Just What Is Procuring Cause?
Beginning a new year often sparks times of reflection and introspection. I have had the benefit and opportunity to work with, for, and represent Realtors® for nigh on twenty-five years. Suffice to say, I have probably seen it, heard it, or been told it more than once… oftentimes by a Realtor®! When you hear something time and again, not unlike the Internet, it must be true… right? Maybe not so much.
One of the most challenging things to understand is procuring cause. I have heard more examples of procuring cause, more definitions of procuring cause, and more explanations of procuring cause than Carter had liver pills (as “they” say), but rarely have I heard the right example, definition, or explanation.
Just what is Procuring Cause?
The first challenging thing to accept about procuring cause is that it is a CONCEPT! There is no one all-encompassing definition. Importantly, there is no Rule of Thumb. When there is a dispute among Realtors® as to who is entitled to compensation in a transaction, the concept of Procuring Cause is oftentimes at the center of the discussion, so why is it so hard to understand? Because first and foremost, it is a Concept. The National Association of Realtors® Code of Ethics and Arbitration Manual defines ‘Procuring Cause’ as, “the proximate cause; the cause originating a series of events which, without break in their continuity, result in the accomplishment of the prime object. The inducing cause; the direct or proximate cause, substantially synonymous with ‘efficient cause.’”
See? A Concept.
Procuring cause is probably one of the most contentious, debated, and misunderstood aspects of being a Realtor®. The Code of Ethics and Arbitration Manual does a good job of presenting the concept of Procuring Cause in Appendix II to Part 10 of the Manual. In the 2023 edition, this starts around page 159 and runs to approximately page 170. Single space, two columns per page, small font. It is a lot to digest, but here are three general factors to consider when deciding who, or what constitutes the Procuring Cause in a transaction.
1. There is NO Predetermined Rule of Entitlement
The Realtor® who shows the property to the prospective buyer is not the procuring cause of the sale simply because they crossed the threshold. The converse is also true; the fact that you were not present the first time your buyer saw the property does not prevent you from being the procuring cause. Similarly, being the Realtor® who wrote the initial offer does not guarantee that you will be the procuring cause. Likewise, another agent or another Realtor® may have written the offer, but you still may ultimately be the procuring cause of the sale. Finally, the presence or absence of an agency contract does not, in and of itself, resolve the question of which Realtor® is the procuring cause of the sale.
2. Is the Dispute Arbitrable and Are the Appropriate Parties Named
Is the dispute about the compensation in ‘this’ transaction arbitrable under the Code of Ethics? Start with Article 17 of the Code of Ethics and use the Standards of Practice to help you decide this preliminary question. Is the dispute being brought within 180 days of the claim ripening? Are all of the Realtors® involved in the dispute members of the same Association, or are there different Associations involved? Are the parties involved all Realtors® or is one more of the agents a non-Realtor® licensee? Is one of the parties a consumer bringing a claim against the broker that they hired?
Let’s not forget one of the most important questions – are the proper parties named in the arbitration? In order to answer this question, you need to know exactly who the proper parties are. If you are licensed as an associate broker or a salesperson, the only person or entity who can pay your fee is your employing broker. That means the brokers absolutely MUST be named as parties to an arbitration, otherwise the dispute is not arbitrable. Depending on how the brokerage is structured, the brokerage may be named as a party, or the broker of record may be named as a party, or both may be named as parties. Associate brokers and salespersons are witnesses whose testimony is relevant to the claim, but the claim for compensation through arbitration is brought by a broker, against a broker.
3. Factors Relevant to Establishing Procuring Cause
If you have a signed buyer agency contract, showed the property to your buyer, and ‘wrote the offer’ with your buyer, does that mean you are the procuring cause of the sale?
IT DEPENDS!!
Here are some other factors that may be important in determining who is the procuring cause of the sale. How much time passed between when you first started working with the buyer to buy this property and when the final agreement was negotiated? Did the first time you show this property to your buyer start an uninterrupted series of events that culminated in your buyer taking title to (or possession of) the property? Did you and the buyer voluntarily end your agency relationship, or did the buyer fire you? Was there a time when the negotiations broke down? If the negotiations broke down, why did they break down and who ended the negotiations? Did the agent who introduced the buyer to the property maintain contact with the buyer directly? If a cooperating agent was introduced into the transaction, was this introduction an intrusion, or was it a natural extension of an existing relationship?
You may want to involve your broker, manager, or other experienced colleague in evaluating these factors to help analyze the transaction objectively.
Here are some final thoughts… sort of. From the Code of Ethics and Arbitration Manual: “A broker will be regarded as the ‘procuring cause’ of a sale, so as to be entitled to commission, if his efforts are the foundation on which the negotiations resulting in a sale are begun. A cause originating a series of events which, without 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 the real estate on the owner’s terms.”
What is procuring cause? It’s a concept; an idea that is at the same time simple and complex. It is the Realtors®’ way for analyzing a cooperative transaction when there is uncertainty or disagreement as to who has earned a fee once the transaction has closed. It is not a perfect paradigm, but it’s a damned good one!
Brett M. Woodburn, Esquire is the principal and founding member of Woodburn Law. He serves as general counsel to several local Associations of Realtors® across Pennsylvania. All rights reserved. This article may not be re-printed or reproduced, in whole or in part, without Mr. Woodburn’s express written consent.
