Who Gets the Sale?

No easy answer to this oft-asked question

February 1, 2005

Q. A customer entered into an exclusive buyer agency agreement with my company and me. When we began to discuss properties, she told me there was a house she liked and asked me to make an appointment to see it. When we arrived, she said she’d already seen the property at the listing agent’s open house. The agent had followed up with phone calls and an e-mail, but the buyer didn’t respond. Her intent, she said, was to be represented by a buyer’s agent and not through dual agency.

The buyer made an offer on that house through me and I called the listing agent to explain my role in the transaction. The buyer also e-mailed the listing agent to make her position clear. In spite of these efforts, the agent was upset I wrote the offer. He said he was the procuring cause since he’d been the first to show the property to the buyer during his open house. As the buyer had shown that she considered me her agent, I felt the listing agent’s claim was incorrect. Who’s entitled to the commission?

A. There are no predetermined rules for what constitutes procuring cause and what entitles a salesperson to a commission. Appendix II to Part 10 of the NAR Code of Ethics and Arbitration Manual explains the various elements of procuring cause as it applies to commission disputes, including the terms of the listing contract, any compensation offered by the listing broker to cooperating brokers (through the MLS or otherwise), and the terms of the purchase contract.

In your case, the fact that the buyer viewed the property at the listing agent’s open house—by itself—doesn’t entitle the listing agent to the “selling” portion of the commission. Likewise the fact that you had a signed exclusive buyer agency agreement doesn’t entitle you to the cooperative compensation. Other factors include what caused the buyer to make the purchase and what motivated the buyer to use one agent rather than another.

For example, since the buyer already seemed to have a significant interest in the property before she talked to you, you may not have been responsible for instilling the “desire to buy.” However, the buyer’s expressed intent not to deal with a dual agent shows a strong motivation to work with a buyer’s agent and is a fact in your favor.

If you can’t reach an agreement with the listing agent and his company, your two options are mediation and arbitration. Article 17 of the Code of Ethics requires REALTOR® principals and their salespeople to arbitrate commission disputes with REALTOR® principals and their salespeople in other companies. However, before considering arbitration, you can opt for mediation services offered through your local association, often at no charge.

In this voluntary mediation process, a trained mediator meets informally with both sides to hear the issue and resolve their dispute. Mediation resolutions often involve a compromise, so you’ll most likely end up splitting the commission. On the positive side, mediation tends to resolve disputes without potentially destroying relationships between the parties. Also keep in mind that—unlike arbitration—a mediator may not impose a solution. All parties must agree to a course of action.

If you don’t settle the dispute through mediation, your next step is to proceed to an arbitration hearing at your local board of REALTORS®.

These arbitrations are conducted by a hearing panel of your peers and are governed by the NAR Arbitration Guidelines in the manual. One thing to keep in mind is that hearing panels generally don’t split commission awards in an arbitration. So you’re risking more financially by arbitrating your dispute.

My advice: Review the guidelines and discuss your case with your broker. If you both think you have the facts to support your case, you may decide to file an arbitration request. But don’t discount mediation. Remember, you still have to work with the listing agent.

Bruce Aydt

Attorney Bruce Aydt, ABR, CRB, SRS, is a national real estate educator, a Missouri real estate broker, and past chair of the National Association of REALTORS® Professional Standards Committee.

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