Procuring Cause: Who Gets Paid?

Angie is holding a busy open house, but she can’t fail to notice when Mary Magic walks in. Mary is 6 feet 8 inches tall and a professional basketball player. She seems very interested in the house: She spends a long time looking at the MLS data sheet Angie provided, tours the whole place, and asks Angie lots of questions about terms and financing. Angie is a fan of the Women’s National Basketball Association and recognizes Mary. They talk about the WNBA and Angie even gets Mary’s autograph—both in her address book and at the bottom of the agency disclosure form that informs Mary that Angie represents the seller.

The next day Angie receives a telephone call from Barry. He advises Angie that he’s a buyer’s agent and has an offer on the property. Angie doesn’t recall his ever making an appointment to show the property, but the offer is very attractive, and the owner agrees to accept it. It’s only after Angie receives the faxed contract from Barry that she realizes the buyer is Mary Magic. Angie then calls Barry to inform him that she’ll be claiming both the listing and the selling sides of the commission because Mary saw the house at the open house the previous day and asked all kinds of questions. Clearly, Angie asserts, that proves that she’s the procuring cause of Mary’s offer to purchase.

Barry contends he was the procuring cause of the sale. Although he acknowledges that he hadn’t shown Mary the inside of the house, he’d told Mary about the property and encouraged her to visit the open house. Barry knew the house well, since he’d sold it to the current owners. In addition, he’d driven Mary by the house after she’d attended the open house and before she made the offer. And as her buyer’s agent, he’d consulted with her concerning the value of the property and the terms and conditions of the offer she eventually made.

After the closing, the selling portion of the commission is placed in escrow with the REALTOR® association, and Barry commences arbitration.

What it comes down to

The resolution of the dispute between Barry and Angie centers on the application of the legal doctrine of procuring cause. Procuring cause acknowledges that to earn a commission a broker or a salesperson doesn’t have to be present when the buyer and the seller ink the deal. Rather, brokers need only show that they initiated an unbroken chain of events that resulted in the deal between the buyer and the seller. Generally, the law requires more than simply showing the property to the buyer. The broker or salesperson must have ignited an interest in the buyer that ultimately led to the purchase.

As is the case with most procuring cause disputes, the facts of this case aren’t clear-cut. That’s because there are so many elements involved. Further, each element needs to be weighed, and the weight of each may be different for each arbitrator. If I were an arbitrator, I’d side with Barry, and here’s why.

Barry had established a relationship with Mary first, and that relationship was one of principal and agent. Although that fact by itself isn’t determinative, it’s a factor that must be considered. Angie, on the other hand, acted with Mary as a disclosed agent for the seller. Although that fact doesn’t necessarily mean that Angie didn’t initiate Mary’s interest in the property, it must also be considered in making a decision.

Barry alerted Mary about the open house and recommended that she see it. Presumably he knew what Mary was looking for in a house and had determined that the house might be the one Mary would purchase. Barry also described the house to Mary, thus painting a verbal picture of what she could expect to see. Whether Barry was the procuring cause at that point is still an open question. However, it’s clear Barry at least motivated Mary to go to the open house.

On the other hand, Angie was present when the house was shown, provided the MLS data sheet, and answered Mary’s questions. Those are important facts and provide strong evidence that Angie was the procuring cause of the sale. However, it’s also a fact that Mary made no offer that day and didn’t express an interest in making an offer. Nevertheless, if the facts ended there, I would have voted for Angie.

What convinced me otherwise is Barry’s reentry into the picture before Mary made an offer to purchase. Barry drove Mary past the house again. Although he didn’t show the inside of the house—an important factor—he was fully familiar with the house layout and was in a position to discuss it with his client. Before Mary’s offer, Barry discussed the value of the property with Mary and what the terms and conditions of her offer should be. Only after that drive-by and that discussion did Mary make her offer. These are the factors that persuaded me to vote for Barry.

Am I absolutely certain that my vote is correct? No, but it’s based on the facts, and it’s rational. How would you vote? Tell REALTOR® Magazine by sending an e-mail to narpubs@realtors.org.

Points of consideration

Many factors can influence a court or arbitration decision on procuring cause. A partial list from the NATIONAL ASSOCIATION OF REALTORS® Arbitration Manual highlights some of the most critical issues.

• Nature of the transaction (listing and buyer representation agreements)
• Offer of cooperative compensation
• Conduct of the seller, the buyer, and the brokers and their affiliate licensees
• Roles and relationships of the parties
• Initial contact with the purchaser
• Continuity of contact (abandonment and estrangement)