What is a sole mandate and how will this help me if I choose to buy or sell property in South Africa?
The most effective way to get the property sold is to choose one local estate agent who is wholly responsible and accountable to the client.
What is a Sole Mandate?
A sole mandate is a written agreement between a property’s seller and an estate agent that was chosen to market the property of the seller exclusively under certain specified terms and conditions agreed upon in the agreement.
In this case, only one estate agent, a sole agent, is given a sole mandate. No one except the seller and the agent may market and sell the property. This is a legally binding agreement and the seller must accept and agree to all the terms and conditions set out in the agreement. Not only that but, the sellers must sign the sole mandate. The agreement must have the expiry date of the sole mandate.
The estate agent must provide the seller with a copy of the sole mandate, explaining the meaning and consequences of the sole mandate should the seller choose to sell the property without the help of the estate agent and clarify the legal consequences that would arise.
As the seller, one must be careful to word the contract carefully; if you as the seller sell the house in your own private capacity, note in the contract whether you will still be giving the agent a commission. Having plenty of real estate agents working on the same property as a seller doesn’t mean the property will have more buyers.
Purpose of Sole Mandate Agreement
Sole mandates avoid duplication of buyers and thus eliminate the threat of potential double commission claims (payment for the same sale by two estate agents).
A sole mandated agent may also informally share the listing with other trustworthy real estate agents for a cut of the fee, the seller will not have to communicate with these other agents and further prevents double commission claims, thereby saving him/her money.
An estate agent will provide the customer with regular access to up-to-date and reliable information to help them make the best decisions to ensure that their property is appropriately priced on the basis of local real estate information gathered on market activity and patterns (comparative marketing analysis).
This is particularly important in tough markets and economic conditions since incorrect property pricing can result in both delayed and lower selling prices as there is typically a limited number of property buyers in the market at any given time and a number of agents are operating out of this pool buyers.
By signing a sole mandate contract, the seller ensures that their property receives the full attention it deserves, from buyers’ pre-qualification (buyer vetting) to secure and accountable house showings, as well as a professionally managed post-sale transfer process.
Advantages of a Sole Mandate
A sole mandate allows the appointed agent to create competition amongst potential buyers and gives them the time to negotiate the best possible price for you.
The agent has a whole team to back him/her and has access to a full buyer list, which means that a quick sale at the best price is more likely.
The property is not “hawking” or “bazaaring” for sale because a sales price limit would set for the prospective buyer which means they will not be bidding down the purchase price.
A single-mandate ensures both privacy and security for the seller. Even there will be only one “For Sale” board, meaning minimum hassle for the prospective buyers to contact the agent.
Disadvantages of a Sole Mandate
A sole mandate can, unfortunately, mean that it can take the house longer to sell. Make sure that the agent has an excellent track record in your area, has a great online presence and reputation and is respected in the real estate community.
In a nutshell, the benefits of having a sole mandate include making more money, receiving more effort, energy and time from the sole agent as they focus their efforts on property marketing as they have a greater responsibility to the requirements of the seller.
This provides another opportunity for the agent to seek higher bids as their commission increases accordingly. Regardless, the agent will make a commission whether the house sells or not.