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In the wake of the National Association of Realtors’ nationwide antitrust settlement requiring the use of agreements between buyers and their brokers, some have suggested that the concept of procuring cause is dead — or that it should die.
But at last week’s Realtors Legislative Meetings in Washington, D.C., Matt Troiani, NAR’s senior counsel and director of legal affairs, told attendees of the event’s Professional Standards Forum that procuring cause will still be a factor in arbitration determinations regarding who is entitled to buyer broker compensation, “at least in many markets.”
“The rumors of procuring cause’s demise have been greatly exaggerated,” Troiani told at least 200 attendees.
“Frankly, we could not get rid of procuring cause even if we wanted to; it predates the Code of Ethics.”
Procuring cause is a legal concept enshrined in many states’ laws. NAR’s Code of Ethics and Arbitration Manual points to Black’s Law Dictionary’s definition of procuring cause:
“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 accomplishment of prime objective of the employment of the broker who is producing a purchaser ready, willing, and able to buy real estate on the owner’s terms.”
Although buyers are now required to decide their agent’s compensation before seeing listings, Troiani stressed that the settlement continues to allow listing brokers and sellers to offer compensation outside of the multiple listing service.
“So in many markets, you will continue to see instances where an offer of compensation is made by a seller or a listing broker and is accepted and memorialized in some kind of agreement with a broker for new buyers,” Troiani said.
According to Troiani, there will continue to be cases where buyer brokerages sign non-exclusive agreements with a buyer, or where a buyer has signed exclusive agreements with multiple brokerages at the same time, and therefore when a sale happens, there may be some dispute as to which brokerage is entitled to that offer of compensation.
“So the extent to which procuring cause comes up in arbitration over time may become fewer, but we do not think that it is going away,” Troiani said.
NAR will continue to provide guidance regarding offers of compensation and procuring cause, Troiani added.
In an op-ed last month, managing broker and Inman contributor Spencer Krull urged NAR to get rid of procuring cause.
“With procuring cause, an agent works with a buyer, and if that buyer ends up using a different agent to write an offer, then the first agent can file a complaint with their local board and go after the second agent’s commission,” Krull wrote.
“Procuring cause is NAR’s equivalent of rewarding the kid who licks the lollipop to make sure no one else will want it.”
