Procuring Cause - Who Gets Paid?

Understanding Procuring Cause in Real Estate: Who Gets Paid in a Dispute?

When it comes to real estate, few topics cause more confusion and contention among agents than “procuring cause.” Who rightfully earns the commission when there’s a dispute between real estate agents? This topic is especially relevant now that we have mandatory buyer agency agreements. So, let’s dive deep into the idea of procuring cause, how it affects real estate agents, and what agents can do to protect their commission.

What Is Procuring Cause?

Procuring cause refers to the chain of events initiated by a real estate agent that ultimately leads to a buyer purchasing a property. It’s a legal concept used to determine which agent is entitled to the commission when there is a dispute between two or more agents who believe they helped secure the sale. In other words, who “caused” the buyer to purchase the property?

As Mike Ferrante, Team Leader the 21 Mike Team at Century 21 HomeStar, explains, procuring cause disputes can arise when agents misunderstand the process. Real estate transactions have many moving parts, and commission disputes can occur when agents have invested time and effort, only for another agent to complete the sale.

Tony Geraci, broker-owner of Century 21 HomeStar, adds that every case is unique, and while one agent might feel entitled to a commission, the final decision often depends on specific facts and the chain of events leading to the sale.

Scenario 1: The Buyer Who Went Elsewhere

Imagine you’ve been working with a buyer for six months. You’ve shown them dozens of homes, but they haven’t found “the one.” Then, out of the blue, you find out they went to an open house, met a new agent, and wrote an offer on a home you hadn’t even discussed with them. They buy the house, and you lose the sale.

Now, you’re thinking, “But I invested six months of my time!” Does that mean you automatically deserve the commission? According to Tony, the answer is no. If there was no written agreement (such as a buyer’s agency agreement), and if you weren’t the one who initiated the specific chain of events that led to the sale, you may not be entitled to the commission.

However, if you had a buyer agency agreement in place, your case may be stronger. Still, as Tony points out, even having an agreement doesn’t automatically guarantee you the commission. The buyer may be legally obligated to pay you, but that’s a separate issue from who caused the sale. You may need to pursue legal action against the buyer for breach of contract.

Scenario 2: The Family Member Agent

Here’s another common scenario. You show a buyer a property, and they decide not to write an offer. Weeks go by, and then you discover that the buyer’s cousin, who just got their real estate license, showed them the property again and wrote the offer. The deal closes, and you’re left wondering whether you deserve the commission.

According to Tony and Mike, this is where things get trickier. If there was a clear break in communication or if the cousin started a new chain of events (showing additional properties, for example), the cousin might be considered the procuring cause. The committee making the final decision would evaluate whether the chain of events was broken and whether the second agent started a new chain strong enough to earn the commission.

What to Do as Agent #2?

So, what should you do if you’re the second agent, and you’re unsure if you’re the procuring cause? Tony suggests reaching out to the first agent to resolve the issue before the sale is finalized. Agents can often avoid arbitration by working out a referral fee or other agreement. Communication is key, and brokers or managers can help mediate a solution that benefits everyone.

Procuring Cause and Buyer Agency Agreements

With the new rule requiring buyer agency agreements to be in place before showing properties, there will likely be an increase in procuring cause disputes. As Mike Ferrante emphasizes, buyer agency agreements clarify many aspects of the agent-client relationship but don’t automatically guarantee commission. If another agent shows a property and writes the offer, that agent may be entitled to the commission.

However, if you’re the agent who first introduced the buyer to the property, and you have documentation showing your ongoing communication and attempts to assist the buyer, your case for procuring cause is stronger. Document your efforts, stay in regular contact with your buyers, and make sure that your buyer agency agreements are in place and fully enforceable.

Protecting Your Commission: Best Practices

Have a Signed Buyer Agency Agreement: Buyer agency agreements are now mandatory. Make sure you have one signed before showing properties, and clearly outline the terms of compensation.
Maintain Clear Communication: Regularly check in with your buyers, even if they seem to lose interest. Document your communication to show that you’re maintaining an ongoing relationship.
Don’t Assume Threshold Rule Applies: Just because you were the first to show a property doesn’t mean you automatically deserve the commission. The chain of events leading to the sale matters.
Work With Other Agents: If you’re the second agent involved, reach out to the first agent. Try to negotiate a referral fee or resolution that avoids arbitration.
Consult Your Broker: When in doubt, speak with your broker or manager. They can help mediate disputes or advise you on whether to pursue procuring cause claims.

In conclusion, understanding procuring cause is essential for real estate agents, especially with the changes to buyer agency agreements. As Tony Geraci points out, open communication and clear documentation are key to protecting your commission. In a competitive market like Cleveland and Northeast Ohio, making sure you follow these steps will help ensure you’re fairly compensated for your work.

If you’re an agent looking for guidance or an investor needing expert advice, contact the 21 Mike Team at Century 21 HomeStar or visit tonytalk.net to schedule a consultation with Tony Geraci.

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Procuring Cause – Who Gets Paid?