In light of a flurry of recent inquiries about commissions, we decided to take a look at the current state of the law as it pertains to how one defines the term “procuring cause.” We started with the National Association of Realtor’s definition, which defines the procuring cause as follows:
“is … the interplay of factors which together demonstrate that the unbroken efforts of a specific broker were responsible for the buyer making the decision to consummate the sale on terms which the seller found acceptable. In other words, a broker who is the procuring cause of a sale is a ‘sine qua non’ of the sale — the sale would not have occurred but for the broker’s efforts.”
If you are even more confused, you are not alone. A large brokerage explains the concept of procuring cause as follows:
“The interactions between a prospective client and a real estate agent that entitles the agent to a commission percentage upon the purchase of a home. If a client has worked with multiple agents over the course of her search, it may be difficult to determine which agent is ultimately responsible for helping the client get the home. Disputes usually occur between the agent that wrote the offer and another that may have helped the client see homes in the past, so there’s an investigation to find out which agent had first contact with the client and showed them the home they eventually bought. Real estate brokerages typically avoid procuring cause disputes by requiring clients to sign a buyer’s agency agreement once they decide to work with an agent and their brokerage. The agreement commits clients to working with that agent to buy a home. The length of the agreement varies, but usually lasts three to twelve months.”
We didn’t find this terribly useful either, so we decided to look at Black’s Law Dictionary and review the recent case law about procuring cause. Black’s Law Dictionary doesn’t even make an attempt to define procuring cause, and unfortunately the case law is all over the board, but with two common themes (a) that the agent must be working with the buyer, and (b) that the agent must have taken some affirmative step to introduce the buyer to the seller and/or the property. Otherwise, the determination of whether or not an agent is the procuring cause is very fact specific. In other words, if someone tells you that they know with any degree of certainty what the term procuring cause means in any situation, then they haven’t reviewed the over 200 appellate cases attempting to define it.
What should a real estate professional take from this? Be very careful when introducing a buyer to a seller and/or property. We have seen a noticeable proliferation of attempts by sellers and builders to attempt to cut a buyer’s agent out of a commission. If you don’t have your buyers sign buyer agency agreements, then make sure you are careful to understand the terms under which a seller is willing to pay a commission and go that extra mile to insure that it is clear to everyone who you are representing and your expectation that you receive a commission for your efforts. This can be the trickiest with builders, where we have seen the greatest increase in realtor inquiries over the last several months as a result of fairly aggressive positions taken by a small number of builders with regard to the payment of commissions on new construction.
If you ever have a question about whether or not you were the procuring cause, or if you want to be proactive and minimize the opportunity for a commission dispute in the future, then you should consult with a real estate attorney.
This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.
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