What Is Procuring Cause In Real Estate?
Victoria Araj9-minute read
May 15, 2023
Procuring cause in real estate is a complicated subject for even the most experienced home buyers. One wrong move during your home buying process could lead to a dispute between real estate agents over who deserves the commission from your real estate transaction. While these disputes are usually resolved after you close on a home, it’s essential to know what procuring cause is during your home buying process so you know how to avoid disputes and save your real estate agent a significant headache.
What Is Procuring Cause?
In real estate, procuring cause refers to the series of events initiated by the real estate agent who ultimately helped the buyer close on the home. If the buyer used more than one agent, determining procuring cause – and ultimately which real estate agent gets the commission on the sale – can be difficult.
A real estate agent is referred to as the procuring cause of a home purchase if they are the one who caused the buyer to purchase a home. Procuring cause can confuse buyers and real estate agents because it can refer to an array of actions throughout the long home buying process.
Procuring cause disputes are usually between two or more agents, not the agents and their clients. These disputes are arbitrated by state or local real estate boards under guidelines defined by the National Association of REALTORS® (NAR) Code of Ethics. While conflicts between buyers and sellers and their agents may be subject to arbitration, these types of disputes are typically resolved by courts.
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What Causes Procuring Cause Disputes?
Since procuring cause is a complicated process involving many factors and moving parts, a wide variety of scenarios can lead to procuring cause disputes. Below are some of the most common types of procuring cause disputes.
- Working with more than one real estate agent. Working with multiple agents can cause many issues, so it’s essential to be upfront with both agents if this is the case. Let’s say one agent was the first to show you a home, but a second agent negotiated the contract and helped you close the house. Which agent is the procuring cause? These situations can become highly complicated and contentious, so it’s best to avoid them if you can.
- Submitting multiple offers. Putting in multiple offers on the same house with different real estate agents at different times can confuse the seller and the real estate agents you’re working with. No matter which offer the seller chooses, the other agent may claim to be the procuring cause.
- Attending an open house without your real estate agent. Attending an open house can cause a procuring cause dispute between your agent and the listing agent. The listing agent may claim that since they showed you the house, they were the procuring cause for you buying it instead of your agent.
- Not maintaining contact with your real estate agent. Sometimes relationships between buyers and their real estate agents fizzle out without a formal ending. These ambiguous endings can cause disputes because the continuity of the relationship between an agent and their client is a key factor in determining procuring cause. If you believe you found a home on your own, but your old real estate agent still believes they are your agent, they could have a claim to be the procuring cause.
What Happens During A Dispute?
When a procuring cause dispute arises between real estate agents, either agent can file a complaint with their local real estate board to request assistance resolving the issue. Each party involved can participate in an arbitration hearing to resolve the conflict.
Filing A Complaint
If an agent believes they were the procuring cause of a transaction but did not receive a commission for their work, they can file a complaint in writing with their local or state real estate board. The agent filing the complaint is known as the complainant. The agent(s) that the complainant is in conflict with are known as the respondents. The complaint should include the names of all parties involved, the amount of money in dispute, and when the real estate transaction closed. The complaint must be filed within 180 days of the closing or within 180 days of the complainant knowing about the issue.
If the Board determines that the complaint is subject to arbitration, it will notify all parties of the decision and set a date for an arbitration hearing.
An arbitration hearing is run by a panel of local real estate professionals that hear the facts of the dispute and issue a decision to resolve the dispute. During the hearing, both sides of the dispute can have legal representation, present evidence of their case, provide testimony from witnesses and subject matter experts, and cross-examine their opponents.
One of the critical factors used to gather evidence from both sides of a procuring cause dispute is the NAR’s procuring cause arbitration worksheet. All agents involved in the hearing may need to fill out this worksheet prior to the hearing. This list of questions helps the arbitration panel analyze the long list of factors that can contribute to procuring cause.
Hearing Panel’s Decision
The arbitration hearing panel must decide within 48 hours of the hearing. The decision will state which party should receive the commission and the amount the commission will be. Generally, the panel will decide one party gets the entire commission, and decisions to split the commission are rare.
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How To Prevent Procuring Cause Disputes
Below are some simple ways you can avoid sparking a procuring cause dispute.
Work With A Single Real Estate Agent
Procuring cause real estate disputes result from home buyers or sellers working with multiple real estate agents. The easiest way to prevent a dispute from occurring is to only work with one real estate agent throughout the entire home buying process. If the same agent completes every step of the process, from finding a home to negotiating the price and closing the deal, there will be no question about who deserves the commission.
