In the world of real estate, the concept of "procuring cause" is crucial when it comes to determining which agent earns a commission in a property transaction. It's the link between an agent's actions and a successful sale or lease. Understanding procuring cause is vital for both agents and clients to ensure fair compensation and avoid disputes. This guide will delve into the meaning of procuring cause, its importance, common causes of disputes, and ways to prevent them.
What is Procuring Cause?
Procuring cause refers to the uninterrupted chain of events initiated by a real estate agent that ultimately leads to a successful real estate transaction. In simpler terms, it's about identifying the agent whose actions were the primary reason a buyer purchased or a tenant leased a property.
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What is an Example of Procuring Cause?
Imagine a buyer is searching for a home and attends an open house hosted by Agent A. The buyer expresses interest in the property but doesn't make an offer. A few weeks later, the buyer sees the same property listed online and contacts Agent B to schedule a showing.
Agent B facilitates the showing, negotiates the offer, and the sale closes. In this scenario, Agent A may argue that they were the procuring cause, as they introduced the buyer to the property initially. However, Agent B would likely be considered the procuring cause, as their actions directly led to the sale.
What is the Key Factor for Proving Procuring Cause?
The core of procuring cause lies in demonstrating a clear and uninterrupted chain of events that directly led to the real estate transaction. It's about proving that your actions as an agent were the catalyst that brought the buyer and seller together and ultimately resulted in a successful sale or lease.
This connection between your efforts and the final transaction can be established through various forms of evidence, such as:
Buyer-Broker Agreement:
This is a formal contract that solidifies the relationship between you and the buyer. It outlines the terms of your representation, including your responsibilities, the duration of the agreement, and the commission structure. A signed buyer-broker agreement acts as a crucial piece of evidence in establishing procuring cause, as it demonstrates your commitment to the buyer and your role in their property search.
Communication Records:
Maintain a thorough record of all communication with your client, including emails, texts, call logs, and even handwritten notes. These records can serve as a timeline of your efforts, showcasing your consistent involvement in the buyer's journey and your proactive steps to find them the right property.
Showings and Property Tours:
Proof that you physically showed the buyer the property or facilitated their access to it is another vital piece of evidence. Keep track of showing dates, times, and any notes or feedback from the buyer during the visit.
Negotiations and Offer Submission:
Your involvement in negotiating the offer price, terms, and contingencies on behalf of the buyer can solidify your claim as the procuring cause. Keep records of all negotiations, counteroffers, and final offer submissions.
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Additional Tips for Establishing Procuring Cause:
Consistent Follow-up: Regularly follow up with your clients, providing updates on new listings, market trends, and other relevant information. This demonstrates your commitment to their needs and strengthens your role as their trusted advisor.
Client Testimonials: If your client is willing to provide a testimonial acknowledging your role in the transaction, this can serve as valuable evidence in case of a dispute.
Expert Witness: In more complex cases, a real estate expert witness can provide testimony on industry practices and standards, helping to clarify the chain of events and establish procuring cause.
Remember, procuring cause disputes can be challenging, but with proper documentation and a proactive approach, you can protect your commission and ensure fair recognition for your hard work.
What Causes Procuring Cause Disputes?
Procuring cause disputes often arise in situations where multiple agents are involved or when there's a lack of clarity about who initiated the chain of events leading to the transaction. Common causes include:
Buyers working with multiple agents: If a buyer interacts with several agents during their search, it can be challenging to pinpoint the procuring cause.
Unclear communication or documentation: A lack of clear communication or proper documentation of interactions between the buyer and agent can lead to disputes.
Changes in representation: If a buyer switches agents mid-transaction, determining who deserves the commission can be complex.
What Happens During a Dispute?
If a procuring cause dispute arises, it's usually resolved through mediation or arbitration between the involved parties. In some cases, the matter may escalate to a legal battle, which can be time-consuming and costly.
How To Prevent Procuring Cause Disputes
Procuring cause disputes can be messy and time-consuming, potentially damaging relationships and delaying commission payments. By adopting proactive measures and prioritizing transparency from the outset, agents can significantly reduce the risk of these conflicts.
Clear Communication:
Open communication is paramount. From the initial meeting, clearly articulate your role, responsibilities, and expectations to your clients. Explain what constitutes procuring cause in your market and how commissions are determined. Address any questions or concerns they may have, ensuring everyone is on the same page from the start.
Written Agreements:
A well-drafted buyer-broker agreement is essential. This legally binding document outlines the terms of your relationship with the buyer, including your obligations as an agent, the buyer's responsibilities, the duration of the agreement, and, crucially, how procuring cause and commission will be handled.
Make sure both parties understand and sign this agreement before any property showings or negotiations take place.
Document Everything:
Maintaining meticulous records of all client interactions is your best defense against procuring cause disputes. Keep track of:
- Property showings and tours
- Emails, text messages, and phone calls
- Notes from conversations and meetings
- Offers submitted and negotiations conducted
These records create a clear timeline of your involvement in the transaction, making it easier to establish procuring cause if necessary.
Avoid Dual Agency:
Representing both the buyer and the seller in the same transaction can create conflicts of interest and increase the likelihood of procuring cause disputes. It can be challenging to advocate for both parties' best interests simultaneously. If possible, avoid dual agency situations or disclose them fully to all parties involved and obtain their written consent.
