F3. Open Mandate

  1. Open mandate

In the case of an open mandate, the seller has more than one agent or agency working on finding a buyer for the property. Although open mandates allow the seller to work with other agencies and their agents it can cause complications and there is always the possibility of a double commission claim. While it may seem to be the best option to the seller in opening his home up to greater exposure in the market, it also increases the scope for confusion as to which agent was the effective cause of the sale.

For example, one agent may have signed the offer to purchase with the buyer but it might have been another agent’s advertising and marketing that brought the buyer to the property in the first place. If the second agent can prove that their marketing was the effective cause, both agencies could then claim commission as both parties fulfilled their obligations in terms of the mandate given them by the seller. Such a matter could end up in court and cost the seller legal costs as well as having to pay both agencies if the court finds that both parties fulfilled their mandates.

Because an open mandate does not have to be a written agreement there is always a chance that there will be miscommunication between the seller and the agent. Having a clear, written contract in place, such as a sole mandate, will protect the seller and minimise the chance of any misunderstandings.

An open mandate could also restrict the amount of time and money an estate agent will spend on marketing the property, which will reduce the home’s exposure to the market. A written mandate, however, ensures that an agent gives their maximum effort towards achieving their goal to sell the property.

Advantages:

  • No contractual commitment.
  • Available to all agents.
  • May sell privately and avoid paying commission.

Disadvantages:

  • Agents are reluctant to work the property as no guarantee of return for the effort. (ie the business has the highest risk of no return for time/money investment – hence the business cannot afford to invest as much)
  • After the initial 6-week period, agents tend to forget about the property resulting in limited exposure
  • All unscrupulous agents may work your property.
  • You open yourself up to liability of ‘double commission” as an effective cause of sale can be argued.
  • Too many “For Sale” boards, give the perception of either being overpriced or that there is something wrong with the property. The consequences are numerous and unpleasant.
  1. Multi-listing mandate

Advantages:

  • Maximum exposure to the market channelled through one agency.
  • Agents work together to the benefit of the Seller.
  • Open hour exposes the property to the rest of the agents in one simple step.
  • An open hour gives the Seller multiple valuations to establish an unbiased fair market value of the property.
  • Possible reduction of market time.
  • Agents usually have an existing buyer base.

Disadvantages:

  • The same buyer viewing the property through two different agents results in cancellations.
  • The double commission claims.
  • Disputes between agencies and agents.
  • Price cutting to get the quickest deal.
  • Unqualified and inexperienced agents have access to the property.
  • Agents frequently have their buyer’s interests at heart and not the sellers.
  • Lesser commission earning leaves agents less motivated to find the best deal for the seller.

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