How can I prove I’m entitled to that commission?

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10/08/2015 | Author: Editorial Staff

My buyer visited a property without me where the listing broker showed the property to my buyer. The next morning, the buyer had me write an offer for the property. When I presented the offer to the listing broker, he said that I wasn’t entitled to a commission because he was the one who showed the property to my buyer. Is the listing broker correct?

The answer to this question hinges on who is the procuring cause of the sale, and it will be up to an arbitration panel to make the final determination if there is a procuring cause dispute.

Procuring cause is defined as the uninterrupted series of causal events which results in the successful transaction—a sale that closes. NAR provides an extensive list of specific factors an arbitration panel should consider in such disputes. Here are a few of those factors:

  • The nature and status of the transaction
  • The nature, status, and terms of the listing agreement or offer to compensate
  • The roles and relationships of the parties
  • The initial contact with the purchaser: Who first introduced the buyer to the property?
  • The conduct of the broker or agent
  • Continuity and breaks in continuity
  • The conduct of the buyer
  • The conduct of the seller

In the question above, the listing broker showed the property. However, an arbitration panel will consider numerous factors, like those listed above, to determine procuring cause of the sale.

Get other answers to legal questions in the Legal FAQs section of texasrealestate.com.

Categories: Legal
Tags: legal faq, buyers, procuring cause, commission disputes


Comments

Rick DeVoss on 02/21/2016

My apologies for jumping into this topic late, but I felt compelled to express some opinions.  ~Actually, there are several topics which have been discussed on this blog.  But let’s look at the subject of “representation.”

Texas law has allowed a licensed person to represent a principle to the transaction.  Each licensed person needs to take that responsibility seriously.  If you are representing the seller, there is No Way you can seriously represent the buyer.

If the Broker appoints two different Agents to represent the parties, then there is a possibility that a fair transaction can be conducted.  But it is treading on thin ice to do so.  ...Do these two agents ever talk to each other??  ...Do they play golf together or go shopping together, or even attend CE classes together??  ...Has the second agent seen the listing or talked to the seller before being appointed??  ...Was it discussed on an office tour??  (One of these days, there will be nasty lawsuit filed by a buyer, and then TREC will outlaw the concept of “intermediary”.)

The use of a “Coming Soon” sign to lure buyers into the lair of the listing agent needs to be outlawed.  ...Most of the buying public does not understand what they are getting into when going into an ‘open house’ or calling on a ‘coming soon’ sign.

In other states, (I will quote New Mexico, since that is where I am licensed), the term “agent” has been replaced with the word Broker for all licensed persons.  And the “broker” does not represent Either party.  They are simply a transactional facilitator, and the system works so smoothly you would not believe it!

When I read some of the comments written herein, it starts to sound like the brokers in Texas need to study what the brokers in New Mexico are doing.  It is sounding like you guys agree with the New Mexico concept, but you are still trying hard to operate under the Texas laws.

...Makes it difficult, doesn’t it…?

Gayle Rosenthal on 10/16/2015

I have experienced this exact fact pattern & once had to file a complaint against a listing agent to get paid the commission I was owed on a lease transaction. I showed 8 rental homes to my client for a whole day, & 2 days later, she drove by a new listing that came up on auto-notification. The home was open, being painted, & the listing agent was there.  Although I had already sent her an application with my name on it by email, she unwittingly used the application the listing agent gave her which had his name on it.  I sent him copies of the Tenant representation agreement she had signed, & advised him that I was her agent.  Not only did he refuse to acknowledge my agent/client relationship, he threatened her with losing the property.  I filed a complaint with TAR & paid the $300 filing fee.  The complaint was accepted & he was notified of the complaint.  He contacted me right away about paying the commission
I was owed.  I insisted on his adding the $300 filing fee, which he grudgingly agreed to.
Thank you TAR ! Moral of the story - don’t interfere with established business relationships.

However the issue of agency relationships & commission entitlement goes far beyond “procuring cause.”  It’s clear that from many of the postings, that abuse of the listing agency position is the real problem in our industry.  I agree with Randy Wilson to a point.  I never take more than 3%  on a listing, even if there is no buyer agent on board.

