- (Flickr photo by RedMorris)
There’s a phrase in the real estate industry that you hear in most housing markets outside of New York City. It is “procuring cause,” and so arrested is my development that the words make me want to giggle.
But procuring cause is no laughing matter.
Nor is it as arcane as you might imagine. Yet the only reference I could find in my 390-page text on New York real estate was its definition in the glossary:
The basis for a direct action that results in successfully completing an objective.
In common parlance relating to real estate, the phrase implies that the broker whose ready, willing and able buyer purchases a property is the one who collects his or her share of the commission.
I’ve never once heard “procuring cause” mentioned here in Manhattan, but it was the source of acrimonious wrangling in and out of legal channels among brokers in the Washington, D.C. area, where I began my real estate business in 2002.
There and elsewhere, if buyers contact a listing broker, call a broker to ask questions about his or her listing or show up at an open house without writing down their agent’s name or without the agent’s prior notification, the broker with the listing can claim the sale and the entire commission, though not with assurance of success.
That’s because the listing broker arguably has been the procuring cause of the sale. It was that broker who introduced the property to the buyer, celebrated its assets, tried to charm the buyer and provided or sought answers to questions absent the buyer’s representative.
A friend of mine, Westchester broker J. Philip Faranda, observes that the phrase is derived from court and arbitration disputes. Says he:
In my neck of the woods, the broker who got the accepted offer on behalf of the buyer is considered procuring cause. If a buyer attends an open house or even has the listing agent show the property, the listing agent is not the procuring cause if the buyer submits an offer with another broker.
When there are disputes, a gracious listing broker will offer the buyer’s representative usually around 25 percent of the commission, half of what normally would be paid, as a referral fee.
As you can imagine, buyers’ brokers fight hard for their entire share, and the dispute can end up in arbitration or court. It is not pretty.
In New York City, procuring cause never seems to arise. Or if it does, I’ve not heard it mentioned.
Yet concern about procuring cause is one important reason that listing brokers always like to know whether consumers have their own representation. Thus the question, “Are you working with someone?” and the space on open house sign-in sheets.
The other two reasons are that they hope to become the buyer’s agent, and they are supposed to provide a list of potential buyers to the property owner.
Here and elsewhere, buyers have the appropriate luxury of bringing in their own broker literally until the contract is signed, yet a late start does not mean that the listing agent won’t protest commission sharing.
Another broker friend of mine, Sandy Mattingly, who blogs as Manhattan Loft Guy, suggests in an e-mail response to my observations on the matter that my inability to find the “procuring cause” definition supports his “view that the way REBNY firms do business with each other is what makes the legal doctrine of procuring cause irrelevant in Manhattan.”
I couldn’t find any mention of procuring cause on REBNY’s Web site, but Mattingly did come up with some useful language:
In the phrase “if a sale is consummated with a Buyer procured by a Co-Broker, unless the Exclusive Listing specifies otherwise . . . ,” I suspect the practice is that “procured”means “brings,” as in presents an offer.
I am 96% certain that any commission dispute within REBNY is resolved without anyone paying any attention to common law procuring cause.
The fine distinction here, then, appears to be that the broker who presents the offer, not the one who introduces the buyer to the property, gets to claim the commission. Not so everywhere else.
Our practice ensures that we are paid for the work we perform representing a buyer, and it is an important consumer safeguard.
Buyers deserve to have an advocate for their best interests, even if those same buyers act like the Lone Ranger, going off on their own and disregarding the hours, weeks, months or even years that their broker has invested in helping with their search.
Tomorrow: Tight lips
To take your own bite out of the Big Apple, start your search for a new home here.
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Malcolm Carter
Licensed Associate Real Estate Broker
Senior Vice President
Charles Rutenberg Realty
127 E. 56th Street
New York, NY 10022
M: 347-886-0248
F: 347-438-3201
Malcolm@ServiceYouCanTrust.com
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