The National Association of Realtors (NAR) is taking action to address issues concerning procuring cause that were brought before it by the Real Estate Buyer's Agent Council (REBAC.) A new presidential advisory group (PAG) is being appointed by NAR leadership to look into the matter and make possible recommendations to NAR President Martin Edwards, Jr.

The procuring cause PAG should consist of about 15 people, and will include representatives of REBAC.

What special interest does the NAR's buyer agency subsidiary have? "I'm taking the fifth on that because it has moved past REBAC," explains Janet Branton, REBAC's managing director. "We made some recommendations over the summer months, and NAR has picked it up as a PAG, and it is out of our hands. We'll let it play out at the NAR where it belongs now."

According to NAR general counsel Laurie Janik, procuring cause determines which licensee "set into motion the series of events that lead to the sale of the home."

"There are several issues," says Janik. "One is that buyers' representatives feel that their relationships with their clients don't receive the same protection that the listing broker relationship with their client receives under the current Code of Ethics. "This group will determine whether or not that is true, and if so, is there a reason and should it be changed."

Buyers representatives are also troubled by the policy that determines what types of disputes have to be arbitrated, according to Janik. "There is a specific list of disputes that must be arbitrated, and some members feel that there are certain situations that should not be arbitrated. They are concerned that once you are arbitrating, they don't like using the procuring cause test to determine who is entitled to compensation."

What test would buyers' agents prefer? "Did the buyer have a contract with the agent, and if so, have that agreement be outcome determinitive. Only if you said no, there is no contract, would you get to procuring cause," says Janik.

Broker-owner Realtor Sandy Jurich says she can provide the perfect case-in-point, having just been through such an arbitration.

"In 2000, I had a listing Realtor who felt he was due compensation from the buyer," explains Jurich. "He happened to work for the builder, and the buyers came through an open house and asked questions, and he felt he was the procuring cause."

But Jurich had a written contract with the buyer, yet she says that the arbitration board, according to NAR's Code of Ethics, did not have to consider her contract with the buyer to find her procuring cause for the sale. Therefore, she took her case to the judicial level to stop the arbitration. While successful in obtaining a temporary restraining order, the court ultimately rescinded the order and the case went to arbitration after all.

"I was found to be procuring cause because the arbitration committee considered the facts," says Jurich, "but with a contract with the buyer, it should never have gone to arbitration in the first place."

According to Jurich, the case ultimately cost her and her local association of Realtors approximately $20,000 to defend.

The case illustrates why buyer's representatives would like to see contracts between buyer's agents and their clients given the same weight as contracts between listing brokers and their clients. "They want contracts to prevail," says Janik. "They are proposing that a preliminary question get asked."

Why isn't a contract a contract? "I think we are getting into the merits of what the PAG is going to discuss," says Janik. "The listing broker is offering through the MLS to pay the agent who is the procuring cause of the sale, not the agent who has the contract with the buyer. The question is do they want to compensate someone who was the procuring cause of the sale, or do they want to compensate someone who has an agency contract with the buyer?

And the last issue? "Some buyer representatives feel that the current business practice of accepting compensation from the listing broker unfairly limits their ability to negotiate their compensation with their buyer client," says Janik.

How long and what steps are involved in the PAG process? "Once the PAG is formed, they need to have a clear job description, and then we need to get the members appointed. Then we'll select a meeting date. The PAG only lasts as long as the president is in office. There's no reason why they shouldn't conclude work by the end of summer so they can give their report to the president before his term is up. Once he gets the report, he can put it in his bottom drawer, or forward it to another committee. I don't want to raise any expectations about what might happen."

One thing that could happen is a change to the Code of Ethics. "Assuming the president saw a change in the code that was merited, then he would forward the matter on to the professional standards committee, and they would discuss it," says Janik.

"If there is an issue that affects current industry practices and that reflect current business models then we need to address them," says Janik. "We need to talk about it and have a fair hearing of these issues."

Published: January 25, 2002

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