Definition
Procuring Cause is a legal doctrine used to identify which real estate broker is entitled to a commission. It refers to the action or series of actions initiated by a broker that directly leads to the successful completion of a transaction, such as the sale or lease of property. The concept is essential in disputes over commission claims when multiple brokers are involved in a single transaction.
Examples
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Broker A shows a client several properties, including one the client eventually buys after a few weeks.
- In this scenario, Broker A could be considered the procuring cause of the sale, assuming there were no intervening agents who do significant additional work leading to the transaction.
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Broker B introduces a client to a property and facilitates several negotiations between the buyer and the seller. The client then buys the property through Broker B.
- Broker B is likely the procuring cause of the sale, having actively guided the negotiation process that led to the transaction.
Frequently Asked Questions (FAQs)
What determines procuring cause?
The determination of procuring cause involves examining whether the broker’s actions were the uninterrupted and timely cause of the transaction. Factors include initiating contact with the client, showing the property, and conducting negotiations.
Can more than one broker claim procuring cause for the same transaction?
Generally, procuring cause is awarded to a single broker or firm. However, disputes can arise when multiple agents claim involvement, and these disputes are often resolved through mediation or arbitration.
What role do written agreements play in procuring cause disputes?
Written agreements such as listing agreements and buyer’s representation contracts serve as critical evidence in determining procuring cause. They establish the broker’s involvement and the terms under which the broker operates.
Related Terms
- Exclusive Listing: A contract where a seller agrees to work with only one broker for a specified period to sell their property.
- Open Listing: A contract allowing property owners to list their property with multiple brokers, with commission paid only to the broker who brings a successful buyer.
- Commission: The fee paid to a real estate broker for their services in facilitating a transaction, typically a percentage of the property’s sale price.
- Dual Agency: A situation where a real estate broker represents both the buyer and the seller in the same transaction.
Online References
- National Association of Realtors (NAR) - Procuring Cause
- Investopedia - Procuring Cause
- The Balance - Real Estate Procuring Cause
Suggested Books for Further Studies
- Real Estate Law by Marion R. Realvor
- The Language of Real Estate by John Reilly
- Modern Real Estate Practice by Fillmore Galaty, Wellington J. Allaway, and Robert C. Kyle
- The Encyclopedia of Real Estate Forms and Agreements by Atlantic Publishing Group Inc.
Fundamentals of Procuring Cause: Real Estate Basics Quiz
### What is the primary function of the procuring cause doctrine in real estate?
- [x] To determine which broker is entitled to a commission.
- [ ] To decide the listing price for a property.
- [ ] To establish the legal owner of a property.
- [ ] To arrange for property inspection services.
> **Explanation:** The procuring cause doctrine's primary function is to determine which broker is entitled to a commission based on their active role in the real estate transaction.
### What typically influences the determination of procuring cause?
- [ ] The value of the property.
- [ ] The geographical location of the property.
- [x] The actions taken by the broker that led to the transaction.
- [ ] The number of brokers involved in the deal.
> **Explanation:** The determination of procuring cause is typically influenced by the actions taken by the broker that directly led to the completion of the real estate transaction.
### Which type of contract might best support a broker's claim to be the procuring cause?
- [ ] A verbal agreement.
- [x] A written exclusive listing agreement.
- [ ] A handshake deal.
- [ ] A lease contract.
> **Explanation:** A written exclusive listing agreement serves as strong evidence to support a broker's claim as being the procuring cause, providing clear documentation of their involvement in the transaction.
### How are disputes regarding procuring cause often resolved?
- [ ] By public votes.
- [x] Through mediation or arbitration.
- [ ] Via lottery systems.
- [ ] By the buyer's decision alone.
> **Explanation:** Disputes regarding procuring cause are often resolved through mediation or arbitration, where a neutral third party helps settle the issue.
### Which of the following scenarios would most likely result in a procuring cause issue?
- [ ] Only one broker is involved from start to finish.
- [x] Multiple brokers claim involvement in the transaction process.
- [ ] The transaction involves commercial property.
- [ ] The property was sold at auction.
> **Explanation:** Procuring cause issues most frequently arise when multiple brokers claim they had a significant role in the transaction process leading to a dispute over entitlement to commission.
### In the context of procuring cause, what does uninterrupted and timely cause refer to?
- [ ] The property's market value.
- [ ] The duration of property ownership.
- [x] A consistent chain of events initiated by the broker leading to the transaction.
- [ ] The complexity of the buyer's financial status.
> **Explanation:** Uninterrupted and timely cause refers to a consistent and direct chain of events initiated by the broker that ultimately led to the transaction without unnecessary delays or interference from other brokers.
### What's an example of an action that might establish a broker as the procuring cause of a sale?
- [ ] Refusing to show a property to the client.
- [ ] Ignoring follow-ups with the client.
- [x] Successfully negotiating the sale price between buyer and seller.
- [ ] Delaying responses to client's inquiries.
> **Explanation:** Successfully negotiating the sale price and facilitating communication between the buyer and the seller are actions that can establish a broker as the procuring cause of the sale.
### Why is procuring cause especially significant in real estate transactions?
- [ ] It determines property taxes.
- [ ] It establishes legal ownership.
- [x] It confirms which broker has earned the commission.
- [ ] It affects property zoning laws.
> **Explanation:** Procuring cause is significant because it confirms which broker has earned the commission based on their direct involvement in securing the transaction.
### Does the type of property sale or lease affect the identification of procuring cause?
- [ ] No, procuring cause only applies to sales.
- [ ] Yes, it applies differently to foreclosures.
- [x] No, it applies to both sales and leases.
- [ ] Yes, it only affects residential properties.
> **Explanation:** The concept of procuring cause applies to both sales and leases, determining the rightful broker to receive the commission in either type of transaction.
### What factor might NOT be considered when determining procuring cause?
- [ ] Broker's initial contact with the client.
- [ ] Broker's role in subsequent negotiations.
- [ ] Whether the broker closed the deal.
- [x] The broker's physical office location.
> **Explanation:** The physical location of the broker's office is irrelevant when determining procuring cause. Instead, factors such as initial client contact, role in negotiations, and contribution to closing the deal are considered.
Thank you for considering the critical elements of procuring cause with us. Keep aspiring for more in-depth understanding in the world of real estate!
