Procuring Cause: How Is It Used In Real Estate?
The process of buying a home has many steps. Each step leads to the next, and typically includes the help of a real estate agent. The procuring cause in real estate consists of the actions made by a real estate agent that caused the buyer to purchase the home. If you chose to work with multiple agents or switched agents partway through a sale, there may be a dispute regarding procuring cause.
This article will cover more about the procuring cause in real estate, and what happens when there is a dispute.
What Is The Procuring Cause?
A procuring cause in real estate transactions refers to the real estate agent or broker whose actions resulted in the sale. As a result of their actions, that real estate professional is compensated with a commission from the property sale.
It’s difficult to pin down an exact procuring cause definition because a wide variety of home-sale steps qualify for it, ranging from providing assistance during a bidding war to price negotiation.
What Happens In A Procuring Cause Real Estate Dispute?
Home buying transactions involve several parties. In addition to the buyer and seller, there is a buyer’s agent, a listing agent, a mortgage originator, an underwriter and more. As in any situation where multiple people are involved, there is a lot of room for error, leading to a procuring cause dispute.
Procuring cause disputes can often arise between agents and clients because of miscommunication. Additionally, there are several steps in a dispute process. Let’s review some of them.
In a commission dispute, a real estate agent will file a complaint with the local real estate board if they do not receive the commission they feel they were owed in a transaction.
Procuring cause disputes are often resolved outside of court by a hearing panel. These panels can address disputes between brokers, or even between brokers and their clients.
The Procuring Cause Arbitration Worksheet
The National Association of REALTORS’® (NAR) Code of Ethics & Arbitration Manual provides a worksheet with questions used to help the hearing panel mediate these disputes. Some of these questions include:
- Who was the first person to introduce the buyer or tenant to the property?
- When was the buyer or tenant first introduced to the property?
- Was the property introduced to the buyer or tenant at an open house?
- Did the buyer or tenant find the property on their own?
- Did the broker or agent who first introduced the buyer to the property maintain contact with the buyer or tenant?
- If more than one broker was involved, when did the second broker enter the transaction?
Other Dispute Factors
Some additional factors considered by a hearing panel during a procuring cause dispute include:
- If an offer of compensation was made through the MLS
- The nature of the transaction
- The terms of the listing agreement
- The terms of the offer to compensate
- The roles and relationships of the parties involved
- The conduct of the broker, buyer and seller
- Any breaks in continuity such as abandonment or estrangement
How Do I Avoid A Procuring Cause Dispute?
There are several ways a home buyer can avoid causing a commission dispute. When going through the home buying process, remember the following:
Be Honest About Working With Other Agents
It’s important to let your agent know if you’re working with another agent. Most agents will ask a client upfront if they’re working with anyone else, but remember to communicate about your working relationship with your agent.
Sign A Buyer-Broker Agreement
A buyer-broker agreement solidifies a working relationship between a buyer and an agent or broker. This contract legally confirms the real estate professional’s obligations and responsibilities, while also acting as a record of their procuring cause in the transaction. Be sure that you are working with the right agent for you before signing the buyer-broker agreement.
Follow Open House Protocol
There is a protocol for open house events. When attending an open house, you should show your agent’s card to the agent hosting the open house. Additionally, when you sign the guest book, include your agent’s name next to yours. The intention is to be open about who you are working with to avoid any future disputes.
The Bottom Line: Protect The Procuring Cause
Procuring cause disputes happen when there is a question about who receives the commission on a real estate sale. Disputes can occur at many steps in the home buying process but are generally easily avoided by clear communication.
If you have further questions about the home buying process, be sure to check out our Learning Center to find information on buying, selling and refinancing your home.