Procuring Cause
If you Google “procuring cause” you will soon see that it is a murky and gray area of the practice of real estate. “Procuring cause” is defined by NAR as a series of events, unbroken in their continuity, that result in the desired objective (i.e., generally, the sale of property). Procuring cause is important to Realtors because it determines entitlement to compensation . . . it is the basis of our commission income.
If you Google it, you will find examples of arbitration and litigation pursued to determine which agent is owed compensation. This is a common battle in almost all counties in Pennsylvania and throughout the country. However, it is not a common dispute in Lancaster County. In Lancaster the agent who writes the offer is the procuring cause. If you did not know that this is an abnormal approach, be forewarned. The counties surrounding Lancaster have a different approach to procuring cause, and you must be prepared if you and your clients venture into other counties.
For example, if your client wanders into an open house in Berks County and loves it, then contacts you to write an offer, you may not be entitled to the commission. The agent who hosted the open house may argue that the commission is theirs because they were the procuring cause. This goes for visiting new construction open houses as well. There are limitless scenarios that could jeopardize your commission payment due to procuring cause. Sometimes the buyer’s agent writes the contract, negotiates the contract and then is informed in a “by the way” manner that they will not be receiving a commission.
To avoid this unwelcome surprise, coach your clients who are shopping in surrounding counties with some do’s and don’ts of house hunting. They should inform you first of any open houses they plan to attend or any new construction communities they are considering. You can make calls prior to their visit to make sure it is known that you are the procuring cause. A follow up with email to the other agents will keep your communications documented if there is a future dispute. Your buyers should not contact other agents directly. Let them know that you are able to get answers to any questions they may have.
Buyers who have signed a Buyer Agency Contract may discover too late that they owe their buyer agent a commission after a chain of events occurs following their interactions with another agent that leads to a sale that may or may not have excluded their buyer agent. Buyers may be exposed financially by making calls and appointments that they think are harmless. Take the time needed to communicate the importance of limiting their communication to just you, their agent.
You may use PAR’s Cooperating Broker Compensation Agreement prior to the submission of your client’s offer to confirm with the listing agent that you will be paid the stated compensation.
Don’t be surprised with a commission dispute . . . understand that Lancaster County is an anomaly of procuring cause, and take precautions when working in other areas.
Lisa Naples, Berkshire Hathaway HomeServices HomeSale Realty
Facts, opinions and information expressed in the Closing Comments Blog represent the work of the author and are believed to be accurate, but are not guaranteed. The Lancaster County Association of Realtors® is not liable for any potential errors, omissions or outdated information. If errors are noted within a post, please notify the Association. Posts represent the author’s opinion and are not necessarily the opinion of the Association.
