In real estate, especially in a tough economy, sellers may be more tempted than ever, to consider options that they normally would not have ever considered.
After all, most people would like to avoid aspects of selling a property, like:
- MULTIPLE COMMISSION CLAIMS – This is where more than one agency claims commission from the seller. Let’s say a seller puts their home on the market with agency A, B, C,… to Z. Agency A introduces a buyer to the property and when they put in the offer its with agency X. Agency X’s claim to commission arises from the contract and agency A’s claim from our common law. What started out as a good idea has just cost twice as much as it should have.
- COMMUNICATION CHALLENGES – Communication can be tricky between two people but as the number of people increases, so the possibility of miscommunication increases exponentially. Let’s imagine the case of a seller who starts selling and every agent through the door gets the listing. After a while, the seller no longer has any clue who is selling the property. While selling, an important latent defect is disclosed to some of the agents by the seller. Unfortunately not to all, and imagine one of those other agents sell the home. The seller is now legally exposed, as is the agent.
- LACK OF ACCOUNTABILITY – Accountability is tricky in a complex multi relationship situation. The case of multiple agents selling one property is no different. In the ensuing chaos, owners become confused and holding any one person accountable or responsible becomes increasingly difficult. In one case, an owner was selling a property and gave keys to four different agents, who were all showing the home. One evening the home was burgled, while the owners were away on holiday. It transpired that one of the agents had not rearmed the alarm and this meant that the insurance would not pay. The tricky point is no one knows who went through last.
- OVEREXPOSED – Exposure is ironically the very reason many owners go for multiple agents. Ironically, it’s exactly this fact that there are multiple agents that the chances of overexposure increase dramatically. Overexposure leads to loss of impact on buyers, the home fades into obscurity because buyers see it everywhere and become desensitized to it. When paired with overpricing this can be fatal to a sale in the average period of time and will in most cases result in the owner achieving a lower amount out than would they could have achieved with correct pricing through a single channel.
- LOSS OF EXCLUSIVITY – Exclusivity sells. One channel through which all buyers must pass. The only source through which a buyer can buy a property. It works because there is then one marketing strategy, consistent sales tactics, and most importantly all buyers know there is no way to get to the property but through that one gatekeeper.
- CREATING THE WRONG IMPRESSION – I recently sold a property in an upmarket exclusive estate. When we came onto the market the garden outside the complex was almost hidden by a four other agents boards. After we erected ours, there were five boards. It looked tragic. There are 16 units in the complex and there were 5 boards outside, there were in reality only two other units for sale but each of them had 2 agents each. During the marketing of my unit, so many buyers commented were concerned about a possible problem in the complex because of all the homes for sale. I one saw 5 boards outside a complex of 16 units most people would be concerned.
- LACK OF AGENT FOCUS – I can imagine that if I took on an open listing, it is very likely that you will prioritize your sole mandates, then duals, and then, if there are time and its not prejudicial to your other deals then you would work on the open mandates. It goes without saying that it is human nature to focus on the safe option with guaranteed returns as opposed to a long shot with a possible reward. But that being said, commitment is a two-way street, and open mandates are more like a one-way street during rush hour.
- RESOURCE CHALLENGES – In real estate today, cyber real estate is at a premium. Estate agents pay sometimes relatively exorbitant fees to portals to give their listings the best chance possible. In addition, even if one just does a list-and-leave by taking the listing and leaving as bait for buyers, even then there is a cost to the agency because some portals charge extra should the number of hits push the practice into the next tier. Ultimately, the manager, the guardian of the firm’s bottom line will keep an eagle eye on the number of open listings, their saleability, etc and if necessary will even cull certain open listings.
- OUTED FOR LISTING WITH MULTIPLE AGENCIES – So as an owner you believe that you have outsmarted the system. You will get a whole bunch of agents to list your property, at no cost to you. In your mind, you have images of your home appearing every second listing on P24, My Property, of Private Property. But the portals got wise to that trick a long time ago. P24, for example, will identify properties listed with multiple agents and cluster them into one listing with multiple agents. Here comes the kicker – because of this system it is highly likely that your prospective buyer might click on agency A today and agency B tomorrow – introduced by agency A and when they come back after the show house they saw with A, then they make the offer with agency B – instant multiple commission claim.
