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J. Warren
J. Warren, Lawyer
Category: Real Estate Law
Satisfied Customers: 2236
Experience:  Experience in residential real estate and commercial leases.
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A realtor filled out the contract to buy a house in my

Customer Question

A realtor filled out the contract to buy a house in my behalf. The brokerage page states that she is the buyer agent and would collect 3% commission. Contract was cancelled and earnest money returned. There is no signed buyer rep agreement. How long am I obligated to pay that agent a commission if I want to try to pursue that house if it is still on the market in a few months?
Submitted: 4 months ago.
Category: Real Estate Law
Expert:  Attyadvisor replied 4 months ago.

Welcome and thank you for your question. I will be the professional that will be assisting you. Was the agent the person that brought you to the property you decided to purchase? Was the agent the procuring cause of the ultimate sale/purchase?

Customer: replied 4 months ago.
Hi! I do not see your answer.
Expert:  Attyadvisor replied 4 months ago.

That is because I asked you a question in order to provide an answer.

As a general rule there are many circumstances involved in answering a legal question. Since I do not know your situation I would need this information to respond.

I will retype the question. Was the agent the person that brought you to the property you decided to purchase? Was the agent the procuring cause of the ultimate sale/purchase?

Customer: replied 4 months ago.
The agent brought me to the house.
Expert:  Attyadvisor replied 4 months ago.

The agent would take the position that they are the procuring cause of the sale unless you can have the agent sign a waiver.

Customer: replied 4 months ago.
does it ever end?
Customer: replied 4 months ago.
How indefinite is the fact that she was the procuring cause? If I follow up the house for months, is she still entitled to a commission?
Expert:  Attyadvisor replied 4 months ago.

It does. Give me a moment to put together the information so you will be safe if you purchase the. property. Even if the agent goes for procuring cause you will show that there was the necessary interruption.

Expert:  Attyadvisor replied 4 months ago.

Since the contract term expired you would ask for a release. The realtor needs to release you, unless this is already stated in your agreement.

Procuring cause is:

When you saw the house with a Realtor. Your Realtor created what is called “procuring cause.” That means, if you buy the house after he/she has shown it to you, that agent “caused” the sale to happen, by being the first Realtor to have shown it to you. This is true even if you later buy it without the help of your Realtor. He/she may have the right to earn commission for the sale, even if the house is “sold by owner”. By the way, it is customary for the seller to pay the commission to your Realtor, which is usually 3% of the sale price." http://www.realtor.com/news/real-estate-news/can-we-buy-a-home-fsbo-if-we-saw-it-with-a-realtor/

Does the termination state anything with regard to forfeiting the right as the procuring cause?

Customer: replied 4 months ago.
It does not say anything. It is the TREC cancellation form.
Expert:  Attyadvisor replied 4 months ago.

Let me pull that up because procuring cause is enforceable under TREC. If the agent will sign a waiver you would be released.

Customer: replied 4 months ago.
No, but I never signed a buyer rep agreement either.
Expert:  Attyadvisor replied 4 months ago.

So the termination agreement you were referring to was just to terminate the contract between buyer and seller. Correct?

Customer: replied 4 months ago.
This is what in signed.
Expert:  Attyadvisor replied 4 months ago.

Thank you for the clarification. You terminated the contract between buyer and seller.

Customer: replied 4 months ago.
Expert:  Attyadvisor replied 4 months ago.

In order to get passed the procuring cause issue which exists with or without an agency agreement you want the agent to release you.

Expert:  Attyadvisor replied 4 months ago.

Good for you for not signing a buyer's agency agreement.

Customer: replied 4 months ago.
I am sorry, but I am not clear on if it ever ends. Timeframe? Change of ownership of the house? Substantial changes to the House (renovations)?
Expert:  Attyadvisor replied 4 months ago.

The realtor can argue procuring cause if you buy this particular house in the next few years. The realtor is the procuring cause UNLESS you get the realtor to sign a release.

Customer: replied 4 months ago.
Ok!
Expert:  Attyadvisor replied 4 months ago.

I know that was not the answer you were hoping to receive so I hope you are not unhappy with me.

Expert:  Attyadvisor replied 4 months ago.

