How Procuring Cause Really Works in Real Estate: Earning Your Commission

As a real estate professional, your paycheck depends on your ability to close deals and earn commissions. But what happens when multiple agents are involved in a transaction? Who gets paid the commission if the buyer closes with a different agent than the one who originally showed them the property?

The answer comes down to something called procuring cause. Having a deep understanding of procuring cause, and how to protect your right to a commission, is essential for any real estate agent who wants a long and profitable career.

What is Procuring Cause?

In real estate, procuring cause refers to the actions of an agent that ultimately lead to a successful transaction. The National Association of Realtors defines procuring cause as:

"The uninterrupted series of events which results in the successful transaction, such as a sale or lease of a property. The broker who is the procuring cause is the one who initiated the series of events, beginning with the first contact with the client, that ultimately led to the desired outcome."

Essentially, it means that the agent who is most responsible for making the deal happen is the one who has the right to the commission, regardless of who actually writes up the contract or hands over the keys at closing.

Procuring cause has been a fundamental concept in real estate law for over a century. Its origins date back to a 1902 court case, McMonagle v. McGovern, which established that a broker is entitled to a commission if they are the "efficient cause" of the sale, even if the final negotiations are handled by someone else.

How Common Are Procuring Cause Disputes?

Procuring cause disputes are one of the most common reasons real estate agents end up in legal battles. According to the National Association of Realtors, procuring cause consistently ranks as one of the top topics for state and local Realtor association ethics and arbitration hearings.

A study by the California Association of Realtors found that 69% of agents have been involved in a commission dispute at some point in their career. Of those, 56% were due to a disagreement over procuring cause.

These disputes can be costly for the losing agent. The median amount of commission in dispute is $11,548 according to Real Trends consulting. And agents who unsuccessfully challenge a procuring cause decision may be on the hook for the other side‘s legal costs as well.

How Arbitration Panels Determine Procuring Cause

When a commission dispute arises between agents, it‘s typically handled through arbitration rather than the court system. Each local Realtor association has a Professional Standards Committee that conducts arbitration hearings to determine procuring cause.

During an arbitration hearing, a panel of 3-5 committee members (who are typically experienced agents and brokers) will review documentation and testimony from both sides. They weigh a variety of factors to determine who was the procuring cause of the sale:

Factors that support procuring cause:

• Being the first to introduce the buyer to the property
• Maintaining ongoing contact with the buyer throughout the transaction
• Writing and negotiating the initial offer
• Providing material information that led to the buyer‘s interest
• Attending property inspections and other key meetings

Factors that undermine procuring cause:

• Breaks in contact with the buyer or "abandonment"
• Failing to show the property the buyer ultimately purchased
• Not accompanying the buyer to view the property they bought
• Another agent significantly altering the terms of the deal
• The buyer finding the property independently online or at an open house

After weighing all the evidence, the panel will issue a ruling on which agent is entitled to what portion of the commission. Their decision is final and binding on both parties.

A Procuring Cause Dispute Scenario

To illustrate how easily a procuring cause dispute can happen, consider this example:

Agent Alice has been working with a buyer couple for several months, showing them a dozen properties. The buyers mention that they are also browsing listings online. Alice continues sending the buyers properties that match their criteria.

One Saturday, the buyers happen to drive by a new listing with an open house sign. They stop in and meet Agent Bob, who hosts the open house. The buyers love the property and submit an offer through Bob the next day.

When the sale closes a month later, Bob‘s brokerage receives the full commission. But Alice believes she was the procuring cause, since she introduced the buyers to the neighborhood where they purchased and had been actively working with them until they met Bob.

Depending on the specific circumstances and the quality of each agent‘s documentation, the arbitration panel could rule either way in this scenario:

• If Alice can show records of consistent communication and sending the buyers properties in that area, the panel may determine that her efforts led to their interest and award her the commission.

• But if Alice failed to have the buyers sign a representation agreement, and Bob can demonstrate that he advised the buyers about the property details and terms that led to their decision to buy, he has a strong case for procuring cause.

Protecting Your Commission Rights

With the stakes so high, it‘s crucial that agents take steps to establish and document their procuring cause. Some best practices:

1. Always use a buyer representation agreement. Getting a signed agreement that specifies your duties and commission structure greatly strengthens your procuring cause claim. Make sure it has key clauses about the buyer agreeing not to work with other agents and referring all communications through you.

2. Stay in close contact. Check in regularly with your clients by phone, email, and text so you can show an unbroken chain of communication and service. Be wary of long gaps where a client could start working with someone else.

3. Document everything. Keep organized records of all property showings, listing information sent, offers written, and other key activities. If a dispute crops up, the agent with the most detailed paper trail usually prevails.

4. Educate your clients. Many buyers and sellers don‘t understand procuring cause. Explain upfront how you get paid and that your commission rights continue even if they buy with another agent. Consider adding a "procuring cause warning" to your email signature.

5. Network with other agents. Having strong professional relationships makes it more likely that you can resolve potential commission issues before they get to arbitration. If you discover your client is working with another agent, reach out to them directly to come to an agreement.

Veteran Agent Viewpoints

Experienced agents who have successfully navigated procuring cause disputes emphasize the importance of being proactive.

"In this business, you can‘t be afraid to have the tough conversations," says Vanessa Baker, a Phoenix agent with over $400 million in career sales. "If you discover your client is considering writing an offer with another agent, you need to firmly but professionally remind them of your representation agreement and the work you‘ve put in."

John Mayfield, a St. Louis broker with 28 years of experience, stresses the importance of documentation. "I train my agents to write up a one-page summary of their activities after every client interaction – showings, writing offers, attending inspections. We call it the ‘procuring cause memo‘ and it‘s a lifesaver if there‘s ever a dispute."

The Last Word on Procuring Cause

Procuring cause disputes may be a fact of life in real estate, but they don‘t have to derail your business. By putting strong agreements and systems in place to protect your interests, you can focus on providing amazing client service with the confidence that you‘ll be paid fairly for your hard work.

If you do find yourself in a commission dispute, don‘t panic. Gather up your documentation, consult with your broker or an attorney, and make your case clearly and factually to the arbitration panel.

In the end, procuring cause rewards diligence, professionalism, and putting your clients‘ needs first. Mastering the nuances of procuring cause is just one more way that top-producing agents demonstrate their value and expertise in a competitive industry.