Legal Hotline Spotlight

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Q: I have been working with a family looking to buy a house since January. Since then, I have shown them many houses, but I never got a buyer brokerage agreement signed. A few days ago, the buyers received a text from a friend who is a REALTOR® in another state about a listing. The buyers sent me the listing information, and we set up a showing with the listing agent.  

After viewing the home, the buyers wanted to make an offer, but because they received information on the listing from their REALTOR® friend, they wanted their friend to get a referral fee from me. I did not agree to pay the other REALTOR® a referral fee.  

The out-of-state REALTOR® then called the listing agent and told him he had buyers interested in the listing, and he asked if the listing agent could represent the buyers and pay him a referral fee. The listing agent agreed, and the buyers wrote and presented the offer through the listing agent instead of with me.  

My question is do I have a case for claiming to be procuring cause if I take this to arbitration? 

A: According to NAR’s 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 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.”  

There are numerous factors a hearing panel will review when deciding procuring cause, including whether the claimant had a buyer brokerage agreement, who initially showed the property, whether agency disclosures were made, whether there was estrangement with the buyer, etc. Here, when the agent refused to pay a referral fee, the buyers decided to work with the listing agent who would provide a referral fee to the REALTOR® friend. This is likely a “break in continuity” because the buyer chose to work with another REALTOR®.  

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