You may be wondering if there are tax deductions when selling a home. And the answer is: You bet!Sure, you may remember 2018's new tax code—aka the Tax Cuts and Jobs Act—changed some rules for
What Is Procuring Cause And How It Helps Determine Commission For Real Estate Agents
The procuring cause helps real estate agents and buyers figure out who will receive the commission on a house sale. It typically comes into play when a buyer purchases a house he saw with two different real estate agents. Maybe one agent found the house and the other agent helped you put together your offer—so who gets the fee for their service? It all hinges on which agent was the procuring cause—the agent who sparked the interest in the buyer that ultimately led him to buying the house.
Let's dive a bit deeper into the details of procuring cause so you can be clear if any tough questions about the commission arise during your home-buying process.
Buyer-broker agreements and procuring cause
To establish that they did work with their client, real estate agents will typically ask clients to sign a buyer-broker agreement. It will stipulate that they represent the buyer and whether or not they have an exclusive right to represent the buyer.
If it's an Exclusive Right to Represent Agreement, the buyer cannot hire more than one agent to represent him. The agreement might also be a Nonexclusive/Not for Compensation agreement, which says the buyer can hire more than one agent to find a home and the buyer doesn't have to pay the agent commission.
A buyer-broker agreement can cover a short amount of time (30 days) or extend several months. Once any exclusive agreement expires, you are free to work with another agent.
What is procuring cause, and how does it establish who gets commission?
The buyer-broker agreement is important because it can help establish the procuring cause for the buyer choosing to purchase a home. Procuring cause means that the agent who "performed the tasks that led you to buy would be the agent who ‘earned’ the commission,” says Jim Mellen, a Realtor® with Re/Max Peninsula in Williamsburg, VA.
In most cases, that would be the agent who first showed you the house. But if you have clearly cut ties with that agent and just happen to see the house again with another agent, procuring cause could also be construed to mean the one who actually writes up the offer and helps you negotiate.
Now you see how this situation can get tricky.
Real estate agents "can be sued if they help a client purchase a home knowing the client already looked at the home while under contract with another agent, and that original contract had not expired or been terminated before the time of the purchase,” notes Noelle Nielsen, real estate professional with Re/Max Advantage Plus in Eagan, MN. “However, the first agent would have to prove the second real estate agent knew the buyer was already under contract when they purchased the house, which can be very difficult.”
To determine who gets the commission, the agents in dispute may choose to arbitrate through the local real estate board. In that case, the buyer might be called in as a witness to explain his side of the story.
To avoid getting into a dispute like this, make sure you are upfront with your agent. Give the first agent a chance, but if you need to move on, be clear with the second agent about which properties you already looked at with the first agent.
For Mark Ross, founder of Ross NW Real Estate and professional real estate broker, real estate has always been the career of choice. During his 25+ years in the industry, Mark has gained experience in....
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