I just need you to be fully informed.

Please do not hesitate to ask me any additional questions that you may have with regard to this matter as it would be my pleasure to assist you.

If you would be kind enough to rate my service positively so I will receive credit for my work I would appreciate it.

The Attorneys on the site do not receive credit for their time or work if the customer does not rate us positively. There is no additional charge to you for a positive rating and you can still receive a refund. Thank you for your consideration.

You may not be aware that the attorneys on the site only receive credit for their work when the customer takes the time to rate them positively. Thank you for your consideration.

Expert:  Attyadvisor replied 4 months ago.

Are you still with me?

Customer: replied 4 months ago.
Hard to believe they still have indefinite contracts. I thought you would know the options around it or the time standards to enforce such contracts. A few years is too open. Are you a real estate lawyer?
Expert:  Attyadvisor replied 4 months ago.

Yes, I have been a practicing Real Estate Law for 28 years in numerous jurisdictions and Federal court.

Expert:  Attyadvisor replied 4 months ago.

The option is getting the agent to waive the right to the commission. After a certain amount of time the agent may not be aware of the sale. The issue is that the agent that is the procuring cause is entitled to the commission. I can provide you with case law if that would help your understanding of the law?

Expert:  Attyadvisor replied 4 months ago.

"The National Association of Realtors has for decades maintained policies to resolve disputes that relate to “procuring cause” – a determination of which real estate professional started an ongoing chain of events that led to a completed real estate transaction. These policies are spelled out in the trade group’s Code of Ethics and Arbitration Manual.

In essence, procuring cause can block agents from stealing the deal away from another agent who is already working with a prospective home buyer. A real estate agent could have a valid procuring cause claim if that agent first introduced a consumer to a home that the same consumer later purchased while working with another agent.

But critics say there are fundamental flaws with procuring cause, and consumers are largely in the dark about policies that can channel a portion of the price they paid for their home to agents who they believed were no longer involved in the transaction.

“Procuring cause can take away from the income of an agent hired to do the work. Consumers should be aware of that. Consumers expect the person who does the work should be the one who gets paid,” said Tom Early, president of the National Association of Exclusive Buyer Agents, a group supporting agents who work only for home buyers. But the policies in place allow an agent or agents who formerly communicated with the buyer to make a claim for all or part of a commission.

Even if a buyer has entered into a written contract to work exclusively with a real estate agent, a Realtor arbitration panel could determine that another agent who previously worked with that buyer is owed payment for previous work performed...." http://www.inman.com/2006/02/13/procuring-cause-who-gets-paid-in-real-estate-deals/

Expert:  Attyadvisor replied 4 months ago.

The Issue would be the Sellers since they pay the commission.

MENDOZA v. COMSAT CORPORATION

http://caselaw.findlaw.com/us-5th-circuit/1153641.html

Expert:  Attyadvisor replied 4 months ago.

"PROCURING CAUSE FACTORS

Whether a broker is the procuring cause of a sale must be factually determined on a case-by-case basis. Many factors can impact a determination of procuring cause, but no one factor is by itself determinative. Procuring cause is in fact the interplay of factors which together demonstrate that the unbroken efforts of a specific broker were responsible for the buyer making the decision to consummate the sale on terms which the seller found acceptable. In other words, a broker who is the procuring cause of a sale is a sine qua non of the sale -- the sale would not have occurred but for the broker's efforts.

When reviewing the factors listed below, it is important to note that the occurrence of any particular factor ina fact situation does not necessarily mean that procuring cause does or doesnot exist. This is because it is the interplay of factors that is so important in recognizing procuring cause, not the presence of any one factor alone. A specific factor can, in fact, cut either way, depending on its importance compared to the other factors in the case and depending on when it occurs in the timeline of the case.

