Could signing a sole mandate reduce your chances of finding a buyer in the shortest possible time at the best price?
According to RE/MAX of Southern Africa CEO, Adrian Goslett, while many sellers tend to shy away from sole mandates because they don’t want to put all their eggs into one basket, signing a sole mandate could actually be far more beneficial to them then they think.
“Essentially a mandate is an exclusive contract between the seller and a real estate agent, allowing that agent to market a specific property and find the right buyer for the home at the highest price in the shortest period of time. It is also an agreement that gives the agent the right to deal with all of the legalities that are involved in the property sales transaction,” explains Goslett.
He notes that when it comes to mandates, sellers have the option of either signing an open mandate or a sole mandate. Goslett says that in the case of an open mandate, the seller has more than one agent – more than likely from different agencies – working on finding a buyer for the property. “Although an open mandate allows the seller to work with several agents and does not restrict them to only using one agency, it can bring about complications and there is always the chance of a possible double commission claim. While it may seem as though an open mandate is broadening the home’s exposure in the market, it is also widens the scope for confusion as to which agent was the effective cause of the sale,” notes Goslett. “Although one agent may have signed the offer to purchase with the buyer, it may have been another agent’s advertising and marketing that brought the buyer to the property in the first place.”
He also notes that with an open mandate not having to be a written agreement, there is always the chance that some elements be unclear and not interpreted correctly. “Having a clear, written contract in place will protect the seller and minimise the chance of any misunderstandings. A written contract will also ensure that the agent puts in maximum effort into obtaining the goals that have been set. An open mandate could restrict the amount of time and money an estate agent will spend on marketing the property, which will reduce the home’s exposure,” says Goslett.
Unlike an open mandate, a sole mandate is a legally binding document which must be in writing. This mandate option gives a specific agent the exclusive right to market and sell the property during a specified time frame. “During this time period, the seller may not appoint another agent to market the property. If the seller is not satisfied with the selected agent they can appoint another agent once the sole mandate period has elapsed. The owner is still entitled to sell the property themselves, provided this has been confirmed in writing with the estate agency that has been awarded the sold mandate. There may still be a fee payable to the agent in the case where the homeowner does sell the property themselves,” says Goslett.
Sellers do have the option of giving the agent an exclusive sole mandate, which is essentially the same as a sole mandate but is slightly more restrictive in that it precludes the homeowner from being able to sell the property. One of the optional terms of an exclusive sole mandate is that the seller may authorise the agent to accept or reject an offer on their behalf.
“The entire concept of a sole mandate is to create efficiency and maximise the benefits to all those involved in the property transaction. It is for this reason that the majority of financial institutions and estate agencies will recommend that the seller has one in place. Several benefits are created by a sole mandate, which will ensure more effective marketing of the property and an orderly conclusion of the sale. A sole agent would be aware of any disclosures, which can be very difficult in the case of an open mandate,” says Goslett.
He adds that logistically a sole mandate makes more sense in that the seller only has to liaise and deal with one agent and not several. This will simplify the process and far less time will be spent coordinating the seller’s schedule with the various agents. It is also better from a safety perspective to only have one agent that has access to the property.
According to Goslett, before a seller signs any mandate they must know that they are working with the right agent for their needs. The seller should ensure that they choose a qualified agent with a valid Fidelity Fund Certificate (FFC).The agent must provide the seller with a marketing plan for their property. He notes that if at any stage during the process the agent is not following the marketing plan they have provided, the seller will have the right to cancel the mandate. Goslett says that it is vital that the agent works according to what is within the seller’s best interest at all times, giving sound professional advice and assisting the seller to make the right decisions, especially when multiple offers have been presented.
“Although sellers may be inclined to think that signing a sole mandate is putting all of their eggs into one basket, it is actually about allowing a reputable, experienced estate agent the opportunity to make the process of selling a home simpler. It will ensure that an entire team within a real estate network is cooperating to sell the property within a reasonable time frame at the best possible price,” Goslett concludes.
This article “Sole Mandates: Is it the Right Choice?” was issued by RE/MAX Southern Africa.