What you need to know about Exclusive Sole Mandates
Category Newsletter: Lead Article
Every agent wants to sign an Exclusive Sole Mandate (ESM), but often sellers opt to sign an open mandate with many agents. This is because sellers often believe that by having many agents on board, their property will sell quickly. But this is not always the case. In fact, it often works out a lot better to sign an Exclusive Sole Mandate.
Before we go any further, it's important to understand what an Exclusive Sole Mandate is. It is when the seller gives one agency and agent the sole and exclusive right to market and sell their property. And, according to Michelle Cohen, Principal at Leapfrog Johannesburg North East, this is the very best route for the sellers to opt for.
"For any mandate- open or exclusive, the agreement needs to be in writing and should stipulate a number of key things," notes Cohen. "This includes the listed asking price of the property, the time frame that the mandate is for(start and end date) and the agreed-upon commission structure. It also includes any other terms and conditions that will apply with regards to the sale of the property. A Disclosure Document confirming the condition of the property forms part of the mandate document. This is a legal requirement. The agent then has confidence that they have all of the details about the property that they are introducing to the market "
An Exclusive Sole Mandate might cause the seller to feel restrictive and as though they are missing out on other potential marketing avenues for their property. Logistically and financially, however, it makes more sense than an open mandate which can led to confusion in the market place as Cohen explains below.
"Working with one agent and agency allows sellers to build a trusting relationship. This is a relationship that sellers can rely on when they need advice and insight while their property is on the market," explains Cohen. "It also simplifies the viewing process. You will only need to allow one agent access to your home when viewings need to take place. This ensures that from a security perspective your agent knows who is coming to view as they are the only ones making the appointments. When working with many agents you often find that the agents bring the quickest offer as opposed to the best offer- they feel under pressure to close the sale before the other agents working on the property bring their buyers and spend less time negotiating on the sellers behalf. When working on an open mandate there is also the very real threat of more than one agent claiming commission from the seller once the seller accepts an offer, on an ESM only one agent is working with your property so that threat doesn't exist."
"An ESM will also avoid disagreements about the listed price of a property," says Cohen. "Sellers will have little control over how much their property sells for if all agents are listing at different price points. The buyers will always call the agent who is marketing the property at the lowest price, this works against the seller!"
With an ESM agreement, you are more likely to get a higher selling price for your property than on an open mandate. You also agree to a fixed commission rate upfront, therefore as the seller you can budget accordingly and as the agent there is a level of comfort that there is a commitment from the seller, and therefore more money and time is spent on the marketing process. The agent puts all of their efforts into getting your property sold for as close to the asking price as possible.
Additionally, an ESM minimises paperwork. Let's imagine that, for example, you had three different agents working to sell your property. There would be triple the amount of paperwork that you, the seller, would need to fill out and supply. It's tedious and time-consuming.
Cohen continues: "As an agent, it's also just good to know that you are the only one working to sell a property. The agent gives it their all with the seller's best interest at heart as the thing that drives them. When working on an open listing and competing with other agents, it becomes a competition to sell, which means that the agent doesn't always have the time to negotiate nor to pre-qualify the buyer. This makes the sale exceptionally difficult and stressful for all parties involved. The focus changes from getting the best offer to getting the quickest offer"
The task of choosing only one agent and agency can be daunting. Cohen recommends that you do the following:
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Ensure that the agent that you interview has a valid Fidelity Fund Certificate and is registered with the Property Practitioners Board, ask for a copy of this registration certificate for both agent and company.
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Find an area-established agent and agency with good client reviews and testimonials.
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Use an agency that has experience in your particular neighbourhood, and written and verbal referrals to back this up.
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Look into whether the agency provides regular training and that the agent understands current market conditions.
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Take a look at all the company's online channels - website and social media.
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Chat about what the marketing process offered will entail.
"As agents, we know that sellers want to make quick work of a sale, which is why they often go for an open mandate. But an ESM is definitely by far the easier and best route to take. Having one agent solely focused on you can make the process seamless and hassle-free for both the seller and the agent, and it can get you far closer to realising your asking price" concludes Cohen.
Author: Leapfrog Property Group