- DILUTED ABILITY TO NEGOTIATE – In negotiations, it’s always best to have all the buyers in the same net. That way you create the opportunity to maximize the outcome. If each agent has 1 buyer, how can anyone of them really build any pressure for buyers to increase their offers or make an offer on better terms?
- INCONVENIENCE – Agents under pressure to sell will inevitably transfer that pressure to the seller. Unlike an agent who has a sole mandate with prescribed viewing times, agents on an open listing will tend to out of desperation try to get buyers through as soon as they call. I once was visiting a friend who was selling, when an agent brought buyers through, the frustration on both sides was intense.
- NO BUYER VETTING – A good buyer is one who wants the type of your property you are selling and which is well suited to the buyer because the agent has thoroughly consulted with the buyer, which makes sure the buyer is willing and motivated to buy. The agent also has to make sure that the buyer is able to buy in that the agent has made sure the funds are available and that if a bond is required that the buyer is prequalified for the required amount. When it’s an open mandate, agents very often randomly take buyers with the idea that maybe the buyer might like the home and if they do they, on the basis of hope, they just trust that they will be good for it. The problem is that you have to survive countless viewings and then sale after sale crashes spectacularly as buyers fail to qualify for the bonds.
- LACK OF SECURITY – In open mandates, buyers don’t seem to even check that the agent is a registered agent or even an agent at all. All they want is boots on the ground, not checking if those boots (or high heels) can be trusted. Then, of course, one has the security challenge that comes with random people inviting more random people into your hope. To quote a saying: What could go wrong?
- TRUST? If you don’t even know the agents you are getting in can you truly trust them? Do you think that they trust you? With no trust on either side, it makes misunderstandings more likely. Conflict also thrives in a low trust environment.
- BEST ADVICE? Given that nobody knows anyone in this situation really well the level of value that the owner can benefit from by using the estate agent is dramatically eroded. Since the ‘buy-in’ is low and the agent knows that any agent, rogue agent, or even the owner can scoop up buyer purely by chance with no investment whatsoever, the chances of an estate agent going that extra mile is greatly eroded and the chance of benefiting from the agent’s experience and advice greatly diminished.
- ‘THE WORLD IS AGAINST ME’ – A seller who sells their home with an open mandate might be excused for thinking that nobody is on their side. The might even be truth in that. Agents who bring buyers may actually feel more allegiance to the buyer than the seller. The seller may even feel that the agents acting on the seller’s behalf do not seem very loyal, which is not hard to believe, given that the seller is not loyal to them. Although the world may not be against the seller the seller may be hard-pressed to find an agent on the seller’s side.
- TOP AGENTS BOW OUT – The best agents will very often not take an open mandate. The reasons may be varied but very often owners who opt for open mandates are ironically very often closed to taking advice, irrespective of the professional’s experience or proven knowledge, opting instead to take their own counsel. The other reason may be reputational damage which arises when a property they are associated with flounders on the market, overvalued with no apparent marketing strategy or plan.
- CO-OPERATION NO MORE – In a sole mandate situation with a listing agent who shares, the seller has a co-ordinated system controlled by a professional which leverages all the local estate agents into one team on the seller’s side. In an open mandate, situation agents are already stressed, the chances of sharing are greatly reduced because agents with buyers will rather go straight to the seller (on behalf of the buyer) than pass through the checks and balances needed to protect the seller.
- DESPERATION AND JACKALS – Nothing draws opportunistic buyers like a forest of estate boards. Multiple boards are seen by many to be an indicator of a desperate or inexperienced seller. These are just what makes for the perfect opportunity for a bargain. If desperate a cash offer might secure a deal straight away or maybe play the agents off against each other, which very often can create the perfect mix for a multiple commission claim against the owner.
- CONTROL (AN ILLUSION) – In philosophical terms, many might say that the idea of control is an illusion. Illusion or not, in a sole and to a lesser extent in dual mandates, the experience, and knowledge of the property professional does allow a large degree of control over the process. In the case of an open mandate, the seller may very well feel that the process is less like a machine interacting with the market and more like a millstone grinding away on them.
In my 17 years as a property professional, I have never seen a property seller benefit from using an open mandate approach. In the few cases where the seller has declared victory, very often the ‘victory’ is often phyric in that the property was sold for too little or on sub-optimal terms.
My advice would be to rather take the time, do some real research on the potential agents, their experience and ability and get them on your team, working for you.