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Procuring Cause: A Concept That Refuses to Fade Away
The recent antitrust settlement by the National Association of Realtors (NAR) has sparked debates around the concept of procuring cause in real estate transactions. While some have proclaimed its end following new regulations requiring buyers to agree on their agent's commission upfront, NAR's legal counsel, Matt Troiani, emphasized its continued relevance. During a recent forum in Washington, D.C., he reaffirmed that procuring cause remains a critical factor in determining broker commissions, especially in many markets.
Understanding the Legal Basis of Procuring Cause
Procuring cause has a legal definition rooted in the actions that bring about a successful sale. According to Black’s Law Dictionary, it encapsulates the idea that a broker is entitled to commission if their efforts initiate the negotiations leading to a sale. This established legal framework means procuring cause won’t simply disappear as a result of changes in the commission structure. Even as buyers now have to clarify their agent’s compensation before viewing properties, various agreements continue to exist in the market.
The Future of Real Estate Compensation Structures
Troiani pointed out that sellers and listing agents can still offer compensation outside the confines of a multiple listing service, allowing flexibility in how brokers negotiate commissions. This can lead to buyer brokerages entering non-exclusive agreements with clients or buyers engaging several agents simultaneously, which may result in disputes over who rightly earns the compensation when a deal closes.
Critiques of Procuring Cause: An Ongoing Discussion
Despite Troiani's assertions, some industry observers argue for the elimination of procuring cause. In a recent op-ed, broker Spencer Krull criticized the system, likening it to rewarding the agent who initially engages a buyer—essentially stifling competition. Such perspectives add depth to the ongoing discussion on the effectiveness and fairness of current real estate practices.
As the real estate market evolves, stakeholders like NAR are tasked with navigating these changes while providing clear guidance on broker compensation issues. For now, while procuring cause may become less frequently cited in negotiations, it won't vanish. Real estate professionals must remain informed and adaptable in this shifting landscape — a crucial step towards protecting both their interests and those of their clients.
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