In the parlance of real estate, Causa Procurator, as defined by the National Association of Realtors, is “the uninterrupted series of causal events leading to a successful transaction.” In plain language, it is the means of determining who is legitimately deserving of 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 either the buyer or the seller, or both. For example:
Comedian Jerry Seinfeld recently bought a $3.95 million row house in Manhattan. His real estate agent was not available to show him the house a second time due to his religious observance. Seinfeld then went into the transaction alone thinking of saving himself the $100,000 commission. He was later successfully sued because the agent had shown cause for purchase by first showing him the property and because Seinfeld had signed an exclusive buyer’s representation agreement. Not understanding the dynamics of Procureing Cause had cost Seinfeld a hundred thousand dollars.
The case of Seinfeld was relatively clear. The agent had shown him the property and had the exclusive right to sell the Seinfeld contract. However, commission claims can be based on much weaker grounds. In fact, any verifiable contact with an agent can theoretically provide grounds for pursuing a case. That’s why agents seem so eager to get a prospect to sign in, whether online or in person. If that agent provides information about a property that the prospective client ultimately purchases, the agent might view his or her 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 on the part of the buyer of exactly what they are agreeing to.
All of this sounds like real estate agents are out to trick buyers and sellers into paying large sums of money they didn’t work to earn. This is rarely true. Cause of Acquisition is a definition in the Real Estate Agent Code of Ethics designed to protect agents from having their commissions stolen. It works like this:
An agent establishes an open and honest working relationship with a prospective buyer, showing them properties, often for months or even years, working with them on their financing, negotiating the sale, and then being cut out of the deal by the buyer (as Seinfeld attempted to do). ) or seller or other agent who arrives at the last minute to draw up the contract. In the latter case, this often happens not because buyers aren’t happy with their agent, but because they have a friend or relative who has a real estate license, often part-time or inactive*, that 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 association of realtors steps in to see that justice is served. Both sides of the issue are brought before a grievance board and the true cause of the takeover 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 newcomer agent who drafted 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 agreement in writing.
Now this is where it gets tricky and can cost both the buyer and seller a lot of money. An agent who backed out of a deal because he was uninformed or misinformed of the true situation may file suit in civil court. Certainly no one needs this kind of hassle and expense, especially during a move, which often stretches resources.
Here are some ways to avoid entanglement with the cause of acquisition:
- Do not sign anything except the 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 signed you up.
- Please do not provide contact information, as this may invite further marketing efforts. Please note that even casual contact with an agent providing information on a property may be grounds for claiming a commission. If you are asked to register for an open house, give your name and nothing else.
- Decide on an agent to work with and work exclusively with that agent, whether or not you have a contractual agreement. If you decide to change agents for any reason, formally terminate 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 sending information and remove your name from their contact list.
That’s it. The vast majority of real estate agents and brokers are scrupulously honest. They deserve to be compensated for their efforts just like any professional. But this only happens when they make a transaction and receive a commission. This is your livelihood. A few moments of prior communication about your intentions as a buyer or seller often prevent misunderstandings later. Tell them what you want. Ask them to explain their obligations. Know who is working for whom. And know how transaction agents will be compensated.
Contracts and other legally binding documents are often misunderstood. This is why an attorney versed in real estate matters is essential to your well-being. And while they are usually brought in to review the contract, prepare documents, and oversee closing, they should also be brought in before exclusive purchase contracts or listing agreements are signed. The cost of this can usually be included in the fee for your closing services. The price for not doing so can be staggering.
In general, there is nothing to fear and much to gain when working with a real estate professional. The Code of Ethics for Real Estate Agents, Article 1, details it:
“In representing a buyer, seller, landlord, tenant, or other client as an agent, real estate agents undertake to protect and promote their client’s interests. This obligation to the client is paramount, but it does not relieve real estate agents of their 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 see the full Code of Ethics for Realtors
Agents found guilty of code violations have their real estate agent status suspended or revoked.
Home ownership is not only the American dream, but also the source of wealth for most Americans. An open and 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 chances are, this agent doesn’t make a good living selling real estate: 10% of licensed agents make 90% of sales. The rest fight over the leftovers. Do not get involved with one of them even if he is a relative. Always work with the best professionals, whether they are brokers or associate brokers. Statistically, you are more likely to end up in court over a real estate matter than any other matter. You don’t have to be one of them.