Selling a home can be a daunting task, especially in today's competitive real estate market. As a seller, you want to get the best possible price for your property while also ensuring a quick sale. However, many sellers in South Africa fall into the trap of using an open mandate, leading to less money in their pockets and a longer time on the market.
In this blog post, we will explain what an open mandate is, the legal implications, and why it's not the best option for committed home sellers.
What is an Open Mandate?
An open mandate is a legal agreement between a seller and multiple real estate agents, allowing each agent to market the property and potentially find a buyer. This type of mandate is non-exclusive, meaning that the seller can also market the property independently or through other agents. Open mandates are often used when sellers want to maximize their chances of finding a buyer quickly by having multiple agents market their property.
The Downsides of Open Mandates
While open mandates may seem like a good idea in theory, they have several downsides that committed sellers need to consider.
Less Money in Your Pocket
When multiple agents are marketing your property, you may end up with a double commission claim if one of your chosen agents introduces the buyer and another agent closes the deal.
Buyers aren't always aware of how critical it is to work with a particular agent on a particular home. A buyer who wants to buy a home only wants to get the job done. Therefore, it is your responsibility to keep tabs on which agents worked on your property and which buyers they introduced in order to prevent a double commission claim.
Longer Time on the Market
Having multiple agents marketing your property often leads to confusion and conflicting information being presented to potential buyers. Many times buyers simply pass over the house where multiple agents have listed the property as they do not want to get involved in a power struggle with other buyers and agents.
When your home is listed with several agencies, it becomes almost impossible to establish trust with buyers, which can also result in a longer time on the market. Buyers who do not feel they can trust the seller or the agent, will often simply walk away and lose interest in the property.
Legal Implications
Open mandates can also have legal implications for sellers. While there are no legal restrictions on having multiple agents marketing your property, it's important to understand that each agent acts independently. This means that there may be conflicts of interest or legal issues that arise if multiple agents present offers from different buyers. Additionally, if you decide to withdraw your property from the market, you may be liable for commission fees to all agents who invested in your property in terms of marketing your property.
Case Study: Commissions Paid to Multiple Agents
In a recent case before the High Court of South Africa (Western Cape Division), the property seller had signed an open mandate with multiple real estate agents. The property was eventually sold through one of the agents, but the other agents also claimed commissions for their marketing efforts.
The case turned on interpreting the open mandate agreement and whether the agents were entitled to commissions for their marketing efforts.
The court found that the open mandate agreement did not explicitly state whether the agents were entitled to commissions for their marketing efforts. However, the court noted that the agents had acted as agents for the seller and were therefore entitled to claim commissions under the common law of agency. The court also held that the seller had not clarified to the agents that they would not be entitled to commissions for their marketing efforts.
The result of the case was that the seller was ordered to pay commissions to ALL the agents who had marketed the property, even though the property was sold through only one agent. This meant that the seller had to pay significantly more in commission fees than if they had worked with a single agent on a sole mandate.
Exclusivity Works Better in a Buyers' Market
In a buyers' market, where more properties are available than buyers, exclusivity is key. By working with a single agent on a sole mandate, you can establish a more personalized marketing strategy that is tailored to your specific property. This attracts mostly serious buyers who are interested in your property and also helps to establish trust and confidence in the buying process.
Working with a single agent makes it easier to control the narrative and the flow of information to buyers. This is critical.
Working with Alta Nel on Sole Mandate
Alta Nel from EXP Realty South Africa is a highly experienced real estate professional specializing in residential property and farms in the Pretoria/Centurion/Lanseria areas.
By working with her on a sole mandate, you can benefit from her extensive knowledge of the local market and her personalized marketing strategy. She works with her clientele and develops a plan that is tailored to their specific needs. Such plans attract serious buyers who are really interested in your property. By choosing exclusivity over an open mandate, you can ensure that you get the best possible price for your property and enjoy a stress-free sales process.
In conclusion, open mandates may seem like a good idea in theory, but they often result in less money in your pocket and a longer time on the market. Also, open mandates demonstrate the potential risks of double commission claims.
Working with a single agent on a sole mandate can help to avoid these risks. By signing a sole mandate, the seller can work exclusively with one agent who will be responsible for marketing the property and negotiating the sale. This can lead to a more personalized marketing strategy and a quicker sale at a better price.
For the best results, consider working with Alta Nel from EXP Realty South Africa, an area specialist in Pretoria. Centurion and Lanseria areas.
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