In real estate, what is procuring cause?
Reader question: One of the agents we are interviewing to help us find a home mentioned something called “procuring cause” which is a term unfamiliar to us. Apparently, we have to be careful about talking with other real estate agents because other agents can get the commission if they mention a potential match that we end up buying. We want to avoid conflicts like this, but we don’t want to be limited in looking around. The agent was somewhat vague, and we want a better explanation.
Monty’s answer: Procuring cause is difficult to explain, which may be why the agent seemed vague. Procuring cause boils down to which agent earns the commission if a dispute arises. To receive the commission the agent has to demonstrate they followed the rules and did the necessary work laid out in the multiple listing service guidelines between brokers when working with a customer and a second agent also lays claim to that same commission. The second agent must also demonstrate they followed the rules. The critical point is determining which agent caused the buyer to write an offer that results in the sale of the property.
On the surface, it would seem simple to decide on, but it is not always that easy. The problem with these disputes is that until the presentation of all the facts procuring cause cannot be determined. For example, drafting the purchase agreement is not enough stand-alone evidence to award the drafter the commission.
Ultra competitive
Real estate sales are fiercely competitive, as can be the clients and customers. Agents work as independent contractors and pay all their operating costs. The average agent produces 12 to 15 transactions annually, so every sale counts. Homebuying customers and clients will sometimes wander around in the marketplace in the belief that they increase their chances for finding the right property. Expired listings with “protected buyers” expose listing agents to procuring cause. Alternatively, customers and clients can accidentally trigger a dispute not realizing how real estate works. The real estate environment is a crucible for conflicts.