If a buyer works with more than one broker or agent during the home buying process, issues can sometimes arise. For example, if one agent shows them the property and another writes up their sales contract, who gets the commission?
This is where the real estate term "procuring cause" comes in handy. Procuring Cause is used by a real estate agent to determine who is entitled to a commission from a transaction.
What Is Procuring Cause?
Procuring cause is a practice used to determine which real estate professional was the cause of an ongoing chain of events that led to a closed real estate deal.
The broker who is the procuring cause of the transaction is entitled to a commission. In some cases, procuring cause disputes can arise between brokers or brokers and their clients.
How Does Procuring Cause Impact Agents?
Procuring cause was created to protect a real estate agent from having another agent steal their deal. For example, if you are working with a client and you show them several homes, but they don’t put in an offer. Then, the same buyer proceeds to purchase one of those homes later while working with another agent, you could claim to be the procuring cause of the transaction.
There are, of course, critics of procuring cause, and the issue becomes even more complicated because buyers are largely unaware of the implications of interacting with more than one agent.
Due to the grey areas of procuring cause, it is possible that an agent hired to work for a buyer may not be adequately protected from another agent claiming their commission. Buyers should be aware that the current policies in place allow an agent who may have formerly communicated with the buyer to claim for the commission once a transaction is closed.
Procuring cause can benefit listing agents and brokers because a listing agent can potentially use procuring cause to claim both sides of a real estate transaction. For example, if a buyer works with a listing agent at an open house and then comes back to the house represented by another agent to make an offer, the listing agent could claim commission under the existing procuring cause policies.
What Is an Example of Procuring Cause?
The guidelines that establish procuring cause vary by state and the applicable Realtor associations. When deciding which agent is the procuring cause, some facts and circumstances are deemed to carry more weight than others.
For example, a buyer could sign an exclusive buyer's broker agreement with one agent, and have a second agent from the same broker handle the transaction and close the deal. Depending on the circumstances, the second agent is the one who earns a commission because of the exclusive buyer's broker agreement.
A common situation in which procuring cause can arise is when a buyer initially begins their home search with an agent, but decides they do not want to work with that agent any longer, and starts working with another. This can happen for various reasons, for example, if the agent fails to perform their duties to a standard the buyer expects, or the buyer simply walks into an open house and decides to put an offer in on a home through the listing agent.
How Can an Agent Avoid Losing Their Sale?
It is crucial that agents educate their buyers about how procuring cause can affect their transaction. Explain to your buyer that giving another agent information at an open house, or calling another agent for information about a home, could create a procuring cause dispute.
It is also essential to try and accompany your buyer to all open houses and showings of the property. Not only will this make it less likely that you find yourself in a procuring cause dispute, but you will also be on hand to advise your clients about the home.
If you find yourself in a situation in which you believe you were the procuring cause of a transaction, you can bring your case in front of an arbitration panel. The arbitration panel conducts an intensive examination of the situation and considers various factors in procuring cause disputes. They will identify what initiated the success of the transaction, and which Realtor can define the chain of events that resulted in the sale.
How Can an Agent Avoid Getting into a Procuring Cause Dispute?
There are some safeguarding questions that you can ask potential new clients to ensure that their professional relationship with another realtor is not ongoing. For example, always ensure that you ask a new client if they are currently working with an agent. This is the quickest way to determine if they are available to work with you.
You can also request that your buyers sign a buyer's broker agreement with you that stipulates your relationship, expected duties, and compensation. It is crucial that you effectively communicate with all new and potential clients about your role as their agent.
Determining procuring cause can be a minefield for real estate agents, but good working habits and clear communication with clients can help you to avoid some of the major pitfalls. If you're looking for vetted buyer’s leads who are ready to pull the trigger now, consider joining the Clever Partner Network, where you can receive a reliable stream of leads — that aren't already represented by an agent.