Agency and Procuring Cause

The guiding rule: There is no predetermined rule.

December 1, 1999

Have you ever heard something like this: “Because I’m the buyer’s representative, I’m the procuring cause of sale”?

Well, as the refrain from the wonderful show tune goes, “It ain’t necessarily so.”

Agency and entitlement to compensation are addressed in Factor No. 1, “No predetermined rule of entitlement,” Appendix II, Arbitration Guidelines, Code of Ethics and Arbitration Manual:

“Agency relationships, in and of themselves, do not determine entitlement to compensation. The agency relationship with the client and entitlement to compensation are separate issues. A relationship with the client, or lack of one, should only be considered in accordance with the guidelines established to assist panel members in determining procuring cause.”

The issue of “predetermined rule” is often mistakenly thought to apply only to that old saw “First over the threshold.” Or, more recently, to “I got the check and their signature on the contract.”

No rule to determine procuring cause may be applied by an arbitration panel. Each case must be considered on its own merits to determine who initiated the unbroken chain of events that resulted in a successful transaction. For example, a panel might be faced with a situation in which a buyer has entered into a contract with a buyer’s representative who never provides any service; then later, but still within the time frame of the contract, the buyer looks at and ultimately purchases a home through the services of a company representing the seller.

A panel might find that although a contractual relationship exists between the buyer and the buyer’s representative, the listing broker, in fact, has led the buyer through the uninterrupted series of causal events that have resulted in the successful transaction and is therefore the procuring cause of sale under NAR guidelines. It’s possible, of course, that the buyer’s representative could be entitled to compensation from the buyer as a result of the terms of their contract.

Alternatively, the buyer might have received substantial services and information from and seen the property through his representative but then later determined that he wished to go “direct” to the listing broker to “write it up” and (potentially) “get a better deal.”

In the absence of any demonstrable break in the continuity of the events (such as abandonment or estrangement--Factor No. 4), a panel would most likely find in favor of the buyer’s representative, but on the basis of procuring cause, not on the basis of the agency relationship.

During the arbitration process, a panel looks at many factors for a comprehensive understanding of the relevant events to arrive at the ultimate determination of procuring cause—all with the goal in mind to reach a fair and equitable decision.

Kalodner is a nationally recognized instructor in professional standards and procuring cause. The 1999 chair of NAR's Professional Standards Forum, she has served on the Professional Standards Committee for nine years and is a member of the NAR Presidential Advisory Group on Code of Ethics Enforcement. She can be reached at Benchmark Real Estate, Monterey, Mass., or by E-mail at nancyk@vgernet.net

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