Procuring cause factors may be grouped, for organizational purposes, into nine different categories. These categories are:

The nature and status of the transaction

The nature, status and terms of the listing agreement or offer to compensate

The roles and relationships of the parties

The initial contact with the purchaser

The conduct of the broker* or agent

Continuity and breaks in continuity

The conduct of the buyer

The conduct of the seller

Other information

In the analysis that follows,specific procuring cause factors are grouped by the above categories. In addition, where there is supporting case law, citations and brief explanations are provided to offer examples of the interplay of that factor with other factors and to suggest outcomes. Please note that much of the case law does not resolve disputes between brokers, but between sellers and brokers. Likewise, most of the cases involve open listings rather than exclusive listings. Nevertheless, these cases focus on two issues which are relevant to fact situations involving exclusive listings and broker-broker disputes -- that is,what has the broker been promised (by either the seller or the listing broker)and what must the broker do to attain his promised commission.

PROPOSED Procuring Cause Factors:

I. The Nature and Status of the Transaction

A. What was the nature of the transaction?

B. Is or was the matter the subject of litigation?

II. The Nature, Status and Terms of the Listing Agreement or Offer to Compensate

A. What was the nature of the listing or other agreement: exclusive right to sell, exclusive agency, open or some other form of agreement?

B. Was the agreement in writing?

C. Was the agreement in effect at the time the sales contract was executed?

D. Was the property listed subject to a management agreement?

E. Is the claimant a party to whom the listing broker's offer of compensation was extended?

F. If an offer of cooperation and compensation was made, how was it communicated?

G. Were the broker's actions in accordance with the terms and conditions of the agreement or offer of cooperation and compensation (if any)?

The nature, status and terms of the listing agreement or offer to compensate are the starting points for any procuring cause analysis. For the brokerto be the procuring cause, however, the agreement need not be exclusive. Farm Credit Bank of St. Louis v. Miller,872 S.W.2d 376 (Ark. 1994); Hennessy v. Schmidt, 384 F.Supp. 1073 (N.D.Ill. 1974); Atkinson v. S.L. Nusbaum & Co., 59 S.E.2d 857 (Va. App.1950). Neither must the agreement be written. Christo v. Ramada Inns,Inc., 609 F.2d 1058 (3d Cir. 1979); Ahrens v. Haskin, 299 S.W.2d 87(Ark. 1957); Feeley v. Mullikin, 269 P.2d 828 (Wa. 1954); Wilson v.Sewell, 171 P.2d 647 (N.M. 1946). The critical questions are whether the agreement was in effect at thetime the sales contract was executed and whether the claiming broker was aparty to whom the agreement extended. Farnsworth ***** *****mited v. Grant, 470 So.2d 253 (La.App. 1985); Winograd, Inc. v.The Prudential Insurance Company of America, 476 N.Y.S.2d 854, aff'd.472 N.E.2d 46 (1984); Mohamed v. Robbins, 531 P.2d 928 (Ariz. App.1975); Hampton Park Corporation v. T.D. Burgess Company, Inc., 311 A.2d35 (Md. App. 1973); Wright v. Jaegeris, 427 S.W.2d 276 (Mo. App. 1968).

For instance, in Winograd, one broker supplied information about the subject space to a second broker who finalized the transaction. 476 N.Y.S.2d at 856. Neither activity was dispositive. Id. The second broker, not the first, was the procuring cause because the listing agreement did not extend to the first broker. Id.

In Mohamed, the extension clause of an exclusive listing agreement was a key factor in establishing that the broker was the procuring cause. 531 P.2d at 930. Here the broker made contact with an appropriate representative of the ultimate purchaser during the period of the listing agreement, initiated negotiations with him and followed up after thelisting agreement expired. Id. The broker took no part, however, in the final negotiations. Id. Nevertheless, the broker was the procuring cause of the ultimate sale because the listing agreement provided that a commission would be due the broker if the property was sold to any person whom the broker had negotiated with prior to the expiration of the listing. Id.

1. Were all conditions of the agreementmet?

Where a condition precedent to the payment of commission is not met, the broker is not the procuring cause -- even though he has produced a buyer/lessee who is otherwise ready, willing and able and even though the sell or/lessor has acted in bad faith. The Quadrant Corporationv. Spake, 504 P.2d 1162 (Wash. App. 1973). In Quadrant, the agreement provided that the broker would get a commission if he produced a lessee who would agree to the terms acceptable tothe lessor and if the lessor was able to secure construction financing necessary to make improvements to the property. Id. With regard to the financing, the broker found lenders willing to take loan applications from the lessor, but the lessor refused to sign said applications. Id. at 1164. The court held that the lessor's refusal was in bad faith and constituted a breach of his agreement with the broker. Id. Nevertheless, the broker was not the procuring cause because it was factually unlikely that the lessor would have been approved for the loans and thus unlikely that the condition precedent to the payment of the broker's commission could have been met. Id.at 1166.

