Procuring Cause and the Late Buyer’s Agent

The National Association of REALTORS® Code of Ethics and Arbitration Manual states the procuring cause broker, to be entitled to a commission, is a broker whose efforts are the foundation on which the negotiations resulting in a sale are begun.  Further, that procuring cause originates a series of events which, without a break in their continuity, result in the accomplishment of the 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. The Georgia courts have tended to express the definition of procuring cause in terms of whether the broker initiated the key uninterrupted series of events which resulted in the sale of the property.

Procuring cause cases are most often resolved by REALTORS® serving on arbitration panels. The cases arise in 2 different ways.  First, between 2 buyer’s agents and second, between a listing agent and a buyer’s agent. The National Association of REALTORS® tries to give guidance to arbitration panels by including in its Code of Ethics and Arbitration Manual a list of factors to consider, but it does not give guidance regarding the relative weight of the factors or how to evaluate the answers. Panel members are given broad discretion in making decisions with regards to procuring cause because each decision requires a fact intensive investigation by the arbitration panel.
Examples of such questions include the following:

1. Who first introduced the buyer to the property?
   
2. When was the first introduction made?
   
3. How was the first introduction made?
   
4. Did the broker who made the initial introduction to the property engage in conduct (or fail to take some action) that caused the buyer to utilize the services of another broker?
   
5. How do the efforts of one broker compare to the efforts of another?
   
6. If more than one cooperating broker was involved, how and when did the second cooperating broker enter into the transaction?
   
7. What was the length of time, between the broker’s efforts and the final sales agreement?
   
8. Did the broker who made the initial introduction to the property maintain contact with the buyer?
   
9. Did the buyer make the decision to buy independent of the broker’s efforts/information?
   
10. Did the buyer seek to freeze out the broker?
    

This discussion will focus on whether an agent brought in after a buyer identifies a property and negotiates the terms is entitled to a commission.

Situation:
A property is listed in the MLS with 2.5% commission to the buyer’s agent. A sign is placed on the property.  A buyer without an agent negotiates with the listing agent over a period of weeks and settles on contract terms.  The listing agent writes the offer with the negotiated terms and sends it to the buyer for signatures. The buyer then decides that he wants a representative. The new buyer’s agent rewrites the offer with the same terms and presents it for the seller’s signature.
Is the Buyer’s agent owed a commission from the listing agent?
Answer:  Probably not. In listing the property in MLS the listing broker has agreed to pay cooperating brokers a commission if they are a procuring cause of the sale.  In this case, the buyer found the property without the assistance of the buyer’s agent and made his decision to purchase the property before the agent became involved in the transaction. However, there is an argument that the efforts of the buyer’s agent carried the contract through to closing or otherwise contributed to a successful sale.   The Arbitration Panel has to weigh the facts and determine the outcome. It is suggested that the buyer’s agent will have a difficult time establishing that he is the procuring cause of the sale.  If the buyer signed a buyer brokerage agreement with the agent, he may be entitled to be paid a commission from the buyer, but he will likely not be able to collect a commission from a seller.

Protect Yourself From Late Buyer’s Agent
There are 2 ways that a listing agent can protect itself from this situation.  First, the Exclusive Seller Brokerage Engagement Agreement in the Commission section allows a commission not to be paid to a cooperating broker in certain circumstances.  A listing agent can include in that section circumstances that would reduce or deny a commission.  Second, that language should be mirrored in the private comments section in the MLS.  

The terms for reducing a commission are up to the listing agent.  Just be sure to include the terms in both the listing agreement and the private comments in MLS for added protection. 

Example language: 
“Commission to the co-operating agent shall be reduced to 1% if the buyer’s agent does not accompany the buyer on the buyer’s first visit to the property.”  Or
 “No commission shall be paid to the buyer’s agent if the buyer’s agent does not accompany the buyer on the buyer’s first visit to the property.”

Reference: Procuring Cause Revisited, Seth Weissman