I think most agents would agree that the active real estate market, especially here in Austin, gives listing agents an improper incentive to shop for unrepresented buyers. Intermediary Relationship has spawned the Mega Broker. Within Mega Brokerages the “confidential” commission sharing is anyone’s guess.  I had a family member who sold a home in another market area. I followed the transaction & it was clear her agent steered the transaction to an in-house buyer’s agent.  It was less clear who was getting paid commissions,  &  closing costs were kicked back to make up for a commission reduction.  All to the bewilderment of my family member.

My opinion is that all commissions, listing, & BA commission, should be spelled out in the contract.  There should also be a box that says “The buyer is unrepresented,”  &  a notice that states clearly that the buyer retains the right to seek representation by a buyer’s agent, subject to the agreement of the parties & renegotiation of the sales price, if such a renegotiation is justified.  Further, since the listing of a property is becoming more & more a matter of marketing, perhaps the terms “marketing agent” and “marketing commission” should replace “listing agent”. 

A buyer should have the right to representation within the compensation structure which the industry has developed.  A “marketing agent” does not become a “procuring cause” by virtue of marketing the home. Further, a “marketing agent” should not be permitted to leverage that position to deny a buyer representation when the seller has made a provision for paying a buyer’s agent within the “listing agreement.”

The muddling of issues on this blog is proof that the industry needs fundamental clarification if not outright reform.  I have said this before on this blog, and I’ll say it again -  Realtors need to decide if they are simply marketing strategists out to obfuscate and make a buck, or if they are true professionals within the meaning of the word.  TAR what do you say ?

Marvin Dorris Jr. on 10/11/2015

Quote you: “I know what the INTERMEDIARY RELATIONSHIP NOTICE says.  However, you have to be able to think and reason this out on your own.  It is impossible to “represent” opposing interests in the same transaction for the reasons pointed out previously.”  It is not impossible.  TREC made a way for you to do it.  You obviously didn’t read my post or don’t believe, or agree, with what the TAR Intermediary Relationship Notice says.  As I said.  I give up.

David Davis on 10/11/2015

Marvin Dorris, Jr.,
I know what the INTERMEDIARY RELATIONSHIP NOTICE says.  However, you have to be able to think and reason this out on your own.  It is impossible to “represent” opposing interests in the same transaction for the reasons pointed out previously.

As for commission that is an all together different story.  You can collect the full commission (even if you are just a licensee {not the Broker}) for the transaction.  All you need to do is maintain the Agency relationship with the seller (created by the listing agreement) and then treat the buyer as a customer (be careful not to provide any of the nine duties of an Agent to the Principal to the buyer) and go to closing.  This happens a great deal of the time, and while it has some risk in it, as long as you play by the rules, it is legal all day long, and you never have to “represent” the buyer.

Please do not list, note, or mention sales commissions by rate or price as doing so can be considered price fixing which is both a violation of the COE and the FTC.

Everything I have said up to now has been FACT!  There is no opinion in it anywhere. 

Now for my opinion:  If the listing agreement calls for X as the commission for selling the property, the sales commission should be X not X/2 (just because only one Agent did the entire job.  There is absolutely no reason for the commission to be X/2.  The parties made an agreement that the commission would be X, barring any amendment to that agreement, the commission should be X!

Marvin Dorris Jr. on 10/11/2015

Very good David.  You’re almost there.  The IABS doesn’t go into much detail about how intermediary works.  It’s kinda complicated.  And, as I posted, “My brokerage experience has taught me that MOST real estate “professionals” don’t have a clue about the requirements of entering into an intermediary relationship. ”  So, who is going to spend the time to explain that to a customer.  TREC doesn’t even attempt it in the IABS.

My question to Randy, “Randy, are you familiar with intermediary relationships?” was an attempt to get him to think before he says this again to a customer: ” I tell my seller when I list the property that I will gladly show his listing but if the buyer is interested he can either “go it alone” or get his own agent. I also tell the buyer this at the time of the showing. My client is the seller not the buyer. If the buyer wants to go it alone, my seller will save another 3% as I won’t even attempt to collect that portion of the commission. ”  If he operated this way in my outfit we would have some serious training sessions!  If that potential buyer wants representation, I just might have someone who can do that!

