About Procuring Cause and Commission Disputes
Making Sure Your Agent Can Get Paid
When it comes to real estate transactions, it's surprisingly easy to cause confusion about commission. The "procuring cause" of a real estate transaction is the agent whose actions and efforts result in the sale of a property. It's the agent who ultimately caused the buyer to purchase the home. As such, that agent is entitled to compensation in the form of a commission.
You don't have to hop from real estate agent to real estate agent to end up causing commission disputes over who is the procuring cause. You might think that it doesn't make a difference because the seller pays the commission, but buyers typically sign buyer-broker agreements, making the buyer responsible for payment of the commission. This is the case even though that fee is paid from the seller's proceeds.
The procuring cause agent might not be the one who obtained the offer from the buyer, who presented the offer, or who successfully negotiated the seller's acceptance of that offer. It's not always that black and white. But it's often not the agent who simply showed the home first.
Realtor Association Guidelines
Every state's realtor association has its own guidelines for establishing procuring cause, but none of them are fast and hard rules. Some facts carry more weight than others.
A buyer could sign an exclusive buyer-broker agreement with one agent, but a second agent who closes the transaction could end up earning the commission. Procuring cause is complicated and the outcome is not always predictable. You might be opening a can of worms if you don't intend to buy a home from the agent you speak with at an open house, the agent you call for information from a newspaper ad, or an agent you ask to show you a home.
Your best bet to avoid procuring cause disputes is to be up front with each real estate agent and hire the one who is best qualified to help you find a home.
How to Avoid Procuring Cause Disputes
No one wants a messy battle over commission at the time of sale. Fortunately, there are a few ways to ensure a smooth, clear process with your agent.
Make It Clear If You're Working With Another Agent
Most agents will ask you right off the bat if you're working with someone else. Agents are trained to ask you this question, but sometimes they don't. Maybe they're distracted, or they just don't want to hear your answer. Set them straight immediately. Promptly volunteer the information so you can work out any conflicts up front.
Sign a Buyer-Broker Agreement
When you're ready to commit to working with a single broker (and their agent), you should sign a buyer-broker agreement with your agent. These agreements should clearly describe compensation and duties, and they'll cement your relationship.
Sign an Agency Disclosure
Agency disclosures describe the various capacities under which an agent can operate. The agent won't know the specific capacity until a property is located, so the disclosure will describe all possible capacities. Be sure to review and sign one so you and your agent are on the same page.
Let Your Agent Show You Properties
Don't ask another agent to show you a property. One of your agent's duties is to show you homes for sale, even if they're homes that you've located yourself. Your own agent is eager to help you, so don't go around them. Let your agent earn the commission.
Don't Call Listing Agents
Don't directly call listing agents for information. This is one of the main catalysts for a procuring cause dispute. Your agent will probably get more detailed information through a phone call than you could anyway. There won't be any confusion if your agent calls the listing agent.
Follow Open House Protocol
Follow open house protocol if you attend one unescorted. Hand your agent's business card to the agent hosting the open house if you go alone. Sign guest books with your agent's name next to your own. This way, the open house agent won't try to corral you or request personal information, and your agent can follow up with them later.
Purchasing a home is one of the biggest transactions you will ever make, and your agent is there to help make it a smooth and successful experience. You probably don't want this big moment to end on a sour note. Follow a few basic rules to ensure that your agent can get paid for their work and no one has to endure any legal battles.