A buyer canceled the purchase contract on a property with her first broker. Then, the buyer went into contract again on the same property, using a buyer’s agent from the same real estate brokerage as the listing agent. The buyer was told by her mother, a real estate broker, that the dual agency would mean the buyer was more likely to get the house.
It was a CRES-insured real estate brokerage that became the dual agent on the sale of the home. When the transaction closed, the original broker of record wanted his full percentage of the selling commission. The dual agent brokerage had done most of the work and taken all of the risk in closing the deal.
How do you handle a selling commission dispute like this? How does procuring cause come into play? CRES ClaimPrevent® Legal Services weighed in.
What Is Procuring Cause?
Procuring cause refers to the actions that lead to a real estate sale. The person responsible for procuring cause generally gets the selling commission. Sometimes it gets complicated, though.
Procuring cause disputes can occur any time more than one real estate professional is involved in a sale. For example, the listing agreement expires and the seller goes with a new listing broker. If somebody, who looked at the house when listed by the first broker makes an offer, the initial broker can make a procuring cause claim.
Why Buyer-Broker Exclusive Contracts Matter
Buyer-broker exclusive contracts are the most common kind of buyer-broker agreements. Buyer-broker exclusive agreements often have a timeframe of several months or more, with specific stipulations on ending the agreement. These contracts can help establish procuring cause.
Best practice is for the listing broker to learn whether the buyer has signed a buyer-broker exclusive representation contract and to have potential buyers they work with sign one. Without a signed buyer-broker exclusive agreement, there is less valid basis for a selling commission claim based on procuring cause.
In this case there was no buyer-broker exclusive in place.
Resolving Selling Commission Disputes
In this case, our CRES ClaimPrevent® Legal Services attorney suggested reaching out to the other broker and requesting the number of hours spent on the transaction up to cancellation of the transaction Then, the new broker should try to resolve the issue pointing out that her brokerage took on all the risk in the dual agency. You should document all of this communication in writing and maintain it in your transaction files.
You can get proactive about selling commission disputes. Check on buyer-broker exclusive representation contracts that buyers may have signed before working with the buyers. Ask other involved brokerages about possible procuring cause: would they be making a claim for real estate commissions as “procuring cause” if the sale closes? Confirm this information in writing and maintain it in your records.
Get Advice on Your Legal Questions
Have you hit a snag when it comes to who gets a commission? Do you have a question about procuring cause? Wouldn’t it be nice to have someone answer your legal questions. If you’re a CRES real estate Errors and Omissions insurance member, you can call CRES ClaimPrevent® Legal Services for free expert legal advice.
Our goal is to help clients prevent claims, so CRES members receive a prompt response from an experienced attorney. Plus, our legal services confirm recommendations in writing. That can help put your mind at ease.
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