Best!

What does your broker say?

I would follow my brokers advice.

I would continue to represent them and try the offer again. Who knows the seller might change their mind and take the offer? You can explain the situation to the buyers that they were in last time and who knows why the offer did not go? Good luck, Tom

How long has it been since the buyer saw it with the seller's agent? Has the seller's agent been in touch them about the house since? If time has passed and they haven't been in touch, the chain is broken and you are within your rights to represent them. A referral to the listing, a call, nothing of the sort. It is a new deal and time. You might want to take them back to see it again.

I think all you can do is fight for your commission and try to get the client to agree with you.

Miriam, you bring up an interesting point about the chain of events. I am not sure yet how much follow up the listing agent provided. It has been appx. 6 weeks since they saw the home and is listed at the same price. I like that it's a "new deal and time" theme; but it's unclear how much is enough... I will definitely keep you updated on the progress of this deal.

There was no agency when they tried to buy it before. I would write it and present it to the LA and take it from there.

Angela, sounds like you got some good advice from the others, sorry can't add anything different. good luck.

JUN

2008

Angela, I would call the Attorney hotline you have in your state, and see what the ATTORNEY's say based on the facts you mentioned above. I would venture to say it is your buyer but ask the big dogs and follow their advise.

I agree with Katrina. Check with the attorney hotline and see what they say. I would also make the argument that you are the procuring cause if they couldn't come to terms without your assistance.

ANGELA - Your agreement means that you are to be compensated for your time. There is no gray area with this. As far as the handling of the situation goes, I would bring them to the home as a buyer client. After the showing, I would submit the offer. The last offer that was made did not result in a deal, and as such, the listing agent has no right to expect anything from your buyer. Have they ever spoken to the listing agent again after the offer was rejected? Did the listing agent try to sign them on as buyer clients and find them a new home? You've done your work, you should be compensated.

Adam's right on target. If the LA hasn't kept up with them you're the procuring cause.

Hello Angela: I have submitted an offer for a buyer client who previously looked at that property with the listing agent. Even then, I disclosed this fact up front to the listing agent. They were fine with it, since they didn't & don't have an agency agreement with the buyer & they can't MAKE the buyer work with them. That deal actually closed.

I would handle your situation the same way and disclose the situation to the listing agent up front when presenting the offer. Who needs trouble at a later date concerning a debate about procuring cuase and who "earned" the commission?

I would run it by my BIC though, it never hurts to get another opinion. Best of Luck!

In my area, if the listing agent never had a written agreement (buyer agency or dual agency) with the buyer, then they don't have to be compensated. In addition, if they had a written agreement that has now been replaced by your written agreement with the buyer, they are no longer entitled to a commission.

The listing agent might technically be procuring cause because they were the first agent that introduced the buyer to the property. HOWEVER, procuring cause does not extend to earning the commission in this case because the buyer has moved on and established a formal relationship in writing with another agent. That's just my 2 cents - but I would agree that you should check with the Realtor association or state real estate commission for more guidance.

If I were the listing agent, I would just be happy someone was bringing a serious buyer to my listing, allowing me to earn the listing side commission, and helping my client to sell their home!

At least here...If the original agent hs had no further contact with the buyer, he/she is considered an "abandoned" buyer and you have no Procuring Cause conflict....IF on the other hand, the agent continues to pursue the buyer....and the buyer has not told him/her of her relationship with you...I would call the other agent and offer A referral fee....make new friends and everyone is happy.

Take advise from all but I would call the agent, explain the situation and concern. Ask yourself this question. if it was reversed, what would you want the other agent to do with you?

First I would do as Brett suggested above and look inward. How would you feel with the situatiuon reversed. Also keep in mind that the listing agent is going to get paid, and the other work is done and dead... If the home is sold to someone else, they would have done the same work and they would make the same money.

After the call to myself, to see what I think, I would talk with my broker to make sure that my broker agrees with me. I might follow that up with a call to the Legal Hotline if it is a close call...

But, I know that if I were in the Listing Agent's shoes, I don't think I would gripe hard... I'd want the home sold.

Write the offer --- the first agent and offer did not come to terms. And, the buyer can choose with whom they want to work. Just take them back to see the home before writing up the new offer with the buyers agreement - in hand.

In our area the BBA doesn't equal procuring cause. It says that the buyer will have to pay you for your work, unless that specific home is excluded. I agree with Miriam, you have to look to see if the chain of communication is broken. If she hasn't contacted the buyer in a long time, then they probably don't have a claim.

