by Spencer Krull | May 7, 2025 | Industry, News Feed
According to managing broker Spencer Krull, with mandatory buyer-broker agreements, it’s time for NAR to get rid of the “participation trophy” of procuring cause.
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With the National Association of Realtors (NAR) on the ropes, reeling from Clear Cooperation, agent dissatisfaction with the settlement, as well as the organization’s handling of its scandals, now is the perfect time to strike a blow to get rid of procuring cause.
What is procuring cause?
NAR’s Arbitration Guidelines in relation to Article 17 of the Realtor Code of Ethics define procuring cause as “the uninterrupted series of causal events which results in the successful transaction.”
According to the NAR settlement FAQ, as a legal concept, procuring cause predates both the organization and its code of ethics. With offers of compensation communicated off-MLS following the settlement, buyer agreements have become an important factor in how buyer brokers protect their compensation in the event of a contractual dispute.
With procuring cause, an agent works with a buyer, and if that buyer ends up using a different agent to write an offer, then the first agent can file a complaint with their local board and go after the second agent’s commission. Procuring cause is NAR’s equivalent of rewarding the kid who licks the lollipop to make sure no one else will want it.
Who’s really to blame?
You’d think that mandatory use of buyer-broker agreements would rid the industry of procuring cause actions, but as a managing broker, I still get calls from other managers saying their agent had a buyer agreement, that my agent stole them, and their agent is thinking of filing a procuring cause complaint.
Sure, there are unscrupulous listing or buyer agents who seduce a buyer away with the promise of a lower commission, or suddenly a buyer “remembers” their aunt is a real estate agent and has her submit the offer.
But the buyer is the one who breached the contract.
Even when an agent asks a buyer if they’ve signed an exclusive agreement with another agent, a lot of buyers answer, “I don’t know.”
They don’t know? Either the buyer was daydreaming of turning a third bedroom into a découpage studio, or the agent was daydreaming of using the commission to turn their own third bedroom into a découpage studio.
Still, many buyers and agents view the buyer-broker agreement as “just something we have to sign because of the NAR settlement.”
If every buyer’s agent took the client’s hands in theirs, stared into their eyes and said, “We’re exclusive; you can’t work with another agent for three months,” some buyers are still going to “step out” on their agent. The new agent isn’t the person who wronged the original agent; the buyer is.
Think of it like a bad divorce, and substitute “cheating spouse” with “cheating buyer.” The spurned husband doesn’t sue the pool guy (or gal); they sue the cheating spouse because the spouse is the one who signed and broke the agreement. (Bonus: At least the husband finally understands why they had the cleanest pool in the neighborhood!)
Time to go
Perhaps procuring cause served a purpose when cooperating commissions were still coupled with listings, but that time has passed, and it’s now time for NAR to take it off the books.
Buyer’s agents: It’s time to get better at articulating your value, explaining why you deserve the compensation you are asking for, and explaining the conditions of the buyer-broker agreement to the same degree you do with a listing.
Buyers: It’s time you understand you’re entering into an exclusive agreement creating a partnership with your agent to work together to get you a home. Oh, and you can’t just “break the contract,” the same way you can’t just break your cell phone contract.
Brokers: It’s time to have your agents’ backs by actively pursuing breached buyer-broker agreements the way you do with listings.
NAR: It’s time to stop giving out the participation trophy of procuring cause; the agents who get the deals across the goal line shouldn’t be penalized because a buyer cheated on their agent. In the post-settlement world, it’s time to dump procuring cause.
Spencer Krull is a managing broker with Side and works as a real estate expert witness and consultant for attorneys. Connect with Spencer on LinkedIn and Instagram.
This post was originally published on this site
by Spencer Krull | Aug 30, 2024 | Industry, News Feed
The case dates back to a 2020 settlement between NAR and the DOJ, and to the DOJ’s 2021 attempt to withdraw from that settlement — something NAR is trying to block.
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The National Association of Realtors on Thursday revealed that it plans to take its fight over a Department of Justice investigation to the U.S. Supreme Court.
The trade group mentioned its plan in a court filing, stating that it plans to file a petition for a writ of certiorari — or a request to review a case — to the high court by Oct. 10. The request comes about a month and a half after NAR suffered a setback in the case when an appeals court refused the organization’s request for a rehearing.
The origins of the legal fight go back to 2020, when the DOJ simultaneously announced a lawsuit against and settlement with NAR. The lawsuit focused on several NAR rules that federal officials believed were anticompetitive. The settlement was meant to increase transparency regarding commissions and to prevent claims that buyer broker services are free.
