Picture this: a real estate agent introduces you to a fantastic house that checks all your boxes. However, before visiting the property, you get busy with work and need to remember to follow up. A couple of weeks later, you attend an open house for the same property and discuss with another agent hosting the event who provides you with crucial information about the neighborhood and local amenities. You appreciate the valuable insights and keep in touch with him. Then, when you're ready to make an offer on the house, you switch agents yet again, and a third realtor steps in to help you negotiate with the seller and finalize the deal.
Now, the million-dollar question arises: which agent deserves the commission?
You had no idea dealing with multiple agents regarding the same property would be such a big deal, did you?
All three agents might present valid arguments to support their claim of being the reason you purchased the property and deserving of the commission.
As the buyer caught in the middle, you'll want to ensure that the rightful agent is rewarded for their hard work. Besides, watching realtors argue over who deserves the commission when you're about to be handed over the keys to your dream home is nobody's idea of a good time.
To know what to do in such a situation – or better yet, how to avoid it, continue reading about procuring cause real estate below.Get A Free Mortgage Quote
Procuring Cause Real Estate: What Is It?
In the real estate industry, procuring cause refers to the agent or broker who plays a crucial role in initiating a series of events that ultimately lead to the successful sale of a property. This vital concept determines which agent receives the commission for bringing the buyer and seller together.
It's true that the seller pays the agent commission, but it doesn't mean procuring cause real estate is not your concern. After all, you're responsible for the payment of that fee.
That said, the issue of procuring cause real estate isn't always black and white, meaning it's unnecessary that the realtor who received the buyer's offer and successfully negotiated the deal is entitled to compensation. However, in most cases, the agent who only showed the property first doesn't deserve the commission.
Sometimes, dealing with multiple agents for a single property is like opening a can of worms. If you face a procuring cause dispute, you're in for some back and forth and a lot of headaches.
What You Need to Know About Procuring Cause Disputes
A procuring cause matter may quickly turn into a dispute when
Below are a few steps typically taken during a dispute process:
Resolving Disputes Through Arbitration
As a first resort, procuring cause real estate disputes between real estate brokers or brokers and their clients are typically addressed through arbitration instead of court.
This is a less formal, time-efficient, cost-effective, yet constructive method for handling disagreements over commission entitlement.
An impartial panel of experienced real estate professionals is tasked with mediating the dispute. They carefully review the evidence, listen to testimonies, and assess the relevant factors to make a fair determination. They strive to reach a resolution that upholds ethical standards and ensures the rightful agent receives their deserved commission for facilitating the property transaction.
Fostering a cooperative atmosphere that encourages open communication, arbitration ultimately leads to a swifter and more amicable resolution.
Seeking Help From the Local Real Estate Board
The agents involved in the procuring cause dispute sometimes decide to consult with the local real estate board to settle the matter and decide who rightfully deserves the commission.
During this process, you (the buyer) might be called upon to serve as a witness and share your side of the story.
The Role of the Procuring Cause Arbitration Worksheet
Provided by the National Association of Realtors (NAR) Code of Ethics and Arbitration Manual, the Procuring Cause Arbitration Worksheet contains a series of questions designed to assist the hearing panel in navigating and mediating procuring cause disputes effectively.
These questions may include:
- Who introduced the buyer to the property in the first place, and when?
- Did the buyer find the property through independent research?
- Did the buyer get to know about the property at an open house?
- Was the buyer in touch with the real estate agent who first introduced them to the property?
- When did the second agent get involved?
Other Key Factors Considered in Arbitration
During the arbitration hearing, the panel takes into account several additional factors to make a fair decision. These include the nature of the transaction, whether the compensation offer was made through the MLS, listing agreement terms, compensation offer terms, the roles played by each party involved in the transaction, and their conduct.
If the buyer had cut ties with an agent before a new one entered the transaction, this break is also considered during arbitration.
After carefully examining all these factors, the arbitration panel makes an informed and just decision regarding the procuring cause and rightful commission entitlement.
5 Tips for Avoiding a Procuring Cause Dispute
To avoid getting stuck with a procuring cause real estate dispute when buying a house, you must keep the following things in mind.
1. Maintain an Honest Relationship With Real Estate Agents
If you happen to be working with more than one professional when looking for a house, let each of them know about your situation.
Most agents inquire upfront if you're already working with someone else to ensure clarity and avoid misunderstandings. But even if someone doesn't ask, you must volunteer to openly discuss your working relationships. This will enable them to work up any conflicts from the get-go and better assist you in finding the perfect property.
2. Sign an Agreement With Your Agent
To formalize your working relationship with a specific agent, you should sign a buyer-broker agreement, also known as a buyer agency agreement. This contract solidifies the terms of your partnership and legally outlines the agent's obligations and responsibilities throughout the transaction.
But of course, before signing, take the time to ensure you've found the right expert for your needs and preferences to ensure a smooth and mutually beneficial collaboration.
3. Avoid Calling Listing Agents
It's best to avoid directly contacting listing agents for information when working with a buyer's agent. This practice can create confusion during the transaction, often leading to procuring cause disputes.
A buyer's agent is better equipped to gather detailed information about the property through their professional network and established channels. They will know the right questions to ask and can negotiate on your behalf to get the necessary information without any potential misunderstandings.
Trusting your agent to take the lead in these interactions will help protect your interests and maintain a professional relationship between all parties involved.
4. Let Your Agent Show You Properties
Your agent is there to assist you throughout the entire home-buying process, and that includes showing you properties, even ones you may have found yourself. So, let them arrange property showings and coordinate all aspects of your property search.
By sticking with your agent and not seeking out other agents to show you properties, you allow them the opportunity to earn their commission for their hard work and dedication. More importantly, it will save you time and effort and reduce the likelihood of potential complications or disputes related to procuring cause down the line.
5. Be Transparent About Who You Are Working With When Attending an Open House
When attending open houses, buyers are usually accompanied by their agents.
However, if you happen to visit an open house alone, inform the hosting party about your relationship with your agent the first chance you get. Share your agent's card and include their name alongside yours when signing the guest book.
This transparency is essential to prevent any potential disputes and honor the procuring cause in the future, ensuring that the deserving agent receives their rightful commission for assisting you with your property search.
Let's Navigate the Procuring Cause Real Estate Situation and Make Your Property Buying Journey a Breeze!
Procuring cause, in a nutshell, is about determining which real estate agent played the most significant role in helping you find and close the deal on your new home. If multiple agents claim they were instrumental in your purchase, things can get tangled up quickly!
Instead of saving time, this practice might actually slow things down. Procuring cause disputes can put a damper on your celebratory house-buying journey, dragging out the process and causing unnecessary stress.
So, let's keep things smooth sailing by working with a single agent you trust and feel comfortable with. Communicate openly with them about your needs and preferences, and watch as they use their expertise to find the best properties tailored to you while protecting your interests.
Meanwhile, if you still haven't managed to secure financing for your new home, let Rate Simple find you competitive rates in minutes. Reach out to our loan officers for a FREE quote today.Get A Free Mortgage Quote