I’m a buyers agent, so I always get paid…
Yep, buyer’s reps always have a right to be paid. But WHO has to pay? Ah, now we get to talk about Procuring Cause.
Let’s start by getting rid of agency. The type of agency relationship with a client has VERY LITTLE to do with getting paid. Agency describes an REALTOR®’s duties, and nothing else (well, not exactly true, but for a discussion of getting paid, let’s pretend).
Let’s compare with a listing. When we list a home, we can be several different kinds of agents, but the listing ALWAYS becomes a contract. When the property is sold, and we have performed to the standards of the contract, we get paid. And who pays us? The person we had a contract with, the property owner. This part is pretty easy, but what happens when we have a buyer?
Jane Agent represents Rich Buyer. Jane has signed a buyer’s agency agreement with Rich. Rich finds a house and buys it. Jane wants to be paid, so who pays her? If Jane isn’t the Procuring Cause as defined by the National Association of REALTOR®S Code of Ethics, then Rich owes her money. What you say? Why? Because Jane has a Contract with Rich. Ok, but buyer’s agents get paid from the transaction every day, so why not now?
REALTOR®S belong to a local MLS, and association. We do this so we can show other REALTOR®S’ properties, and cooperate in the sale of homes. The listing agents have a Contract with a seller. This contract describes how much money the agent will receive if they sell the home (usually a percentage of sale). A REALTOR® agent posts the listing in their local MLS, with a commission they’re willing to offer another REALTOR® member who produces a buyer in accordance with the Code of Ethics. In essence, the MLS and the Code of Ethics becomes the Contract between 2 REALTORS® to share a commission. So if Rich found a home, and purchased it without Jane following the Procuring Cause rules, Jane can only collect from the person she has a contract with; Rich! Bad news for Jane and Rich. He doesn’t want to pay, and she may have to go to court to collect.
The key concepts of procuring cause are referenced in this definition from Black’s Law Dictionary, Fifth Edition (and quoted from NAR):
“The proximate cause; the cause originating a series of events which, without break in their continuity, result in the accomplishment of the prime object”
If the prime object is to sell a home, and the buyer finds a home, and engages in a contract on his own, the Buyer’s Agent is not procuring cause, and therefore the listing agent has no obligation to share commission from the listing side. The Buyer’s Agent didn’t fulfill his part of the MLS contract – originating a series of events…
Oh yes, there is a laundry list of things the listing agent should do legally and morally. I’m not suggesting we try to fool a buyer into doing something questionable. Just keep one important fact in mind. A Buyer’s Agency Agreement is between buyer, and REALTOR®. Compensation agreement from the transaction comes from being a REALTOR® first, and then following the Procuring Cause guidelines from our Code of Ethics to complete to cooperation – compensation contract.