What is Open Mandate?
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Open Mandate with an Estate Agent
If you don’t like to be locked in to a fixed period
contract or you want many agents to market your house at the same time, you
could sign an open mandate with each estate agent. With this arrangement,
whichever estate agent brings the buyer gets the commission and the other
agents get nothing.
In fact, you do not
even need to sign an open mandate but it is recommended so that issues like the
commission percentage are agreed in advance of a sale and so that the estate
agent can list your property on the property portals.
As the seller, an open
mandate must seem an attractive option because you could have many estate
agents selling for you and thus you would expect to get greater marketing
exposure.
But there are problems
with going the open mandate route with many agents:
Usually agents are
passive and are not going to spend much time marketing your property because
they know that there is a possibility that all their efforts could go
unrewarded if another estate agent finds a buyer first. Consequently, agents
will spend less money on advertising your home. Agents may put a For Sale sign
outside your house and list your property on their company website (both of
which are essentially free to do), but may not do much more than this.
Since the estate
agents are competing against each other to get the sale first, an agent who
finds a potential buyer will be so keen for you to accept any offer that he or
she may put pressure on you to accept the price offered, even if it is lower
than what you would have wanted. So an open mandate can create a situation
where the estate agent ends up working more for the buyer, rather than for you,
the seller.
You will have to
co-ordinate home viewings with a number of different agents, which can be quite
a hassle since each estate agent will need a key, alarm access etc.
each agent will put up
a For Sale sign outside your home. This can create the impression that your
house is less exclusive or that there is something wrong with it and/or you are
desperate to sell. None of these impressions will help you secure a sale at the
right price.
once a sale happens
there is a risk that you might have to pay “double” commission to 2 estate
agents, each of whom may have a claim as to why they were the “effective cause”
of the sale.
Having an open mandate
with only one or two agents would mean you have the benefit of not being locked
in to a contract period without the disadvantages associated with having too
many agents.
2. Multi-listing Mandate with an Estate Agent
Some estate agencies
have a multi-listing (“mls”) arrangement with other agencies. What this means
is that after you sign the multi-listing mandate with the “listing agent”, your
property details are sent to the other member agencies in the multi-listing
group.
These other estate
agents can then also market your property and will approach you directly if
they think they have a potential buyer. If one of these other agents does find
a buyer, then the commission is shared (usually equally) between the listing
agent and the referring or “selling” agent who found the buyer.
The multi-listing
mandate may be called a “letter of authorization” and is technically a shared
sole and exclusive mandate (see explanation of sole mandate, below).
In principle, this
sounds like a good arrangement to get competition going amongst the estate
agents. However, in reality there are definite disadvantages:
In order to be part of
a multi-listing arrangement, the listing agent sometimes must agree to charge a
seller a certain (high) commission percentage which cannot be reduced. (As an
aside, this could be considered price-fixing and there are some who believe
that the Competition Commission may well view it as anti-competitive behavior
and take action against it.)
Just like with open
mandates, mls estate agents try to get the seller to accept an offer from a
buyer which they have sourced, which may not be the best offer.
It can be very
inconvenient dealing with independent requests for house viewings from estate
agents you may never have heard of. For each one you will have to arrange keys,
alarm codes etc.
If a multi-listing
mandate is signed, the listing agent very often does not spend too much money
marketing your property since there is a greater chance that the other estate
agents might find a buyer first, in which case the listing agent will only get
half of the commission. But, as with open mandates, the other agents also
aren’t going to exert themselves too much because of the risk that they aren’t
first to get a buyer. So what usually happens is that the other estate agents
don’t market the property actively either but may show a potential buyer the
available multi-listed properties if the buyer has no interest in the agents’
own listings.
Multi-listing mandates
might increase the potential exposure that your property gets but, equally,
there is far less accountability and much more passive marketing than would be
the case for a sole mandate or an open mandate with only one or two agents.
3. Sole Mandate with an Estate Agent
A single estate agent
is authorised to market your property and, when the property is sold, the agent
is paid regardless of who sourced the buyer (although it is usually the agent).
As the seller, you are required to sign a fixed period contract, usually for 3
months.
The estate agent who
has the mandate with you may often market your property informally with other
agents whom your agent trusts. If one of those estate agents refer a buyer to
your agent, then they will usually get a share of the commission. However, this
arrangement is not your concern and you only have to deal with the single
estate agent you appointed. Your agent retains control of the selling process
and you won’t get calls from other estate agents.
Strictly speaking,
unless the mandate specifically states otherwise, if the seller him- or herself
finds a buyer then no commission is payable to the agent. However, normally a
sole mandate will include wording (such as “sole selling rights”) to make it
“exclusive”, which means that even if the seller finds a buyer then the agent
will earn commission.
As the seller it may
seem unfair that if you find a buyer yourself then the estate agent will still
earn a commission. Plus, you are locked in to using the services of that agent
for the agreed time. So, as the seller, you do take a risk when you grant a
sole mandate and you must be certain you are selecting a great agent who will
give your property maximum exposure.
At Steeple we offer
fantastic marketing, a super-low commission … and no lock-in sole mandates!