Tell Your Current Real Estate Agent About Past Agents
If you must change real estate agents in the middle of the home buying process, you must be honest with your new real estate agent about your situation. Failure to inform your new agent about your circumstances could cause them to miss out on any commission payments for helping you find your home, no matter how many hours they contributed to the process. Veteran real estate agents may have experience dealing with procuring cause and can solve any issues with the previous agent before they become official disputes.
Sign An Agreement With Your Agent
Before you even begin to search for homes, the best way to dispel fears of a procuring cause dispute is to sign a buyer agency agreement with your agent. These legal contracts, also known as buyer representation agreements or buyer-broker agreements, clearly define who the buyer’s agent is and outlines the terms and conditions of your business relationship.
Buyer agency agreements can come with a variety of terms and conditions. An exclusive buyer agency agreement requires the buyer to only work with the agent they sign the contract with. Rarely, a real estate agent and buyer may agree to a non-exclusive agreement, allowing the buyer to work with other real estate agents depending on the terms of the contract.
The terms of the agreement will clarify the agent’s duties and responsibilities, the timeframe that the contract is valid, the conditions for termination of the agreement and the commission to which the agent is entitled. Even though the seller usually pays a commission for both the listing agent and the buyer’s agent from the proceeds of the sale of the home, a buyer agency agreement may still make a buyer responsible for ensuring that their agent receives their commission.
One of the most important factors a buyer agency agreement can define is whether an agent works as a dual agent. A dual agent is a real estate agent that represents both the buyer and the seller in a real estate transaction. While this might seem like it will simplify the process, dual agency can cause both sides to question whether the agent has their best interests in mind. If you are buying a home and want your agent to exclusively work on behalf of your needs and desires, make sure your buyer agency agreement clarifies that you are the only client that your agent is working for in the transaction.
Always Tour Properties With Your Agent
You may not intend to complicate your home buying experience by popping into an open house on your own, but this simple act can cause a procuring cause dispute. If you talk with the listing agent and don’t mention that you are working with your own agent, the listing agent may assume they are the procuring cause if you buy the home. The best way to avoid this confusion is to always tour properties with your agent. This way, there is no confusion between agents. The opportunity to walk through homes with your agent also allows you to communicate what you like or dislike about a house so your agent knows exactly what you’re looking for in your dream home.
If you walk by an open house that you absolutely must see on your own, remember to follow certain protocols to avoid procuring cause disputes. If there is a sign-up sheet when you walk in the door, make sure to put your agent's name and number next to yours so the listing agent knows who to contact. When talking with the listing agent hosting the open house, remember to tell them your agent’s name and give them their business card. Being transparent about who is representing you during the home buying process is essential to avoiding disputes.
Avoid Contacting Listing Agents
Contacting a listing agent directly can also initiate a procuring cause dispute. If you see a home that you love listed online, it may be tempting to call the phone number on the listing or email the listing agent as soon as possible. However, the best course of action is to send the listing to your agent, who can handle the outreach. This saves you time and shows the listing agent that you’re a serious potential buyer because you already have a real estate agent ready to negotiate a deal.
Stay In Contact With Your Agent
As mentioned above, the continuity of your relationship with your real estate agent is a crucial factor in determining procuring cause. The home buying process can have periods when you are not actively searching for a home. Even during these downtimes, staying in contact with your agent is vital. A good real estate agent should send you consistent updates of their work on your behalf, and you should respond with updates on your most recent thoughts and desires for your home.
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What Happens If You Need To Change Real Estate Agents Mid-Search?
Your ability to switch real estate agents after you’ve started working with an agent depends on the timing of the split and whether you signed a contract with the agent. Changing agents might be tricky if you signed a buyer agency contract with an exclusivity clause. It will be hard to find another agent because there is a strong possibility that they may not be able to receive any commission even if they help you find a home. The best option is to talk with your current agent to see if you can negotiate an official end to your contract.
If you’re at the beginning of the process, your agent may be willing to agree to terminate the contract because they have not put in much work on your behalf. If you’ve worked with the agent for a long time and things have not worked out, waiting until your contract expires may be the best option. If you’re unsure of the specifics of your contract, have an attorney review it to assess your options.
The Bottom Line
A real estate agent is referred to as the procuring cause of your real estate transaction if they performed the series of actions that caused you to purchase a property. If you work with multiple real estate agents or even talk to another agent at an open house without your agent present, you could unknowingly cause a procuring cause dispute that puts your agent’s commission in jeopardy. While NAR has an arbitration process to resolve these types of disputes, knowing how to avoid these disputes during the home buying process can save all parties involved lots of hassle after closing.
Working with one experienced and trustworthy REALTOR® can go a long way in avoiding these disputes, but finding that REALTOR® is just the first step in the road toward finding your dream home. Apply for a mortgage today if you’re ready to take the next step.
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