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The matter appeared to be closed at that point, but in July 2021 the DOJ withdrew from the settlement. Days later, the feds quietly resumed their probe and sent NAR a subpoena for information related to its now-defunct Participation Rule — which required listing brokers to offer compensation to buyer brokers in order to submit a listing to a Realtor-affiliated MLS — and on anti-pocket listing Clear Cooperation Policy.
However, NAR has spent the last three years fighting the DOJ’s withdraw from the settlement. In September 2021, NAR asked a court “to quash a request by the Department of Justice that reneges on the terms of a settlement agreement.”
Later, in January 2023, a federal judge sided with NAR and ruled that the DOJ’s resumed probe violated the “validly executed settlement agreement” between the two parties.
The DOJ then appealed. In April of this year, an appeals court sided with the DOJ and ruled that the investigation could resume. NAR responded by asking for a rehearing, but in July the appeals court denied that request — a turn of events that makes the Supreme Court NAR’s next step.
The legal battle between NAR and the DOJ is separate from the numerous consumer-led commission lawsuits that have challenged, and ultimately changed, the way agents do business. Those lawsuits led to a March settlement, as well as rules changes that went into effect on Aug. 17.
However, the DOJ has engaged in talks with attorneys who litigated the commission cases, and earlier this year NAR President Kevin Sears framed the federal agency as potentially more disruptive than the consumer lawsuits. The DOJ has also sent signals regarding what it would like to see happen with agent commissions.
All of which means the case that NAR now plans to take to the Supreme Court is just one component of a larger struggle the organization is having with the DOJ.
Besides revealing the intention to take the case to the Supreme Court, Thursday’s filing additional states that the DOJ has agreed to narrow its request for documents. In response, NAR has agreed to turn over some documents by Sept. 30, and will turn over others if the Supreme Court refuses to review the case or if the court rules in the DOJ’s favor.
Read NAR’s latest filing here (refresh the page if the document doesn’t appear):
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by Spencer Krull | Aug 21, 2024 | Industry, News Feed
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Douglas Miller says offering compensation to buyer brokers off the multiple listing service is “commercial bribery” and “a group boycott.”
That kind of dramatic language may tempt some in the real estate industry to dismiss Miller, an attorney and executive director of the tiny, volunteer-run nonprofit Consumer Advocates in American Real Estate (CAARE), as an inconsequential flamethrower.
But one of the high-profile law firms behind the first major antitrust lawsuit challenging the U.S. commission structure, filed in March 2019 and known as Moehrl, has openly admitted that Miller was the reason the firm got interested in the case in the first place.
“We were approached by a Realtor and consumer advocate named Doug Miller,” Benjamin Brown, managing partner of Cohen Milstein, said in March after the National Association of Realtors reached a proposed settlement in multiple antitrust commission lawsuits, including Moehrl and a similar case known as Sitzer | Burnett.
“Doug had a wealth of knowledge about the industry but no formal antitrust or economics background,” Brown added. “A small team at my firm worked for months with Doug and a couple of expert economists to build the case.”
Now Miller and CAARE have set their sights on a new, related target: workarounds to the rule changes from the NAR deal.
Doug Miller
“We are extremely concerned that Realtors are using misinformation and scare tactics to try and persuade their clients into signing anticompetitive buyer brokerage and listing contracts that artificially inflate buyer brokerage fees,” Miller told Inman.
“In fact, we are seeing Realtor competitors gather as groups to design fee agreements to accomplish this. We believe this is straight-out collusion that violates the spirit of the settlement agreement.
“Forms committees composed of competitors who design fee agreements that result in higher buyer brokerage fees are likely to be the target of future litigation. Anyone who uses the work product of those committees is likely to face similar threats not unlike the Moehrl and Sitzer cases.”
Miller stressed that he’s warning the industry about this because the last thing he wants to see is more litigation.
“We would prefer to see Realtors engage in honest business practices than to see them get sued,” he said. “This would be better for everyone involved.”
According to Miller and CAARE deputy director Wendy Gilch, some Realtors are perpetuating three “misleading” talking points, even after the NAR settlement’s rule changes went into effect on Aug. 17:
- Sellers must offer money to buyer brokers (off the MLS) or buyer agents won’t show their houses.
- Buyer agents won’t show houses to buyers unless there is an offer of compensation from listing brokers because they are not going to show houses unless they get paid.
- They’ve created a checkbox to continue steering, but blame it on being a fiduciary to the buyer.
“None of these points should be true anymore, and those who continue these practices will likely find their way back into court,” Miller said.
“All Realtors know (or should know) that there is an easier solution and that the above comments are misleading and designed to perpetuate high buyer broker fees through fear.
