For selling agents, the real estate industry can sometimes resemble the Wild West. It can be lawless, relentless, and without justice. Business is mostly done by handshakes and goodwill, and written agreements are usually put off until the real work is over.

Unfortunately, it is not uncommon that a selling agent introduces a ready, willing, and able buyer to a property and later learns that the same buyer submits an offer on the same property under a different brokerage. In these instances, the scorned selling agent has two options:

1.     The agent can chalk up the loss as a cost of doing business

2.     The agent can file an action against the buyer’s new broker in Procuring Cause. Neither option is very appealing.

The point of this newsletter is to introduce the balancing factors for Procuring Cause.

Balancing Factors for Procuring Cause

Procuring Cause is very difficult to gage. There are numerous factors that can be weighed. Depending on the case, some factors will be considered and others will not. Ultimately, the person making the determination will balance those factors that are relevant, and make a call concerning who actually “caused” the buyer to purchase the specific property.

The 12 balancing factors for Procuring Cause are as follows:

1.     Who first introduced the buyer to the property?

2.     How was the first introduction made?

3.     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?

4.     If more than one cooperating broker was involved, how and when did the second cooperating broker enter into the transaction?

5.     What was the length of time between the second broker’s efforts and the final sales agreement?

6.     Did the broker who made the initial introduction to the property maintain contact with the buyer and/or operate under a valid, written agency agreement?

7.     Did the buyer make the decision to buy independent of the broker’s efforts?

8.     Did the first broker submit an offer for the buyer?

9.     Was the second brokers’ offer substantially different from the first offer?

10.   Did the buyer or second broker seek to freeze out the first broker?

11.   1What services were provided after entering into contract?

12.   How do the total efforts of one broker compare to the efforts of the other?

These general factors give great leeway to the arbitrator or judge to take whatever information is necessary and determine who actually made the sale. However, it also makes it nearly impossible to advise selling agents in any meaningful way. Agents can be liable for Procuring Cause even when they act in good faith. And for that, Procuring Cause really offers no justice at all.

The Problem Scenario

The buyer contacts the selling agent for representation in the buyer’s effort to purchase a predetermined property. Prior to taking the client, the selling agent inquires whether the buyer is currently working with another DRE licensee. The buyer says “no.” The selling agent takes the buyer to the property, meets with the listing agent, and writes a winning offer. As soon as the deal closes, an unknown broker files an action against the selling agent in Procuring Cause claiming that he first introduced the buyer to the property and his efforts procured the sale.

Is the action proper? Maybe. The simple allegation that the complaining broker first introduced the buyer to the subject property is likely enough to get the action entertained. From there, the arbitrator or judge will weigh any number of the twelve factors to determine who really “sold” the buyer on the property. The winner is entitled to the selling agent’s share of the commission (*however, the normal trend is to give each selling broker an equitable amount apportioned by the total percentage of professional service rendered to the buyer – which heavily favors the broker who put the deal into contract).

Of course, the issue of “fairness” is all but ignored in the above scenario. The selling agent could lose the commission by no fault of his own. And the complaining broker may end up without any compensation or recognition after working hard to introduce the buyer to the buyer’s dream property. Given the leeway and the lack of bright line rules, the final determination is often arbitrary and unsatisfying to all parties.

In My Experience

Often, the complaining broker is either brushed away completely for total lack of validity (resulting from the buyer unequivocally siding with the second broker and beating up on the complaining broker) or the complaining broker accepts a reasonable referral fee as settlement. My advice is to commit these factors to memory and never be too litigious when your buyer finds a new agent. Procuring Cause is a crapshoot, and the selling agent is still very much in the Wild West.