In the unique parlance of real estate, Procuring Cause, as defined by the National Association of Realtors, is “the uninterrupted series of causal events that lead to a successful transaction.” In simple terms, it is the means of determining who rightfully deserves a real estate commission for making a sale. What it means for the home buyer or seller is that an agent with little or no involvement in a transaction can claim a commission from the buyer, the seller, or both. For example:
Comedian Jerry Seinfeld recently bought a $ 3.95 million townhouse in Manhattan. His real estate agent was not available to show him the house a second time due to his religious observance. Seinfeld then entered the transaction only thinking of saving the $ 100,000 commission. He was subsequently successfully sued because the agent had shown Procuration by first showing him the property and because Seinfeld had entered into an exclusive buyer representation agreement. Not understanding the dynamics of Procuring Cause had cost Seinfeld a hundred thousand dollars.
The Seinfeld case was relatively straightforward. The agent had shown him the property and he had the exclusive right to sell the Seinfeld contract. However, commission claims can be based on much rarer grounds. In fact, any demonstrable contact with an agent can, theoretically, provide a basis for a cause. This is why agents seem so eager to get a potential customer to sign up, either online or in person. If that agent provides information about a property that the prospect eventually buys, the agent could view his efforts as the beginning of “the unbroken series of causal events that lead to a successful transaction.” Unfortunately, this happens occasionally.
Additionally, some agents present exclusive purchase agreements similar to the one Seinfeld signed with little or no understanding from the buyer of exactly what they are agreeing to.
This all sounds like real estate agents are trying to trick buyers and sellers into paying large sums of money that they did not work to earn. This is seldom true. Procuring Cause is a definition belonging to the Code of Ethics for Real Estate Agents designed to protect agents against theft of their commissions. It works like this:
An agent establishes an open and honest working relationship with a prospective buyer, shows him properties, often for months or even years, works with him on his financing, negotiates the sale, and then the buyer cancels it (as Seinfeld tried to do) or the seller or other agent who arrives at the last minute to write the contract. In the latter case, this often happens not because buyers are unhappy with their agent, but because they have a friend or family member who has a real estate license, often part-time or inactive *, whom they want to favor by giving them the commission. even though this agent had nothing to do with the process.
This is where the local estate agents association steps in to see that justice is served. Both sides of the issue are brought before a grievance board and the true cause of acquisition is determined. In the above case, it is clear that the agent who intervened at the last minute had no right to expect a commission. However, what if this Johnny-Come-Latest agent who wrote the contract had an exclusive buyer agreement? In this case, the commission usually goes to the agent who has not only the signed contract but the exclusive written agreement.
Now this is where it gets difficult and can cost a lot of money for both the buyer and the seller. An agent who does not reach an agreement because he was not informed or misinformed of the real situation can sue in a civil court of law. Certainly no one needs these kinds of hassles and expenses, especially during a move, which often pushes resources to the limit.
Here are some ways to avoid tangles with Procuring Cause:
- Do not sign anything except mandatory agency disclosure documents that are designed to tell you where the agent’s loyalties lie and nothing else. If you choose to enter into an exclusive buyer agreement, keep in mind that even if you buy through another agent or directly from an owner or builder, you will likely be required to pay a commission to the agent who hired you.
- Please do not provide contact information, as this may invite further marketing efforts. Be aware that even casual contact with an agent who provides information about a property can be grounds for claiming a commission. If you are asked to sign up for an open house, give your name and no more.
- Decide on an agent to work with and work with that agent exclusively, whether or not you have a contractual agreement. If you decide to change agents for any reason, formally end your relationship with your former agent. Keep a record of the termination, such as a signed and acknowledged letter. Do not contact the former agent after your relationship ends.
- If you receive information from the list or are contacted by an agent you are not working with, ask them to stop submitting information and remove your name from their contact list.
That’s. The vast majority of real estate agents and brokers are scrupulously honest. They deserve to be compensated for their efforts as any professional would. But this only happens when they make a transaction and receive a commission. This is their way of life. A few moments of communication beforehand about your intentions as a buyer or seller often avoid misunderstandings later. Tell them what you want. Ask them to explain their obligations to you. Know who works for whom. And learn how the transaction agents will be compensated.
Contracts and other legally binding documents are often misinterpreted. That is why an experienced real estate attorney is essential to your well-being. And while they are typically brought in to review the contract, prepare the documents, and oversee the closing, they also need to be brought in before the exclusive buyer contracts or listing agreements are signed. The cost of this can usually be added to the fee for your services for the closing. The price for not doing so can be overwhelming.
Overall, there is nothing to fear and everything to gain when working with a real estate professional. Article 1 of the Code of Ethics for Real Estate Agents details it:
“By representing a buyer, seller, landlord, tenant or other client as an agent, real estate agents are committed to protecting and promoting the interests of their client. This obligation to the client is paramount, but does not exempt real estate agents from Your Obligation to Treat All Parties Honestly. When serving a buyer, seller, landlord, tenant, or other party in a non-agency capacity, real estate agents remain obligated to treat all parties honestly. ” Click to view the full Realtor Code of Ethics
Agents found guilty of code violations have their real estate status suspended or revoked.
Homeownership is not only the American dream, but also the source of wealth for most Americans. An open, honest approach and a little common sense go a long way to a successful transaction by preventing problems before they happen.
* Everyone knows a real estate agent. And this agent is most likely not making a living selling real estate – 10% of licensed agents make 90% of sales. The rest fight for the leftovers. Do not get involved with one of them, even if it is a relative. Always work with the best professionals, whether they are brokers or associate brokers. Statistically, one is more likely to end up in court for a real estate matter than for any other matter. You don’t need to be one of them.