Procuring Cause: What It Is, And Why It’s Important In Real Estate
Emma Tomsich4-Minute Read
May 14, 2020
Buying a home comes with a lot of paperwork, new obligations, and some legal terminology that’s important to understand so you can keep a good track record of which agents and brokers support the process. Luckily, to help you stay informed and organized, we are going to introduce you to a term called procuring cause.
Procuring Cause, Defined
The procuring cause refers to the actions of a real estate agent or broker whose efforts conclusively result in a property’s sale. The broker or agent is thus compensated with commission from the sale.
To further explain what specific actions can be defined as procuring cause, think about what concrete steps an agent takes toward confirming a purchase. This can include anything from hosting house showings to receiving purchase offers to negotiating a final price.
Don’t feel bad if you’re still a little confused about the differences between real estate agents and other real estate professionals. Procuring cause is an especially abstract term with plenty of controversy from transactions that involve more than one real estate agent selling the same property. A buyer-broker agreement can help prevent such controversy by clarifying exactly who represents the buyer.
A buyer-broker agreement is an important first step toward defining an eventual procuring cause claim because it officially establishes the duties of the real estate agent toward a transaction. The buyer-broker agreement serves two main purposes: to act as a record that agents can cite for commissions from procuring cause; and to be a confirmation of what the agent’s specific responsibilities and limitations are.
Types of Buyer-Broker Agreements
Buying a home comes with a lot of new responsibilities, such as finding the right size home, a good school district, nearby amenities, affordable prices, and a satisfying general location. A buyer-broker agreement saves time with each of these previously mentioned tasks because you can rely on your agent’s knowledge of each property and the area itself.
There are three types of buyer-broker agreements. Let’s take a minute to define each one.
First, there is the nonexclusive right to represent agreement. This outlines the relationship between the broker and agent and explains each of their responsibilities and obligations. If the broker represents the buyer or proposes the house the buyer decides to buy, the broker is fairly compensated. However, the buyer does not have to pay commission if the broker is paid by another party such as the seller. Finally, the agreement states that the buyer can purchase a home through another broker, as long as the home wasn’t introduced by the first broker.
Next is the nonexclusive not for compensation agreement. This type of buyer-broker agreement also outlines the buyer and agent’s obligations and responsibilities. However, the main difference between this agreement and the first one is that the nonexclusive not for compensation agreement specifies that no compensation is to be paid to the broker. The buyer may also hire more than one broker and either the buyer or broker can revoke the contract at any time.
Finally, there is the exclusive right to represent agreement. This is the most common type of buyer-broker agreement. Under this agreement, the buyer agrees to work exclusively with one broker, and the broker is paid the amount agreed upon even if the buyer finds their own house.
Procuring Cause Disputes
It’s important you’re aware that a procuring cause dispute can happen after leasing or selling a property. This often involves the agent who did not receive a sales commission documenting the case with their local real estate board.
Procuring cause disputes are common in the industry, especially when there isn’t proper buyer-broker paperwork. Unfortunately, a procuring cause dispute can happen if not all parties are aware of all official information defining client exclusivity or lack thereof. Luckily, avoiding a dispute is probable if the agent initially asks a client whether they’ve seen a different agent while shopping for homes.
A Final Word
While procuring cause disputes might sound as intimidating as they are abstract, it’s much easier for everyone involved to prevent them before they become an issue. To avoid dealing with a procuring cause dispute, remember what you learned today, and make sure to stay organized and transparent when communicating with your agent about purchasing a home. Ultimately, finding a good buyer’s agent will help you keep costs down and keep track of all the transaction details mentioned above.
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