I had this happen earlier this year I showed the house twice to the buyer as the listing agent. The buyer told me that they were not sure if they were going to use an agent they were fine with me and so on. Called them the next day and guess what? I got an offer from them on my listing from a different agent.

Now I didn't take the agent to task on the deal, it is my job to do what is in the best interest of my client, not fight over commission. I could go to arbitration, but stuff happens in this business. I believe in what goes around comes around. The thing that irritates me the most, is that the agent knew I showed the house to them, and NEVER acknowledged it. Just played stupid until he tried to play games at the settlement table with wanting a new $3000 glass shower door that was not part of the contract and I told them to just back the truck up or I WOULD take him to arbitration. They backed down and rightfully so.

I would acknowledge the situation, ask the listing agent if you can pay her a small referral fee for showing the house to the client and she will probably say no and be glad to have a contract on her listing. Then get it in writing.

Good luck!

Angela,

Well, I think every situation is different. I recently had old clients come to me to write up an Offer on a house they had seen during an Open House. I found out later, they had actually gone back and asked the listing agent to show them the house. The listing agent had obviously done some of the work and felt that she was the procuring cause. To maintain a cooperative spirit within my market area with other Real Estate companies, my Broker and I agreed to pay the Listing Agent a referral fee.

These are repeat clients of mine and really want the house.

I sit on the Arbitration panel for my local board, NVAR and run across similar situations in many hearings. I think the key is to look at the definition of "procuring cause." The only thing that points toward you earning the commission rather than the listing agent here is the phrase "without break in their continuity."

A broker will be regarded as the "procuring cause" of a sale, so as to be entitled to commission, if his efforts are the foundation on which the negotiations resulting in a sale are begun. A cause originating a series of events which, without break in their continuity, result in accomplishment of prime objective of the employment of the broker who is producing a purchaser ready, willing, and able to buy real estate on the owner's terms.

In my own experience, I've found it is always best to be up front and keep open lines of communication with the listing agent. You don't want to put your BUYER at a disadvantage because the listing agent feels they earned more than half of the commission and could therefore sell the home to someone else and make more money. You have to remember that as the buyer's agent, you are suppoesed to be advocating for the buyer.

In my opinion, you do need to let the listing agent aware of what is progressing, out of courtesy. I believe in "do unto others". Just let her know that your buyers didn't fully understand agency, and have hired you to represent THEIR best interests, not the seller. The listing agent should be thrilled to sell it at this point.

Does the buyer really want to use you as a buyer's agent? If so, then you should make an offer with the written understanding that you will be capturing the co-op fee, which the buyer bears through the sales price anyway.

If the buyer does not really want to use you, then that would be a different story. Here's a good explanation of procuring cause from a RE instructor.

It probably wouldn't hurt for you to show the buyer the home she wants to put an offer on. Has the listing agent been in contact wth your buyer over the last 6 weeks? The listing agent's job, first and foremost, is to sell her listing. That is why her clients hired her. I'm guessing she will be happy to sell her listing.

I would involve your Broker based on the above circumstances.

Quite frankly,I would insist the offer is presented period.

The other agent has no representation with the Buyer, it`s a moot point.

It`s your client...

Thanks for everyone's responses so far. It not only helps us to understand how to deal with these matters, but educates the consumer as to how they might be handled if they're ever involved in something similar.

My broker has provided sound advice, and I plan to go with what we discussed. I will definitely be presenting the offer because I have a fiduciary duty to represent my client, presenting all offers on her behalf. It's great to read the variety of opinion and how some of you have handled this situation.

I believe you should do the right thing and call the other agent to discuss this situation. I had a very similar situation and I told my agent to call the other agent. When my agent call the other agent she told her she had a buyer agency agreement with the buyer. She offered her a referral fee which she was very happy to get. She knew that she had not gotten a buyer agency agreement signed. The listing agent had every opportunity to work with this person as a buyer agent but she didn't follow through. Good Luck

Check out Black's Law Dictionary on this subject. If the other agent was instrumental in finding the home, writing a contract, etc., sounds like a procuring cause issue to me. I would definitely know this in front before writing the offer - just count on perhaps losing if the other broker decides to go after your commission. ;-)

I just had this issue come up in our office....just make sure you know what you're getting into. ;-)

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Angela Lucaj

Canton, MI

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Address: 44785 Five Mile Rd., Plymouth, MI, 48170

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