Legal Hotline: Is the Agent Who First Showed the Property to the Buyer Entitled to Compensation?
October 12, 2020 Legal Updates
Maybe. For transactions involving properties listed in the MLS, the agent who is the procuring cause is entitled to compensation once the transaction has closed. A broker is regarded as the procuring cause if it was his or her efforts that laid the foundation on which negotiations resulting in the sale began. The broker’s efforts cannot be interrupted by a break in continuity.
Determining procuring cause requires a nuanced analysis of several factors and must be determined on a case-by-case basis. No one factor alone is determinative. Furthermore, there is no “threshold rule” that dictates that the agent who first showed the property is the procuring cause.
Disputes related to procuring cause that brokers are unable to be resolve themselves must be submitted to REALTOR® sponsored arbitration. Procuring cause disputes submitted to arbitration will be resolved by a panel of REALTOR® members who will consider some of the following questions:
- Were any agency disclosures made? When?
- Was there any buyer representation agreement? Was it an exclusive agreement?
- How was the first introduction to the property made?
- When was the first introduction to the property made?
- What subsequent efforts were made by the broker/agent?
- Was contact with the buyer maintained by the original broker/agent?
- Did the original introduction of the buyer to the property start an uninterrupted series of events leading to the sale?
- Were there any interruptions?
- Did the buyer terminate the relationship with the agent? Why?
- Was there interference in the relationship?
- Did the buyer seek to freeze out the buyer agent?
- Did the seller act in bad faith to deprive the agent of the commission?
The full Arbitration Worksheet from NAR can be found here.
REALTORS® must always remember to never let a compensation dispute interfere with the transaction. Disrupting an otherwise successful transaction with a commission dispute may lead to both an ethics complaint and a licensing complaint.
Written by: Justin Davidson, General Counsel; Catherine Taylor, Associate Counsel; and Jonathan Schreiber, Legislative & Regulatory Counsel.
Services provided through the Massachusetts Association of REALTORS® is intended for informational purposes and does not constitute legal advice, nor does it establish an attorney-client relationship. The Massachusetts Association of REALTORS®, by providing this service, assumes no actual or implied responsibility for any improper use of responses to questions through this service. The Massachusetts Association of REALTORS® will not be legally responsible for any potential misrepresentations or errors made by providing this service. For more information regarding these topics authorized callers should contact the MAR legal hotline at 800-370-5342 or e-mail at email@example.com. Subscribe to the Sidebar podcast here.