The relationship with your estate agent may start off well, but not continue that way. Are you stuck in the relationship if you have signed a sole mandate? Picture: Austin Distel/Unsplash
When the time comes to sell your home one of the choices you will need to make is to do it via a sole or open mandate.
A sole mandate gives a single agent the exclusive right to market and sell your home, while an open mandate allows any qualified agent to find you a willing buyer - a case of "may the best salesperson win".
Estate agents say the way to sell quickly and at the best possible price is to grant only one agency the right to put your property on the market.
An open mandate, says Tony Clarke, managing director of the Rawson Property Group, may sound like the way to go as you may have access to a wider pool of buyers, however the opposite is more commonly true.
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In the property market, Clarke says competition between agents tends to incentivise a quick sale over a good price.
This is because no one wants to waste time on negotiations when they could be beaten to the finish line by another agent.
It becomes safer for an agent on an open mandate to push through a lower offer - and be guaranteed that commission - than to hold out for a higher offer and risk losing out completely.
“For similar reasons, agents on open mandates typically invest less time and money in great marketing since they have no guarantee they will recoup that investment if the sale goes to someone else.
“That means open mandate homes are often under-represented, despite their many agents, with poor quality photos and careless or unattractive listings.”
Samuel Seeff, chairperson of the Seeff Property Group, says “there is no doubt sole mandates consistently deliver the best results for sellers".
“There might be the odd example where an open mandate has brought about a sale, but time and again our own sales records and the market as a whole has shown a sole mandate delivers the best results.”
But what happens if you have chosen to give an estate agent a sole mandate but the relationship sours and you want out?
We turned to the legal minds to get the answer here. Managing director of Madeleyn Inc Attorneys, Henry George Madeleyn says generally Section 14 of the Consumer Protection Act stipulates that a mandate must be for a specific fixed term and may not run for longer than 24 months. This is a protective clause.
Madeleyn adds that it is legally the responsibility of the estate agent to notify the seller before the contract comes to an end, so the seller then can decide whether to renew it or cancel it.
This notification may not be sent earlier than 80 days before the expiration of the mandate and no later than 40 days before the expiration.
If the seller chooses not to renew the mandate for a fixed term and neglects to cancel it, the mandate will continue to exist on a month-to-month basis until its cancellation.
However, says Madeleyn, a mandate can be cancelled during its fixed term.
But with early cancellation can come some penalties that are payable. “The law states that cancellation penalties need to be fair and cover costs incurred by the estate agent to that point”.
This penalty is there to cover only the costs already accrued by the estate agent, including telephone and travel expenses, as well as marketing costs.
There should be a clause included in the sole mandate that clearly details the cancellation process, and should preferably detail any applicable cancellation penalties, adds Madeleyn.
Worth noting is that the seller as the consumer has five days after signing the agreement to cancel the mandate with no penalties paid.
When the five days are up the seller will need to give 20 days’ notification of the cancellation via writing (this can include an SMS).
Note, a sole mandate can also be structured in such a way that if the agent does not deliver on the expectation, the mandate can be cancelled.
Despite penalties, a sole mandate is often preferred.
Clarke says an open mandate may work against the sellers who will also have to keep track of multiple agents, make their home available for multiple viewings, get out of the way for multiple show houses, and make room for multiple For Sale signs.
“It can become a logistical nightmare and destroys any impression of exclusivity buyers might have had. It also makes it difficult to get accurate feedback on how your property is doing, what buyers are saying, and what market conditions really are.”
Even more importantly, open mandates can cause disputes about which agent is truly responsible for the sale.
“If a buyer visits a show house with one agent but negotiates and makes an offer via a different agent, you could be faced with two parties who contributed to the sale,” Clarke says.
“Unless your contracts are extremely clear and you know exactly who did what and when, that could put you in a position of having to pay double commission - something you’d never have with a sole mandate.
“With a sole mandate, your agent can afford to give your property their full attention because they’re guaranteed the commission from the sale. That means they’re not going to shy away from spending more time and money on marketing or putting more effort into negotiations. The higher the price they achieve, the better they are rewarded for their efforts.”
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