Jay Thompson is a former brokerage owner who spent over six years working for Zillow Group. He retired in August 2018 but can’t seem to leave the real estate industry behind. His weekly Inman column is published every Wednesday.
Wade into any real estate discussion group, and you will swiftly hear all sorts of stories about buyers and sellers committing atrocious acts of horror against agents.
- “I showed a home, and now the buyer wants to work with the listing agent. What can I do?”
- “Showed a buyer six homes, they ghosted me and bought through another agent!”
- “After I showed my sister a home, she decided to use her hairdresser (who’s been a Realtor for two weeks) to buy the home. Claims they, ‘really need the business!’ WTF? I need the business too. I’m never talking to my sister again.”
Invariably the response to issues like this is:
“PROCURING CAUSE! They owe you commission! Go after it!”
Some respondents dive into more detail, providing “facts” like, “You showed the home, you are the procuring cause.” Or, “If you show the home or write the offer, you are the procuring cause and entitled to full commission.”
Then there is, “If you have a buyer-broker agreement, you are automatically the procuring cause.”
Yeah, but not necessarily. There is far more to procuring cause than showing a home. Writing an offer is not a guarantee you are the procuring cause. Nor is having a signed buyer-broker agreement.
Don’t believe me? Consider what the National Association of Realtors (NAR) has to say about procuring cause — straight out of the NAR’s Code of Ethics New Member Course:
Key Factors of Procuring Cause
A common misconception is that the party who first showed a property to the purchaser is automatically entitled to the commission. This is not the case.
Similarly, writing the successful offer to purchase is not the sole deciding factor of procuring cause.
The fact that a REALTOR® had a buyer agency agreement with the purchaser does not automatically entitle that REALTOR® to the commission.
In short, nothing is automatic or guaranteed in matters of procuring cause.
What is procuring cause?
As Quicken Loans simply explains, it’s: “the actions made by a real estate agent that caused the buyer to purchase the home.” As simple as that sounds, the actual process of proving that a Realtor is procuring cause in a buyer buying a home is quite a bit more complex, involving arbitration.
“Procuring cause is a legal concept developed over many years by the courts,” according to NAR. That alone should tell you it’s not a simple concept. The legal definition does little to alleviate the confusion surrounding procuring cause:
The reasoning relied on by the courts in resolving such claims is articulated in Black’s Law Dictionary, Fifth Edition, definition of procuring cause:
The proximate cause; the cause originating a series of events which, without break in their continuity, result in the accomplishment of the prime object. The inducing cause; the direct or proximate cause. Substantially synonymous with “efficient cause.”
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. Mohamed v. Robbins, 23 Ariz. App. 195, 531 p.2d 928, 930.
Yes, that is a lot of legal mumbo-jumbo. Here the keywords are “a series of events,” and “without break in continuity.”
Showing a home is not a “series of events.” Neither is writing an offer. Or getting a buyer-broker agreement signed. Those are singular events, not a series. Toss is the requirement of “without a break in continuity,” and things can really get complicated.
Complicated to the point of the NAR creating a 273 page Code of Ethics and Arbitration document, 12 pages of which are dedicated to procuring cause (see Appendix 2 to Part Ten).
That appendix explains, in painful detail, what is to be considered in procuring cause cases brought to arbitration. If procuring cause is as simple as, “Get a buyer-broker agreement, show a home, write an offer, collect a commission,” then why are there 89 questions for hearing panels to consider?
“But I showed the home, without that, there wouldn’t be a deal! That makes me the procuring cause!”
Wrong. It’s more than that. Some of the questions hearing panels might use to determine procuring cause include, sourced from various boards and organizations:
- Was the introduction of the property instrumental in creating the desire to purchase?
- Did the buyer know about the property before the broker contacted him?
- Did the buyer find the property on his own?
- Was there a faithful exercise of the duties a broker owes to his client/principal?
- Did the broker who made the initial introduction to the property engage in conduct (or fail to take some action) which caused the purchaser or tenant to utilize the services of another broker?
- Did the cooperating broker (or second cooperating broker) initiate a separate series of events, unrelated to and not dependent on any other broker’s efforts, which led to the successful transaction—that is, did the broker perform services which assisted the buyer in making his decision to purchase?
- Did the broker make continued efforts after showing the property?
- Did the broker remove an impediment to the sale?
- Did the broker make a proposal upon which the final transaction was based?
- Did the broker motivate the buyer to purchase?
Those potential questions go on and on and on. Procuring cause is complicated.
In addition to the almost 100 questions, The NAR arbitration manual lists primary factors for consideration:
“The following factors are recommended for consideration by Hearing Panels convened to arbitrate disputes between brokers, or between brokers and their clients or their customers. This list is not all-inclusive nor can it be. Not every factor will be applicable in every instance.”
Factors that typically (but not always) pertain to procuring cause cases are:
No predetermined rule of entitlement
This is important. It expressly says:
“Every arbitration hearing is considered in light of all of the relevant facts and circumstances as presented by the parties and their witnesses. ‘Rules of thumb,’ prior decisions by other panels in other matters, and other predeterminants are to be disregarded.”
The “rules of thumb” like, “I showed it,” “I wrote the offer,” and “I have a signed buyer agreement” are to be disregarded.
Arbitrability and appropriate parties
The fact that “arbitrability” is even a word should tell you that this gets complicated. This basically means:
“Hearing Panels may consider questions of whether an arbitrable issue actually exists and whether the parties named are appropriate to arbitration.”
Communication and contact — abandonment and estrangement
These two sentences best capture this factor:
“Many arbitrable disputes will turn on the relationship (or lack thereof) between a broker (often a cooperating broker) and a prospective purchaser. Panels will consider whether, under the circumstances and in accord with local custom and practice, the broker made reasonable efforts to develop and maintain an ongoing relationship with the purchaser.”
In fewer legal words, if you don’t make an effort to develop and maintain an ongoing relationship with a buyer, you’re probably not going to be the procuring cause. There’s more to being an agent or broker than opening a door. A lot more.
Consideration of the entire course of events
This is exactly what it says. The entire course of events matters. Showing a home is one step, a singular event. It is not a free pass to procuring cause. Ditto with writing an offer, or getting a buyer-broker agreement.
Yes, it’s complicated
Procuring cause is a complicated and important concept. You owe it to yourself to understand it — really understand it. Procuring cause claims between agents and brokers have to be resolved through mediation or arbitration — if the agents or brokers are Realtors. (See Article 17 of the Code of Ethics. It’s all about this requirement).
Procuring cause disputes between an agent or broker and a buyer or seller are frequently resolved in court. In other words, you need to sue your buyer if you want to be found the procuring cause of a sale.
Best have all your ducks in a row and truly understand the concept if you want to meet someone in front of a judge or jury.
Read the arbitration manual. Review the questions on the arbitration worksheet. And please, stop proclaiming that simply showing a home entitles you to compensation. It doesn’t work that way.
Jay Thompson is a real estate veteran and retiree who lives in the Texas Coastal Bend, as well as the one spinning the wheels at Now Pondering. Follow him on Facebook, Instagram and Twitter. “Retired but not dead,” Jay speaks around the world on many things real estate.
