What Is Procuring Cause in Real Estate Transactions?

Buying a home includes many essential steps. You’ll often work with a real estate agent when buying a home. To earn a commission, this agent must prove they were the reason you are purchasing the home. 

A procuring cause in real estate transactions refers to the uninterrupted series of actions performed by a real estate agent in helping a buyer purchase a home. If you work with multiple agents or switch agents during the sale process, there may be a dispute regarding the procuring cause. Read on to understand contributing factors to a procuring cause and how to avoid disputes and conflicts over a commission.

A procuring cause in real estate refers to the events or steps taken by a real estate agent leading to the purchase of a home. The procuring cause determines who will get a commission. The real estate agents themselves are considered the cause of the buyer to procure (buy) the home. 

The term procuring cause can be confusing, as it can refer to many actions throughout the home-buying process. If you work with more than one real estate agent, the procuring cause may be unclear, leading to possible conflicts over which real estate agent should get the commission. 

Any procuring cause disputes are usually between real estate agents, not between the agents and their clients. Procuring cause disputes are arbitrated by local or state real estate boards and mediated under guidelines set out by the National Association of Realtors (NAR) Code of Ethics. 

Clients or real estate agents can find themselves in procuring cause disputes for many reasons. One of the biggest causes of these disputes is buyers who call property listing agents directly. This can lead to procuring cause disputes as the listing agent may be the first to show the property. But they may not be the final procuring cause. Other factors that can lead to procuring cause disputes include: 

• Buyers who work with multiple agents
• Not signing a buyer-broker agreement to work with a single broker
• Buyers who don’t sign an agency disclosure to work with a single agency

During a commission dispute, the real estate agent will file a complaint with the local real estate board. This happens if the agent doesn’t receive a commission they feel they deserve. Usually, these disputes are resolved outside of court. They may be forwarded to an arbitration panel. These panels may work to resolve disputes between brokers or, in some cases, between brokers and their clients.

The arbitration board will use the NAR Code of Ethics and Arbitration Manual to mediate disputes. The worksheet provided includes questions such as: 

• When did the second agent or broker get involved with the buyer and transaction?
• Was an offer of compensation made through the multiple listing service (MLS)? 
• What type of transaction is taking place? 
• What are the terms of the listing agreement?
• What are the terms of the offer to compensate?
• Who first introduced the buyer or tenant to the property?
• When was the buyer first introduced to the property?
• Did the buyer or tenant find the property through an open house?
• Did the buyer locate the property themselves?
• Did the agent or broker who first showed the property stay in contact with the buyer? 
• Were there any breaks in the continuity of work, such as abandonment or estrangement?

You can take several steps to avoid procurement causing disputes as a buyer.  

If you sign a written agreement to work with a single real estate agent, this can help avoid issues regarding the cause of the purchase. You could also sign a buyer-broker agreement or a buyer-agency agreement.

This solidifies the working relationship between a buyer and their agent or broker. This contract confirms the legal relationship, including the real estate agent’s obligations and responsibilities. This document acts as a record of their procuring cause in the transaction. Ensuring you’re working with a real estate agent you trust before signing the buyer-broker agreement is essential.

It’s important to be clear and open with your real estate agent. Let your agent know if you decide to see properties with other real estate agents. Clear communication with your agent at every stage of the real estate transaction is essential. 

If you change plans about the type of property or choose to work with a different agent, it’s essential to be transparent with the real estate agent. Clear communication and transparency upfront can resolve issues that could become a procurement cause dispute. 

If you sign a buyer-broker agreement or other agreement between real estate agents, it’s essential to notify the agent if you decide to work with another agent. This can build trust with the agents while allowing the agents to work out any disputes before closing. 

If a dispute arises, you have the option to seek legal advice. Usually, the real estate agents will file the dispute with the local real estate arbitration board. In some cases, this can delay the sale. Normally, even if there is a procuring cause dispute, the sale will go through, and the agents will work to resolve the dispute later. 

The simplest way to avoid a procuring cause dispute is to only work with one real estate agent and sign a buyer-broker agreement. It’s often tempting to call listing agents or attend multiple open houses. If you attend an open house, you can give the showing agent your real estate agent’s card to prevent future disputes. While disputes may arise at any stage of the home-buying process, you can generally prevent them with clear and open communication. Ready to buy a home? Learn how to make an offer on a home or get essential tips for first-time homebuyers.