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The Question of Mandates

Why To Consider a Sole Mandate

Owners often choose an Open Mandate when marketing their homes, believing that the more agents they have working on their property, the sooner they will achieve a good price for their house. In reality, the opposite is often true.

Sole Mandate (SM); Open Mandate (OP)

[SM] A personalised marketing and advertising plan will be developed to suit your needs. Activity will be monitored and controlled.
[OM] You run the risk that none of the agents will put time and effort into actively marketing or Advertising your property, because they all expect that someone else is doing it.

[SM] A single agent interacts with you to understand your requirements.                                                              
[OM]Oopen mandate properties tend to be merely ddded to a list.

[SM] A sole agent allows buyers to compete on the property, thereby maximizing realized selling price.           
[OM] On open mandates, agents compete, thereby compromising price.

[SM] Continuous feedback from your agent allows for  careful price management, thereby maximizing the realized selling price.
[OM] Mismanagement of price can result in a lower price being realized

[SM] A sole agent is accountable to you for results. Real estate managers monitor and track the service provided by their agents on their sole mandates.                .
[OM] Agents are less accountable on open mandates. Managers don't monitor agents' performance on open mandates

[SM] Your sole agent will negotiate with potential  buyers to get the highest possible price for  your property.                                                                        .
[OM] With an open mandate, buyers will seek out the agent who will offer them the property at the lowest price

[SM] Less likelihood of commission disputes.                    
[OM] With more than one agency handling your property, commission disputes often arise.

[SM] You have the peace of mind of knowing that only one responsible party has access to your property.             .
[OM] Multiple agents frequently mean multiple keys - and the possibility of compromised security

The Listing System and Mandates

Listing System - there is a listing agreement or mandate signed and this is an agreement between the seller and the agent and it stipulates how they will work and what compensation will be received by way of brokerage and what the property will sell for. There are different types of mandates or listing agreements and I will briefly discuss these below:

  • Exclusive Mandate – An Exclusive Mandate is a legally binding agreement between the seller and his chosen agent. Nobody, including the seller, except the agent holding the sole and exclusive mandate, is allowed to market the property for the duration of the mandate, which expires on a specified date. This means that if anyone other than the mandated agent sells this property, then, the seller would still have to pay commission to the mandated agent. The agent to whom the exclusive mandate was given, also remains entitled to the commission if he introduced a buyer to the property during the mandated period and this buyer only purchases the property after the expiry of the mandate. This would only apply for a specified time, which is normally 3 months depending on the wording of the mandate. The advantage of an Exclusive mandate is that the agent will spend maximum time working the mandate and exposing the mandate because the agent will be sure of income if the mandate is correctly worked. The agent will confidently spend money on advertising if they are assured of income return from the sale.
  • Sole Mandate – A Sole Mandate is a legally binding document. A Sole Mandate means that the seller cannot confer a similar mandate on another agent before the date of expiry of the Sole Mandate. The agent holding the sole mandate has the sole rights to market the property until a specified date. If another agency sells during this period, the agency holding the mandate can claim damages from the seller, which may be equal to the commission that they would have earned if they had sold the property. In the case of a Sole Mandate, the Seller is allowed market and sell his own property without any implication, as long as the mandate does not read that the agency holding the mandate has sole and exclusive rights to sell. The agent will work this mandate as for an exclusive mandate above.
  • Joint Mandate – A Joint Mandate is legally binding and is essentially the same as a Sole Mandate, except that the seller has conferred a sole mandate on two agencies instead of a single agency. Both agencies have equal rights to marketing the property. The agency that actually concludes the sale will get the commission for selling the property. If another agency was to sell the property, both agencies would have a claim against the seller for damages. The potential income from a Joint Mandate is literally a 50% chance. Although the agent is likely to work this mandate, and do some advertising, I think you would definitely work harder of Sole and Exclusive mandates. The seller is open to disputes with a Joint Mandate, but not as badly as if he has a whole lot of agencies involved with his marketing.
  • Open Mandate – An Open Mandate his means that the seller has conferred a mandate on a number of agencies. All the agencies mandated have the right to market and sell the property. The agent that concludes the sale will be entitled to the commission. However, this can lead to double commission disputes as it is possible that the agent selling is not the only agent who introduced that buyer to the property. This would lead to the Seller being liable to pay a double commission. The agents also don’t work particularly hard on these madates and nobody is responsible because the agent knows that the other agencies may sell the property and they will have wasted their time, effort and money on marketing.
  • Multi Listing System – The Multi Listing System is an Open Listing. It means that there is a sharing of comprehensive home information among real estate agents. Listing brokers enter the information about a home for sale and offer to share the commission with a real estate agent who brings a buyer. No one agent can claim to have the sole rights to marketing this property. Therefore, the agent selling does not need to hold a mandate as they are sharing the mandate with another company on a commission split basis. This means that nobody is really taking responsibility for this property and the marketing thereof either. This method can also lead to disputes which will place the seller at a disadvantage.

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