As a seller, you\u2019ll need to make several smart choices to get the best price for your home. One of those will be choosing between a sole or an open mandate.<\/p>\n
The differences between the two types of mandates may seem quite obvious: 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 \u2013 may the best salesperson win.<\/p>\n
Under normal circumstances, you\u2019d be forgiven for thinking that open mandates sound like the better deal. More competition and more exposure mean better service and a wider pool of buyers, right? Unfortunately, in the case of property sales, the opposite is more commonly true.<\/p>\n
\u201cThe thing about competition is that it creates its own incentives,\u201d said Tony Clarke, MD of the Rawson Property Group, \u201cand those incentives don\u2019t always align with your own.\u201d<\/p>\n
On the property market, Clarke said that competition between agents tends to incentivise a quick sale over a good price. No-one wants to waste time on negotiations when they could be beaten to the finish line by another agent at any moment.<\/p>\n
Because of this, it becomes far safer for an agent on an open mandate to push through a lower offer \u2013 and be guaranteed that commission \u2013 than to hold out for a higher offer and risk losing out altogether.<\/p>\n
\u201cFor similar reasons, agents on open mandates typically invest less time and money on great marketing,\u201d said Clarke, \u201csince they have no guarantee that they\u2019ll be able to recoup that investment if the sale goes to someone else. That means open mandate homes are often underrepresented, despite their many agents, with poor quality photographs and careless \u2013 or just plain unenticing \u2013 listings.\u201d<\/p>\n
Agents with the wrong incentives aren\u2019t the only problem with open mandates, however. Sellers 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 \u201cFor Sale\u201d signs on their walls.<\/p>\n
\u201cIt can become a bit of a logistical nightmare,\u201d said Clarke, \u201cand certainly destroys any impression of exclusivity buyers might have had. It also makes it difficult to get accurate feedback on how your property is faring, what buyers are saying, and what market conditions really are.\u201d<\/p>\n
Even more importantly, open mandates can cause disputes as to which agent is truly responsible for the sale.<\/p>\n
\u201cIf 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 both contributed to the sale,\u201d said Clarke. \u201cUnless 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 \u2013 something you\u2019d never have with a sole mandate.\u201d<\/p>\n
In fact, almost all the downsides of an open mandate are solved by simply choosing a single agent to represent you.<\/p>\n
\u201cWith a sole mandate, your agent can afford to give your property their full attention, because they\u2019re guaranteed the commission from the sale,\u201d said Clarke.<\/p>\n
\u201cThat means they\u2019re 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 \u2013 an incentive that aligns their goals far better with those of the average seller.\u201d<\/p>\n