2. Did the final terms of the sale meet those specified in the agreement?

Fora broker to be the procuring cause of a sale, the final agreed-upon price need not be the same as that specified in the listing agreement. Follman Properties Company v. Daly,790 F.2d 57 (8th Cir. 1986); Fanning v. Maggi et al., 126 N.Y.S.2d 551(1953); Wilson v. Sewell, 171 P.2d 647 (N.M. 1946). Courts recognize that the buyer and seller will negotiate and that the seller's agreement to a lesser price than originally asked for should not negate the broker's efforts. Wilson, 171 P.2d at 649.

It is not, however, sufficient for the broker to bring the parties to agreement only as to price. Kaelin v. Warner267 N.E.2d 86 (N.Y. App. 1971). There must be agreement as to all essential terms for the broker to be entitled to receive the commission specified in the listing agreement. Id. For instance, in Kaelin, the listing agreement required the broker to procure a buyer at a sale price of $100,500, "with terms to be arranged." Id. at 87. The broker procured an offer of $100,500, but the parties could not agree as to the terms normally required for a real estate transaction, including payment terms and closing date. Id. Since there was no agreement as to all essential terms, the broker did not earn his commission. Id. at88.

In In re Fox' Will, a broker who introduced the parties and showed the property to the buyer first was not the procuring cause where it was another broker who was able to bring the buyer to the terms specified in the listing agreement. 126 N.Y.S. 158 (1953).....

http://http://www.realtor.org/LetterLw.nsf/23e5e39594c064ee852564ae004fa010/fd449c24a2df2d2c8625693c0064191b/$FILE/Procause.doc.

This is up to the agent if they want to claim the commission. In essence the seller owes the commission and this would be between the seller or listing agent and the buyers agent.

Customer: replied 4 months ago.
I found that article earlier and clarify procuring cause. Thank you!
Expert:  Attyadvisor replied 4 months ago.

It will really be up to the agent. As you can see there is volumes of law on this matter. If you agree the agent was the procuring cause there isn't much a dispute. Was there a listing agent or was this for sale by owner?

Customer: replied 4 months ago.
For sale by owner. I think she is no longer the procuring cause since several things have happened since she first showed me the house and our deal fell through, but not interested in property enough to risk it.
Expert:  Attyadvisor replied 4 months ago.

With for sale by owner the agent would go after the owner. If enough has changed there is a possibility she would lose. Is there some reason the seller does not want to pay? Can you get her to agree to a lower amount?

Expert:  Attyadvisor replied 4 months ago.

It is always a risk on this site to provide an answer the customer does not want to receive. They often shoot the messenger. I have an ethical duty to provide you with the law whether we like the potential outcome or not.

Expert:  J. Warren replied 4 months ago.

Hi Mariela,

AttyAdvisor gave you some good information and unfortunately had to the bear of bad news. When there is no time limit placed on procuring, the matter is considered ambiguous and all the factors set forth above come into play. The bot***** *****ne is the only way to eliminate risk of the agent coming after you is to have a waiver signed whereby the agent agreed to not pursue commissions. The other way is to close on the house and take a risk that the agent will not bring an action seeking their commission based on procurement. The longer you wait to purchase the home the less risk the agent will have recourse, however, they can still make file a suit and make things miserable for some time even if you come out on the winning side of the lawsuit.

All my best and encouragement. Thank you for allowing me to help you with your questions. I realize this was not the answer you were hoping to receive however I have done my best to provide information which truthfully addresses your question. Please note: If I tell you simply what you wish to hear, this would be unfair to you. I need to be honest with you and sometimes this means providing information that is not optimal. Negative ratings are reserved for experts who are rude or for erroneous information. Please rate me on the quality of my information; do not punish me for my honesty.

Customer: replied 4 months ago.
Thank you for your response!
Expert:  J. Warren replied 4 months ago.

You are welcome!

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