Open Mandate
In the case of an open mandate, the seller has more than one Property Practitioner or agency working on finding a buyer for the property. Although open mandates allow the seller to work with other agencies and their Property Practitioners, it can cause complications, and there is always the possibility of a double commission claim. While it may seem to be the best option for the seller by opening their home up to greater exposure in the market, it also increases the scope for confusion as to which Property Practitioner was the effective cause of the sale.
For example, one Property Practitioner may have signed the offer to purchase with the buyer, but it might have been another Property Practitioner’s advertising and marketing that brought the buyer to the property in the first place. If the second Property Practitioner 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 to them by the seller. Such a matter could end up in court and cost the seller legal fees, as well as requiring them 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 of miscommunication between the seller and the Property Practitioner. 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 a Property Practitioner will spend on marketing the property, which will reduce the home’s exposure to the market. A written mandate, however, ensures that a Property Practitioner gives their maximum effort towards achieving their goal to sell the property.
Advantages:
– No contractual commitment.
– Available to all Property Practitioners.
– May sell privately and avoid paying commission.
Disadvantages:
– Property Practitioners are reluctant to work on the property as there is no guarantee of return for their effort (i.e., the business has the highest risk of no return for time/money investment, hence they cannot afford to invest as much).
– After the initial 6-week period, Property Practitioners tend to forget about the property, resulting in limited exposure.
– All unscrupulous Property Practitioners may work your property.
– You open yourself up to the liability of ‘double commission’ as the 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.
Multi-listing Mandate
Advantages:
– Maximum exposure to the market channelled through one agency.
– Property Practitioners work together to the benefit of the seller.
– An open hour exposes the property to the rest of the Property Practitioners 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.
– Property Practitioners usually have an existing buyer base.
Disadvantages:
– The same buyer viewing the property through two different Property Practitioners may result in cancellations.
– Potential double commission claims.
– Disputes between agencies and Property Practitioners.
– Price cutting to secure the quickest deal.
– Unqualified and inexperienced Property Practitioners may have access to the property.
– Property Practitioners frequently have their buyers’ interests at heart and not the sellers’.
– Lesser commission earnings leave Property Practitioners less motivated to find the best deal for the seller.