Procuring Cause in Real Estate

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With the real estate market being extremely busy and highly competitive at the moment I thought it was very appropriate to touch upon “procuring cause” of a sale and who is entitled to the commission when multiple sales associates end up working with the same buyer. It’s not as easy as “I showed them the house they bought first” or as black and white as most people think.

What does “Procuring Cause of Sale” mean?

As a general rule, to entitle a broker to a commission, the broker must either find or procure a purchaser or effect a sale of such property. The broker is typically entitled to a commission when he or she produces a purchaser that is “ready, able and willing to perform upon the terms fixed.”

This is known as the “Procuring Cause Doctrine”.

To earn a commission under the procuring cause doctrine, the broker must bring the parties together and a sale must be effectuated as a result of continuous negotiations between the seller and buyer. The broker/agent has two requirements under the doctrine in order to be entitled to a commission:

  1. Initiate negotiations by doing some affirmative act to bring buyer and seller together; and
  2. Remain involved in the continuing negotiations between buyer and seller (there are exceptions when the broker is purposefully excluded from the continuous negotiations).

NOTE: It comes down to who is responsible for bringing the transaction together or who made it happen. What were the buyer/sellers wishes? What communication took place? Did the 1st agent offend the buyer? Tons of questions will be asked and to be quite frank, they can be difficult to resolve. Lots of investigation goes into a commission dispute.

Procuring Cause by “Entitlement” is not Enough

Keep in mind, arbitration panels cannot base their decision on a rule of entitlement, which are considerations such as:
Who crossed the threshold first?
Who wrote the successful contract?
Who has an exclusive agency relationship with the buyer?

Procuring Cause and a “Series of Events”

Instead, the panel’s job is to focus on the “series of events” and analyze the facts to determine if an interruption in the relationship between the agent and buyer occurred.

Examples of breaks could include:
1. The agent abandoned the buyer, perhaps by not being available
2. The buyer abandoned the agent (leaves the agent)
3. A third possible cause could be estrangement (alienation)

Don’t Leave Procuring Cause to Chance

I leave you with this….. in my mind we should always work so well for our clients that by choice they wouldn’t imagine working with anybody but you. But the truth remains that buyers will put us in these situations, oftentimes inadvertently, and we’re forced to fight for what we feel rightfully entitled to. And there’s nothing worse than having to make any situation about us and a commission so it’s important we clearly communicate up front with our buyers like we discussed in “Managing Expectations in Real Estate“.

But just know this, if you ever find yourself on the losing side of such a situation and you know and feel with every fiber of your being that you earned a commission, I will always do everything I can within my power to help you make it right and get it settled. I’ve gone to bat for many of you and I will continue to do so.

Have a great day everyone!

Adam

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