Now, to the word represent or representing.  Quote you: ” No, even as the broker (which you now claim you are, by the way, so am I) you do not represent both sides.  Read the IABS it says “ACTS AS AN INTERMEDIARY”.  It says nothing about “representing” in the discussion about Intermediary.” 

I refer you to the TAR Intermediary Relationship Notice.
B.  “Broker’s firm represents the owner under a listing agreement and also represents the prospect under a buyer/tenant representation agreement.” (WOW!)  That’s crazy, Huh?
I won’t quote the lengthy “C.” , you can read it for yourself.
D.  Broker will (or will not) appoint licensed associates to communicate with, carry out instructions of, and provide opinions and advice during negotiations to each party.  If Broker makes such appointments, Broker appoints:

In my shop, I make appointments, (Susie doesn’t get to do both sides!)  which will hopefully solve your problem of representing both sides.  If not, I give up.
Best Regards to You and Randy….......

David Davis on 10/11/2015

Marvin Dorris, Jr.,
1. No I am not Randy’s Public Defender;
2. My comment “ASK YOUR BROKER” was ( and still is) designed to be progressive not aggressive as your have presumed.  Since you are the broker you will know that all brokerage decisions go through you.  That was the only point I was trying to make, and I still stand by it (you may as well too, because like it or not, that is the way the TRELA is written).
3. No, even as the broker (which you now claim you are, by the way, so am I) you do not represent both sides.  Read the IABS it says “ACTS AS AN INTERMEDIARY”.  It says nothing about “representing” in the discussion about Intermediary. 
As discussed many times in other threads, it is impossible for one person (broker) to represent both (opposing) sides in a single transaction.  Let us look a the definition of the word represent.  It means to stand in place of, or instead of someone or something else.  In other words the Agent is acting in place of the Principal.  One Agent cannot act in place of two different Principals that have opposing “best interests”.  It simply is impossible.  How could you defend the best interest of one without violating the best interest of the other?  Simple answer: You can not!

Marvin Dorris, Jr on 10/10/2015

Hello David.  Are you Randy’s public defender?  I asked two simple questions and get a SHOUTING response with NO answer other than a shouting dissertation…..ASK YOUR BROKER.  Read your comment on 10.8…“HERE WE GO AGAIN WITH INTERMEDIARY” and representing both sides. ( You like to SHOUT TOO.)

As far as the broker, or you, representing both sides, you need to ASK YOUR BROKER.  There may be a way a BROKER can have representation for both sides.  Find out. 

 

David Davis on 10/10/2015

Randy,
Did you send some kind of private response?  Why is this person “shooting at you” in a public forum?

Marvin Dorris Jr on 10/09/2015

Randy, I am the Broker.  Your comments lead me to believe you don’t understand intermediary relationships.  If you hold a TREC license you are supposed to know how it works.  Perhaps you should ask YOUR broker.  He/She is responsible for your real estate training.  I’m not surprised with your response.  My brokerage experience has taught me that MOST real estate “professionals” don’t have a clue about the requirements of entering into an intermediary relationship.  You included.

David Davis on 10/09/2015

@Marvin Dorris, Jr
The simplest way to answer that is “ASK YOUR BROKER”.  He or she is in charge and control of INTERMEDIARY within the brokerage.  There are some brokers that do not allow it, and some that do.  For this reason, the only way to accurately or intelligently answer your question is to tell you to ASK YOU BROKER!

You must follow whatever guidance your broker gives you on this subject.  If your broker is not willing to advise you on the subject, and you think you may want to participate in INTERMEDIARY transactions, you should seek out another broker who both willing to advise you, and allow you to work these types of transactions.

Keep in mind, that INTERMEDIARY is NOT required for the listing Agent or Broker to keep all of the sales commission.

Marvin Dorris Jr on 10/09/2015

Randy, are you familiar with intermediary relationships?  If so, how does that work?

