It's the Rule

Procurring Cause and Commission ..
by: CEO Terese (Terry) Penza, CAE, RCE, e-Pro

February 2005

The following are areas that an arbitration panel considers when rendering a decision of who gets the commission:

Initial contact with the purchaser
(1) Who first introduced the purchaser or tenant to the property?
(2) When was the first introduction made?
(a) Was the introduction made when the buyer had a specific need for that type of property?
(b) Was the introduction instrumental in creating the desire to purchase?
(c) Did the buyer know about the property before the broker contacted him? Did he know it was for sale?
(d) Were there previous dealings between the buyer and the seller?
(e) Did the buyer find the property on his own?
(3) How was the first introduction made?
(a) Was the property introduced as an open house?
(b) What subsequent efforts were made by the broker after the open house? (Refer to Factor #1)
(c) Was the introduction made to a different representative of the buyer?
(d) Was the "introduction" merely a mention that the property was listed?
(e) What property was first introduced?

Conduct of the brokers
(1) Were all required disclosures complied with?
(2) Was there a faithful exercise of the duties a broker owes to his client/principal?
(3) If more than one cooperating broker was involved, was either (or both) aware of the other's role in the transaction?
(4) Did the broker who made the initial introduction to the property engage in conduct (or fail to take some action) which caused the purchaser or tenant to utilize the services of another broker? (Refer to Factor #4)
(5) Did the cooperating broker (or second cooperating broker) initiate a separate series of events, unrelated to and not dependent on any other broker's efforts, which led to the successful transaction—that is, did the broker perform services which assisted the buyer in making his decision to purchase? (Refer to Factor #4)
(a) Did the broker make preparations to show the property to the buyer?
(b) Did the broker make continued efforts after showing the property?
(c) Did the broker remove an impediment to the sale?
(d) Did the broker make a proposal upon which the final transaction was based?
(e) Did the broker motivate the buyer to purchase?
(6) How do the efforts of one broker compare to the efforts of another?
(a) What was the relative amount of effort by one broker compared to another?
(b) What was the relative success or failure of negotiations conducted by one broker compared to the other?
(7) If more than one cooperating broker was involved, how and when did the second cooperating broker enter the transaction?

Continuity and breaks in continuity (abandonment and estrangement)
(1) What was the length of time between the broker's efforts and the final sales agreement?
(2) Did the original introduction of the purchaser or tenant to the property start an uninterrupted series of events leading to the sale or lease, or was the series of events hindered or interrupted in any way?
(a) Did the buyer terminate the relationship with the broker? Why? (Refer to Factor #4)
(b) Did negotiations break down?
(3) If there was an interruption or break in the original series of events, how was it caused, and by whom?
(a) Did the seller change the listing agreement from an open listing to an exclusive listing agreement with another broker?
(b) Did the purchaser's motive for purchasing change?
(c) Was there interference in the series of events from any outside or intervening cause or party?
(4) Did the broker who made the initial introduction to the property maintain contact with the purchaser or tenant, or could the broker's inaction have reasonably been viewed by the buyer or tenant as a withdrawal from the transaction?
(5) Was the entry of any cooperating broker into the transaction an intrusion into an existing relationship between the purchaser and another broker, or was it the result of abandonment or estrangement of the purchaser, or at the request of the purchaser?

Conduct of the buyer
(1) Did the buyer make the decision to buy independent of the broker's efforts/information?
(2) Did the buyer negotiate without any aid from the broker?
(3) Did the buyer seek to freeze out the broker?
(a) Did the buyer seek another broker in order to get a lower price?
(b) Did the buyer express the desire not to deal with the broker and refuse to negotiate through him?
(c) Did the contract provide that no brokers or certain brokers had been involved?

Conduct of the seller
(1) Did the seller act in bad faith to deprive the broker of his commission?
(a) Was there bad faith evident from the fact that the difference between the original bid submitted and the final sales price equaled the broker's commission?
(b) Was there bad faith evident from the fact that a sale to a third party was a straw transaction (one in which a non-involved party posed as the buyer) which was designed to avoid paying commission?
(c) Did the seller freeze out the broker to avoid a commission dispute or to avoid paying a commission at all?
(2) Was there bad faith evident from the fact that the seller told the broker he would not sell on certain terms, but did so via another broker or via the buyer directly?