“By now, all Realtors know that it is very easy for a buyer agent to work with a buyer when the seller isn’t offering compensation. They write the offer with a request for a seller credit. It’s simple, it’s straightforward and it exposes the buyer brokerage fee to free market forces.”
The “checkbox” referred to is giving buyers the option, through a buyer agency contract, to tell their agents not to show them properties based on whether the seller or listing broker is offering compensation to the buyer broker.
[T]he checkbox is not going to protect agents from being accused of steering,” Miller said.
“What it does do is open up a lot of issues with agents who try to call and see what they get paid, but can’t get an answer from the listing agent. Do they just ‘skip that home’ even though they might be offering something. Or, the listing agent says they are open to comp and to submit an offer.
“Are these agents explaining to buyers they can offer whatever they want and ask for concessions to cover the buyer agent fees. They don’t necessarily have to offer over the list price. Some agents are using this checkbox in the buyer agreement as a tool to get sellers to offer agent comp. In what world does an agent refuse to submit a competitive offer because ‘they might not get it?’”
Gilch provided several examples of agents allegedly promoting these talking points.
Wendy Gilch
“These Realtors specifically are all at different brokerages in the U.S., which shows just how widespread these ideas are growing,” Gilch told Inman.
Under the settlement changes that went into effect on Aug. 17, offers of compensation from sellers or listing brokers to buyer brokers may no longer be communicated in multiple listing services. Communicating them off-MLS is not prohibited under the deal, but that does not necessarily mean listing brokers can offer them without worrying about legal trouble.
Offering commissions to buyer brokers off the MLS is “a huge mistake,” according to Miller.
“There are many reasons why brokers should not do this: It is almost identical conduct to the complained-about conduct in the Moehrl | Sitzer cases,” Miller said.
“Just like with Moehrl, it results in artificially inflated buyer brokerage fees. It will create liability for the brokers and their seller clients. It serves as a group boycott because the compensation is not offered to would-be competitors.
“It is a restraint on trade because DIY buyers are automatically excluded from this money. It interferes with the buyer’s fiduciary relationship and demands that the buyer agent perform a service for the seller or listing broker: to procure a ready, willing and able buyer.”
Moreover, even if offering compensation off the MLS doesn’t violate a state’s licensing laws, that does not mean it doesn’t violate other laws, according to Miller.
“It just means that maybe the local regulator won’t take away your license if you do this,” Miller said.
“Look up the definitions of ‘commercial bribery,’ or ‘interference with a fiduciary relationship,’ or ‘group boycott.’ If antiquated licensing law says it’s OK to share your commission with a buyer broker, that does not mean you can do it and be exonerated from violations of common law or federal antitrust law. That’s really poor advice.
“In fact, I’m currently researching how exclusive commission split offers to buyer brokers function as a group boycott against lawyers who want to enter the field. Again, the solution is so simple. Stop offering money to buyer brokers. It will encourage competition.”
CAARE recently published advice for sellers and buyers, urging sellers not to work with real estate agents that say other agents won’t show their homes unless they offer compensation up front and urging buyers not to work with agents who encourage them to skip homes that don’t make such offers.
“[W]hy in the world should sellers put all their cards on the table about compensation or seller credits?” Gilch said.
“If sellers offer nothing, it forces buyers to make the first move to ask for a credit instead. And that leads to competition on buyer broker fees. That credit is going to be smaller if buyers negotiate a good deal with their agents.
“If the listing broker offers fixed amounts to all buyer brokers, the benefit of negotiating the buyer rep fee deteriorates. Plus, it creates the false impression to many buyers that the credit is meant for the buyer agent, not the buyer. We’re back to the same problem that existed prior to the lawsuits.”
Source: CAARE
CAARE referred to the previous system as “socialized real estate commissions.”
“It’s not about whether or not a buyer can afford a buyer agent or not,” Miller said.
“Instead, it is about whether or not a buyer gets to negotiate the fee of their own buyer agent. The current system allows buyer agents all to get paid the same regardless of their experience or skill.
“We call that socialized real estate commissions and we believe that’s wrong and harmful to consumers and causes fees to be set without the benefit of competition. That’s why buyer broker fees are nearly all the same in many parts of the country.”
CAARE is advising buyers to ask for a seller credit in the form of a flat fee, rather than a percentage of the purchase price, if they can’t afford their own agent.
“If you negotiate a fee of around 1 percent, you’ll likely save the seller about 2 percent in commissions,” CAARE said. “Plus, if your offer only includes a 1 perent seller credit and a competing buyer asks for 3 percent, your offer becomes more attractive, increasing your chances of acceptance.”
“It’s a far simpler solution that injects market forces into the fee negotiations,” Miller added. “This is the way it should have been for decades.”
Email Andrea V. Brambila.
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