Legal FAQs for REALTORS®
— Commission Disputes
How do agency relationships relate to procuring cause? (updated Jan. 1, 2002)
A cooperating broker's agency relationship to the buyer is not determinative of procuring cause. However, the timing of the cooperating broker's disclosure of agency status may affect his right to a commission. For example, if a buyer decides at the last minute that he wants representation by a buyer's agent, even though the original broker disclosed his subagent status early in the relationship, the series of events leading to the sale probably have not been broken by any action or inaction on the part of the original broker. The original broker would be the procuring cause of the sale. On the other hand, if the subagent fails to disclose her status until the buyer seeks information about the property's market value, and the buyer feels compelled to obtain the information from another broker, the subagent's failure to explain the agency status at the outset may be the event that causes the buyer to find another broker. The second broker would be the procuring cause of the sale.
What is the proper forum for procuring cause disputes? (updated May 14, 2009)
Procuring-cause disputes between REALTORS® are usually settled in arbitration proceedings because of the mandatory-arbitration provision found in Article 17 of the Code of Ethics. Article 17 provides that contractual disputes between REALTORS® associated with different firms must be submitted to arbitration rather than resorting to litigation. To sue another REALTOR® for a commission in such cases and then to refuse to withdraw from or to dismiss the suit upon demand by the other party is a refusal to arbitrate under Standard of Practice 17-1. This would be a violation of the Code of Ethics. However, litigation is not a violation of Article 17 if all parties to a dispute waive their right to arbitrate. Remembered that the broker (REALTOR® principal in arbitration cases) is a necessary party to any arbitration or litigation.
How is procuring cause defined? (updated April 28, 2009)
NAR defines procuring cause as "the uninterrupted series of causal events which results in the successful transaction." Commission conflicts must be evaluated based upon all the relevant facts and circumstances leading up to a sale. Rules of thumb and other predetermined ideas must be disregarded.
Although NAR provides an extensive list of specific factors to be considered in procuring cause disputes, most cases will turn to the following factors:
-Who first introduced the buyer to the property, and how was the introduction made?
-Was the series of events starting with the original introduction of the buyer to the property and ending with the sale hindered or interrupted in any way?
-If there was an interruption or break in the original series of events, how was it caused and by whom?
-Did the action or inaction of the original broker cause the buyer to seek the services of the second broker?
-Did the second broker unnecessarily intervene or intrude into an existing relationship between the buyer and the original broker?
The reason for the entry of the second broker into the transaction always should be examined closely. For example, if the original broker did not call the buyer for three weeks after a showing, the hearing panel might decide that he abandoned the buyer and paved the way for the entry of the second broker. If, on the other hand, the buyer looked at a home with the original broker and the next day wrote an offer through his cousin, the second broker, then the second broker may be seen to have intervened unnecessarily in the transaction.
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? (updated October 2, 2015)
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.
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