Procuring Cause

Definition

“Procuring Cause” is a legal term referring to the series of events or actions initiated by a real estate broker that directly result in a completed transaction, such as the sale of a property. This concept is often pivotal in determining whether a broker is entitled to their commission.

Procuring cause disputes commonly arise when there are questions about which broker’s activities were most directly responsible for the closing of a deal. For a broker to claim a commission, they must demonstrate they were the catalyst for the buyer meeting the seller and completing the transaction.

Examples

Introduction-leading Sale: A broker introduces a potential buyer to a property, and after several visits and negotiations, the buyer purchases the property directly from the seller a few months later. The broker can claim they are the procuring cause for the sale.
Open House: A broker conducts an open house and later the attendees purchase the property through another agent. The initial broker could argue they were the procuring cause because their open house efforts led to the final sale.
Lengthy Negotiations: A broker spends months working with a buyer, showing various properties and finally a property is bought after negotiating directly by the buyer through the seller, without the appearing broker formally involved in the final steps. The original broker can still demand a commission as the procuring cause.

FAQs

What determines if a broker is the procuring cause?

To determine if a broker is the procuring cause, consider if the broker’s actions initiated an uninterrupted series of events that resulted in a sale. The determining factors can include the conduct during open houses, showings, negotiations, and communication efforts with the buyer and seller.

Is procuring cause the same as listing agent?

No. The listing agent is the broker who has the property listed for sale, while procuring cause relates to the broker whose actions were pivotal to making the sale happen, regardless of whether they listed the property.

Can more than one broker be considered a procuring cause?

While possible, it is less common. Typically, only one broker is deemed the procuring cause, being the major influencer in the buyer’s purchasing decision. However, in complicated scenarios, determining the rightful procuring cause might need arbitration or legal involvement.

How is a procuring cause dispute resolved?

Disputes over procuring cause are often resolved through mediation or arbitration, especially when brokers are part of a real estate board or association. If unresolved, legal action might be necessary.

Does the buyer or the seller decide the procuring cause?

Neither buyer nor seller directly decides; it is typically determined by considering the sequence of actions initiated by the broker, aiming at defining whose efforts effectively led to the transaction’s success.

Broker Commission: The fee earned by a broker for successfully closing a transaction, which might depend on being the procuring cause.
Listing Agreement: A contract between a property owner and a broker that grants the broker the authorization to act as an agent for the property’s sale.
Agency Disclosure: A document that details the broker’s role and obligations in representing the buyer or seller in a transaction.

Online Resources

References

National Association of Realtors. “Procuring Cause Amendment from NAR.” Accessed January 15, 2023.
Bronzell, R. “Understanding Procuring Cause in Real Estate Disputes.” Real Estate Journal, October 2020.
“Procuring Cause Basics.” StudyRealEstate.com. Last modified December 12, 2022.

Suggested Books for Further Studies

Modern Real Estate Practice by Fillmore W. Galaty, Wellington J. Allaway, and Robert C. Kyle
- Focuses on brokerage, agency, and the legal aspects of real estate transactions.
The Real Estate Sales Secret by Patrick Duffy
- Addresses practical scenarios and in-depth analysis on broker contributions leading to sales success.
The Laws of Real Estate Disputes by Stephen Mettling
- Discusses legal frameworks surrounding commission disputes including procuring cause situations.

Real Estate Basics: Procuring Cause Fundamentals Quiz

### What key aspect best defines "Procuring Cause"? - [x] The actions by a broker that directly result in a completed transaction. - [ ] The highest bidder in a property auction. - [ ] The appraisal value of the property. - [ ] The property that has been listed the longest. > **Explanation:** Procuring cause involves the broker's actions leading directly to the final transaction or completion of a deal. ### What is often essential to determine entitlement to a broker’s commission? - [x] Procuring cause - [ ] Buyer’s credit rating - [ ] Property market value - [ ] Length of time a property is on the market > **Explanation:** A broker must often show they were the procuring cause to be entitled to their commission from a completed sale. ### Can a broker still claim a commission if another agent completes the sale? - [x] Yes, if the initial broker was the procuring cause. - [ ] No, the final agent always receives the commission. - [ ] Yes, if multiple agents are involved. - [ ] Only if a separate commission agreement exists. > **Explanation:** If the initial broker’s actions initiated an uninterrupted chain of events resulting in the sale, they may be considered the procuring cause, entitling them to the commission, regardless of who completes the deal. ### Which method often resolves procuring cause disputes? - [ ] Public voting - [ ] Market analysis - [x] Mediation or arbitration - [ ] Redrawing property lines > **Explanation:** Procuring cause disputes are typically settled through mediation or arbitration rather than public voting or market analysis. ### Does the procuring cause consider length of time searching for a property? - [ ] Yes, the time taken is the most crucial aspect. - [x] No, it's the series of initiated actions leading to the sale. - [ ] Yes, but only for commercial properties. - [ ] No, it's based entirely on buyer's decisions. > **Explanation:** The critical factor in determining procuring cause is the uninterrupted series of events initiated by the broker that led to the final sale, regardless of the time spent. ### Who often provides a decisive determination in procuring cause disputes? - [ ] The property seller - [ ] Local real estate board - [ ] The buyer - [x] Arbitrators or mediators > **Explanation:** Arbitrators or mediators often provide decisive determinations in procuring cause disputes, particularly when brokers are part of a real estate association. ### Some common occasions when procuring cause disputes arise are? - [x] Open houses with multiple agents and follow-up sales by other brokers. - [ ] Completion of home inspections by the buyer. - [ ] Setting up utilities in new homes. - [ ] Landscaping post-purchase. > **Explanation:** Disputes commonly arise following open houses where showings or negotiations carried out by one broker result in sales closed by another. ### For a broker to effectively claim commission based on procuring cause, they must: - [ ] Have worked the longest in the market. - [x] Prove their actions lead directly to the final sale. - [ ] Have the best reputation. - [ ] Represent both buyer and seller. > **Explanation:** Effectively claiming a commission based on procuring cause requires proving that the broker’s actions directly led to completing the transaction. ### If a buyer fluctuates between brokers before completing a sale, the procuring cause might be: - [x] The broker whose actions initiated the entire purchase cycle. - [ ] The last broker the buyer contacted. - [ ] The broker who showed the highest number of properties. - [ ] The broker with a direct contract to complete the transaction. > **Explanation:** The broker whose actions initiated the sequence of events leading to the transaction’s completion is generally considered the procuring cause, irrespective of buyer fluctuations. ### When does a procuring cause argument become inherently weak? - [ ] When the broker works independently without association. - [ ] When automated property tours are offered. - [ ] When there’s a direct personal connection between buyer and seller. - [x] When a significant interruption occurs between initial introduction and final sale. > **Explanation:** Significant interruptions between the introduction provided by the broker and the final sale often weaken a procuring cause claim as the direct line of efforts gets broken.