Procuring Cause: How Is It Used In Real Estate?
The process of buying a home has many steps, each one leading to the next and typically involving the help of a real estate agent. To earn a commission, an agent must prove they were the reason the buyer purchased a property.
The procuring cause of a property sale is the uninterrupted series of actions performed by a real estate agent that helped the buyer purchase a home. If a buyer works with multiple agents or switches agents partway through a sale, a dispute regarding procuring cause may be a concern.
This article will cover more about procuring cause in real estate, what happens when there’s a dispute and steps you can take to avoid a conflict over commission.
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, from providing assistance during a bidding war to price negotiation.
What Happens In A Procuring Cause Real Estate Dispute?
Home buying transactions typically involve several parties besides the buyer and seller. You can have a buyer’s agent, a listing agent, a mortgage originator, an underwriter and more. In any situation where multiple parties are involved, there is room for error or ambiguity, which can lead to a procuring cause dispute. Procuring cause disputes commonly come up between agents and clients because of miscommunication.
Several steps are taken over the course of a dispute process. Let’s review some of them below.
In a commission dispute, a real estate agent files a complaint with the local real estate board if they don’t receive the commission they believe they were owed from a real estate transaction.
Procuring cause disputes are often resolved outside of court and forwarded to an arbitration panel. These panels can address disputes between real estate brokers or between brokers and their clients.
The Procuring Cause Arbitration Worksheet
The National Association of REALTORS® (NAR) Code of Ethics and Arbitration Manual provides a worksheet with questions to help a 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 panel during the arbitration hearing include:
- Whether 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?
Home buyers can take several steps to avoid a commission dispute. When buying a house, remember the following:
Be Honest About Working With Other Agents
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. It’s critical to communicate about your working relationship with your agent.
Sign A Buyer-Broker Agreement
A buyer-broker agreement, or buyer agency agreement, solidifies the working relationship between a buyer and an agent or broker. The contract legally confirms the real estate professional’s obligations and responsibilities and acts as a record of their procuring cause in the transaction. Be sure that you’re working with the right agent for you before signing the buyer-broker agreement.
Follow Open House Protocol
Open houses follow a certain protocol. Your agent typically attends open houses with you. But if you attend an open house by yourself, you should show your agent’s card to the agent hosting the open house. When you sign the guest book, include your agent’s name next to yours. The intention is to be transparent about who you’re working with to avoid any future disputes.
The Bottom Line
Procuring cause disputes happen when a question arises over who receives the commission on a real estate sale. Disputes may come up at various stages of the home buying process, but they can generally be prevented by maintaining clear and open communication. Prioritizing honesty and transparency can help build a successful, and hopefully, dispute-free partnership.
A real estate agent can be your greatest asset for a smooth home buying process. If you’re looking for a real estate agent, visit Rocket HomesSM to find an agent today.