Randy Wilson on 10/08/2015

Personally, as a listing agent, I represent ONLY my seller. I tell my seller when I list the property that I will gladly show his listing but if the buyer is interested he can either “go it alone” or get his own agent. I also tell the buyer this at the time of the showing. My client is the seller not the buyer. If the buyer wants to go it alone, my seller will save another 3% as I won’t even attempt to collect that portion of the commission. Works great for me and keeps me out of court. Personally I think that the law should be changed so that if there is a Realtor on one side of the deal there should be a requirement for a Realtor on the other side as well and that both Realtor’s cannot be the same individual thereby guaranteeing that both buyer and seller are fairly represented.

Stuart Scholer on 10/08/2015

David Davis reminds us what the Intermediary is if there are no appointees. And even if there IS an appointee for an unrepresented Buyer we all know that the quality of the Buyer’s representation could easily come into question.  That is why when I take a Listing I tell the Seller up front that (in most cases) I will not show their property. I tell them that if a Buyer is really qualified and motivated then they will “bother” their Agent to show the house. I also explain to them that I am not interested in earning that extra 3% that is paid to the Buyer’s Agent. I also explain to my Seller Clients why they should be happy with my policy… less exposure to lawsuits by “unrepresented Buyers”, which are one of the most common lawsuits brought on by Texas consumers. My discount service is streamlined and works well in the Houston market which is very transparent thanks to our HAR.com. I have always felt empathy for the Buyers that get snagged by Listing Agents. When I bought my first house I came to understand late in the contract process that I was not represented. My Agent was a sub-agent. I felt betrayed.

David Davis on 10/08/2015

To Volley, You have to be willing to do something about it.  Even if that “something” is to hold yourself above that standard.  Would I report that to the board?  Without having been there and experienced all of the details of the situation, I honestly cannot answer that, so I wont set here and tell you that you should have…..  I suppose the heaviest question I would pose in deciding what to do is this.  Did my Client get what (s)he wanted in the deal?  If they did, I would probably just move on to the next deal.  If not, or it in any way damaged my Client, my tenacity might tend to surface.

You are the professional here.  You have to act like it at all times.  I know it is hard, especially in the light of what appears to be a fool, but you have to move on.

If you do decide to report it to the board start with TAR and they will assign it to your local board if such is justified.

Remember (even though it doesn’t seem like it at times) we are in a very tiny industry.  The odds that you will again deal with the agent you complain of, are very high.

Michael Zehr on 10/08/2015

The short article doesn’t say if there was an agency agreement in place. If there was and it was signed the buyers had a written obligation to inform the broker at the open house that they had a buyers agent and at that point that broker should have recommended they have their agent show them the house.

David Davis on 10/08/2015

Here we go with the INTERMEDIARY and “representing both sides” again.  IT IS IMPOSSIBLE TO REPRESENT OPPOSING PARTIES (BOTH THE BUYER AND THE SELLER) IN A SINGLE TRANSACTION!  If you are the Broker of Record for a Brokerage, you MAY ACT AS AN INTERMEDIARY, but no where does it say you represent both sides.

George D. Felan on 10/08/2015

Hmmm.  Where does one begin?  The supposed issue here is “procuring cause of sale” which is defined as the “uninterrupted series of causal events…”  I would certainly categorize the buyer as the “interruptee”, and the seller’s agent as the “interruptor.”  Everything was going smoothly in a “casual” way until this event occurred. 
I would also beg to disagree that the “procuring cause of sale” is a primary issue in this case.  I believe that the primary issue is REPRESENTATION OF THE CLIENT.  The buyer’s agent has the legal and ethical responsibility of representing his client to the best of his ability and in a fiduciary manner, regardless of what the seller’s agent or the buyer himself may think until the formal agreement is mutually terminated by the buyer and their agent.  The buyer’s agent has probably spent hours upon hours of credible work on behalf of the buyer and representing his best interests in doing so.  In writing up the contract for the buyer, the buyer’s agent is taking on all responsibilities, legalities, and liabilities in doing so and justly should be compensated for such efforts.
It is truly unfortunate that these types of issues come up.  We, as agents, should abide by the rule that is the foundation of our Code of Ethics: Do unto others as you would have them do unto you.  We as agents should perceive potential clients and customers as sheathed in the “robes of representation”, and not the “cloak of conspiracy” whereby we try to cheat another agent out of their duly earned commission.
It is my personal opinion and belief that this Association of Realtors should take it a step further.  Rather than simply present a client with the Information about Brokerage Services for their signature and filing into our cabinets, which they probably never read anyway, I propose a new rule: the Felan Warning, (duly named for me, since I believe I am the first to publicly pronounce it), which would require agents to verbally “Felandize” each and every potential client.  It could be something like: “Are you currently represented by an agent? If you are, you have the right to continue that relationship, or you may terminate that relationship at risk of legal peril.  If you chose not to continue that relationship, you are informed that I may act as an intermediary representing both sides of this transaction, but will be unable to give advice to either side.  Do you understand your options?”
Finally, I have great interest in these types of issues in our industry, and would like to be an involved participant in a local, state, or national way.  I hope to hear from the leadership of the Association of Realtors.

