I’m sure there are several variations on this theme depending on which State in this Union you practice your profession, but the cause and effect are almost always the same when it comes to determining who earned the commission on a real estate deal. This subject is always a great conversation starter amongst us real estate pundits but may be one of the more misunderstood issues in our industry. Let’s take a gander at a couple of instances and the basis for determining the root of who was the procuring agent or broker.
Estrangement and Abandonment
These two terms are the basis for shaping the outcome of who is due the commission. And, it’s not always as easy as saying, “I wrote the deal so I get the commission.” If there is any question who originally brought the buyer to the attention of the seller or vise versa, one must look at any break in the chain between when the buyer or seller where first introduced to each other and was there any reason they didn’t consummate a deal while in your charge. First let’s look at Estrangement. Was there anything you said or did…or didn’t say or do that caused either party to not close the deal? One case study had a buyer’s agent go after a commission when the folks she was working with bought a house she showed them using another agent. The case goes on to show the buyers had requested their first agent help them with finding a lender for a house they wanted to make an offer on. Despite the first agent’s efforts, the buyers were unable to obtain financing and the deal died. Subsequently, the buyers moved on and the first agent thought that was that. The buyer’s then made an offer on the same house with another agent and the deal eventually closed. It was determined the first agent was not due a commission because the first agent was unable to help their client obtain financing which amounted to estrangement of the parties.
A second case study focuses on abandonment and was more interesting because the first agent did everything right and was found to be the procuring cause of the buyers finding the house they eventually purchased. In this case, a fairly new agent was working with some buyers when she explained to them she was going to be out of town for a week on vacation but that here Broker was available and would be happy to assist them if they saw something while she was gone. On her return from vacation, she had learned her buyers had made an offer on a property she had shown them prior to her holiday. It turned out the buyers lender (who the buyers had a relationship before they met the first agent) had referred the buyers to a ‘colleague’ who eventually wrote up the deal. After closing, the first agent went after the commission and proved that there was no break in the chain and that she made every effort to make sure her buyers were in touch with her Broker while she was away. Because she was diligent and kept an impeccable paper trail of all here correspondences, it was determined there was no abandonment by proving through emails and phone records she did remain in contact with her buyers throughout the course of their relationship and she won her case and got her commission. (By the way, these case studies were determined before our MLS had Exclusive Buyer Agency Agreements in place)
How about on the Sellers Side of the Deal?
Here things are a bit more black and white (at least in the State of Washington) due to exclusivity of the agreement between the Listing Broker and the Seller. That said there are still instances where the first listing Broker will still be due a commission if the house sells even after the listing agreement expires. There is a provision in our listing agreements that states: Further, if Seller shall, within six months after the expiration of this Agreement, sell the Property to any person to whose attention it was brought through the signs, advertising or other action of Broker, or on information secured directly or indirectly from or through Broker, during the term of this Agreement, Seller will pay Broker the above commission. Sounds like if you take an expired listing in Washington, you better be certain you know whose been in the property, seen the for sale sign, read the newspaper or been on the internet looking at houses…or you may be up against a procuring cause issue when you sell the house!
So, I’d love to hear about how this subject works in the state where you work and live. Have you had an instance where procuring cause affected you? Any case studies you know of that you’d like to share?