Procuring Cause When a Buyer Agent Does Not Write the Offer
QUESTION: In last week’s Q&A, available here, a listing agent helped a represented buyer make an offer by giving access to the forms and not giving any guidance on how to fill them out. I understand that this conduct is ethical so long as the buyer is initiating the interaction with the listing agent, and the listing agent is fully complying with Article 16 as well as the rest of the Code of Ethics. However, the Q&A got me wondering. Is the buyer agent entitled to cooperating compensation in this scenario, or is the listing agent the procuring cause?
ANSWER: It is unclear whether the buyer agent is entitled to cooperating compensation from the listing firm. However, there is a strong case that the buyer is obligated to pay the commission if Form 201 was used for the agency contract.
Under MLS rules, a buyer agent is entitled to cooperating compensation only when: (1) a listing agent’s unilateral offer of compensation is made to the buyer agent by virtue of the buyer agent’s MLS membership, and (2) the buyer agent acts as the procuring cause of the sale or lease. As the North Carolina Court of Appeals has noted, a “broker is the procuring cause if the sale is the direct and proximate result of his efforts or services. The term procuring cause refers to a cause originating or setting in motion a series of events which, without break in their continuity, result in the accomplishment of the prime object of the employment of the broker[.]” Jaudon v. Swink, 276 S.E.2d 511 (1981) (quotations omitted).
NAR has developed a four-page worksheet to help panelists determine whether an agent is the procuring cause when an arbitration action is filed with a local board. Many factors in the worksheet are not mentioned in last week’s Q&A. For example, we do not know who first introduced the property to the buyer. It is possible the buyer agent mentioned the open house to their client and showed property via email before the listing agent’s encounter. The absence of these details makes the question of procuring cause impossible to analyze. Certainly, the listing agent from the Q&A has an argument to make that they are the procuring cause and not the buyer agent. Will that argument overcome other facts raised by the buyer agent in a hypothetical arbitration hearing? The answer will undoubtedly vary based on the facts raised.
Assuming the buyer closes on the property and the listing firm does not pay cooperating compensation, the buyer agent’s contractual right to a commission from the buyer is much clearer. A commission is deemed earned in the Exclusive Buyer Agency Agreement (Form 201) when the buyer enters into a contract to purchase the type of property specified in paragraph 1. The earned commission is then due and payable at closing or buyer’s breach of the purchase contract. Paragraph 4(b) of Form 201 requires the buyer agent to seek compensation from the listing firm, but if the buyer agent does not receive compensation from the listing firm, then the buyer agent has a contractual right to seek the commission from the buyer.
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