Alice Caron on 10/08/2015

I think it comes down to doing your prep work and like one of the agents said, giving the client your business cards to give someone they may talk to in an open house, etc.  We must as agents educate our clients as to how this process works and what the consequences could be if they do something contrary to what we advised.  There is enough business out there for all of us.  We just have to not wait for the low hanging fruit.  And we must look at the long term not short term.  Karma.

Volley Goodman on 10/08/2015

To David,
Yes, I am off the topic, but I could not help but bring up the issue of fraud which takes place all the time regarding this issue. I understand some listing agents are abusing the rules, and have experienced that myself, but I have encountered the type of fraud I mentioned many more times.
Volley

David Davis on 10/08/2015

Volly, What you describe is just plain fraud!  I am not saying it doesn’t happen, we all know it does, but for the purposes of this forum we have to assume all parties are playing by the rules.  There is nothing in the original post that indicates anyone was not playing by the rules.  Is the issue educating a principal (client) as to what the rules are?  I think maybe so.

Donald Moore on 10/08/2015

Does the Buyer’s agent have a properly filled out representation agreement? If so, then the agent needs to inform the buyer that they will be required to pay his commission if the seller does not. Hopefully, at that point, the buyer will notify the seller’s agent that unless is agent is allowed to represent them as their buyer’s agent then the offer is withdrawn.

It would also be good to point out to the buyer that if they go through with this purchase, then the seller’s agent cannot legally represent them in the transaction. The seller’s agent’s fiduciary obligation is to the seller and that he is contractually bound to the seller by the listing agreement. They are on their own. 

Unfortunately, there are to many greedy real estate agents that put their own interest above the interest of their clients. 

David Davis on 10/08/2015

THERESA AKIN,
You say the other agent had no IABS.  Was this an “open house” that your buyer stopped into?  Did you know that the “open house” is the “other” circumstance where the IABS is not required?  Obviously a Buyer Representation Agreement without the IABS as part of the agreement is just plain planned suicide!
As for the other Agent not honoring your known representation agreement, and doing anything inconsistent with that agreement, that is a violation of COE.

Volley Goodman on 10/08/2015

There are books being published (and read) that advocate an abuse of the Real Estate buying process. The books say use the listing brokers to show you houses. Once you find a house you like contact an agent or broker who will then simply write up the contract and then after the seller’s agent has done all the work - showing the property, negotiating a deal with the seller etc., who will “rebate” you most of the commission back to you.

As a listing broker I have ran on to this too many times to mention. When asked the books advise the “prospective buyer”  to say no when asked if they are represented by an agent.

The seller’s agent is now presented with a quandary. She knows she has done all the work for the other agent and she wants to make the sale, but she also knows the buyer’s agent is merely collecting a commission of perhaps 1% for doing nothing more than writing a contract.

There have been times I have refused to pay a commission to such agents and their brokers have supported me in my decision, but in other cases I have to deal with independent brokers who are in business to do nothing more than write the contract for 1% of the commission.

Is the seller hurt when their agent refuses to pay the commission? In some cases my sellers have refused to pay the commission to such brokers even though they are sacrificing the sale to that buyer.

In some cases I have been told by the buyers that “THEY did all the work, and THEY DESERVE the commission because they actually found the house.” They do not respect the work I did to put the deal together and make it happen. I say they need to understand the work Realtors do and respect the rules.

What do you think?

THERESA AKIN on 10/08/2015

Another reason I insist on a Buyer/Tenant Representation Agreement. I also give my clients my business cards just incase they happen to stop by a property that is ‘open”. I remind them they are under agreement and to inform any other agent of the agreement and hand said agent my card.  I tell them this is detrimental to fair representation.  I had a client who did stop by a rental. He informed/called me first. I was 5 minutes away but he went in looked around and by the time I got there he was about to fill out the application. The agent met me at the door and immediately stated I would not be compensated since she “showed” it. She didn’t want to let me in and wouldn’t even though I stated I had proof of representation. My client immediately said, ‘‘If she doesn’t get compensated, I question your property management.”  He took the property and I was compensated. She had no representation papers or IABS form for him to fill out. Her ethics came into question a few times with other agents. Because of that she moved to another agency. No matter what I have the IABS and Buyer Rep Agreement. I will not work without it. I remind my buyers/tenants of the agreement.

David Davis on 10/08/2015

Brad, I am not sure I understand your point.  I understand the listing broker has a fiduciary obligation to the seller, that is given, but how does this come up in this process?  Are you suggesting that because the buyer was represented by another Agent that the listing broker did not take the offer or present it to the seller?  If so, I would agree, that there is a breach of fiduciary obligation on the part of the listing broker as (s)he put their own interest in front of a client’s.  At the same time, if this happened, because the listing broker knows about the representation agreement between the buyer and the buyer’s agent the COE would prevent interference in that agreement.  At this point I think the listing broker should inquire into who the buyer’s agent is, and refer that buyer back to the proper agent.  The fiduciary responsibility to the principal (client) comes first, agreed, but at the same time we have to be cognizant of the COE and play by those rules as well.

Brad Bowen on 10/08/2015

What about Listing Broker’s fiduciary responsibility to Seller?  Did Listing Broker present the offer to Seller?  My opinion is that Listing Broker should present the offer and then bring to an arbitration panel, otherwise, Listing Broker will be the cause of delay.  Delay is damaging to Seller.

Lou Burns on 10/08/2015

Agents and brokers have been struggling with this problem for decades and unfortunately the guidelines we keep seeing are wishy-washy at best and leave no easy path for closure. What they allude to is the necessity of having to go through arbitration to settle the matter. Of course, buyer’s agents should have a representation agreement for protection against such instances. Our agents have been encouraged to go after the buyer when they go “rogue”.

That being said, it is important that we all play well in the sandbox. Helping another agent out under most circumstances pays tangible and intangible benefits. Most important, the listing broker should realize that sometime in the future it will probably happen to him/her. What goes around, comes around.

David Davis on 10/08/2015

What about the obligation of the Listing Broker to provide the Information About Brokerage Services (IABS) (and explain its contents) to the Buyer?  The question that starts out “My buyer” indicates that there is some kind of representation agreement in place between the Buyer and the Agent asking the question.  If this is the case, in all likelihood the buyer would have an obligation to inform the listing agent that the buyer was represented by another agent (see generally paragraph 6 (b) of the Residential Buyer/Tenant Representation Agreement.  This also would likely cause the listing agent to “give pause” to the situation if (s)he knew the buyer was represented by another Licensee.  When the Listing Broker hands the IABS to the Buyer (as required by law) and begins to explain it, it is almost a certainty that the Buyer will say something about being represented.  Considering the fact that one of the only two times when the IABS is not required by law to be given to a consumer is when speaking to a consumer that the Licensee knows for a fact is represented by another Licensee, one would think that one of the very first questions to come up from the listing broker to the buyer is “are you working with any other Licensee, Agent, or REALTOR®?”  If the Buyer answers falsely, that could be considered a breach of the representation agreement, and would entitle the Buyer’s Agent to a commission paid by the Buyer (See generally paragraph 11 (A), (B), & (C) of the Residential Buyer/Tenant Representation Agreement).


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