9 minute read
SOLE OR OPEN MANDATE?
The sole option
In a buyers’ market, sellers need every advantage to conclude a successful sale – like signing a sole mandate to ensure that their property gets the maximum attention
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WORDS: MARANA BRAND • IMAGES: SHUTTERSTOCK
Many sellers falsely believe that if they let multiple agencies market their home, they’ll increase their reach to potential buyers, enabling them to sell quicker.
Having a number of real estate agents working on the same property for sale, however, doesn’t mean more buyers for your property. “The truth is that in any town, at any time, there’s only one pool of buyers searching for property. If your property is priced correctly, the buyer will invariably end up with your chosen agent,” says Lanice Steward, head of training, Pam Golding Property group.
What’s what
It’s often far more e ective to sign a sole mandate and allow one agent the space to secure the best sale.
“A sole mandate is an exclusive contract that stipulates an allotted timeframe during which a seller may not appoint another agent to market their property. This ensures that the agent will put maximum e ort into fulfilling the goals that have been set within the contract,”
explains Adrian Goslett, regional director and CEO, RE/MAX of Southern Africa. In an open mandate, on the other hand, multiple agents from a variety of agencies will be marketing and trying to sell your property.
Why one agent?
A sole mandate allows the appointed agent to create competition among potential buyers and gives them time to negotiate the best possible price for you, rather than having agents competing to close the deal at any cost, often putting the seller’s price at risk.
“There’s no doubt that a single partnership with the right agent increases the peace of mind of the homeowner. The exclusivity of the relationship allows the seller to hold the agent fully accountable for results and also, in the process, gives both parties the time to agree to any changes to the marketing and pricing strategy. It should come with the same level of commitment, risk and return on investment associated with any healthy business partnership,” says Steward.
Adds Goslett, “While some might be inclined to think that signing a sole mandate is restricting, it’s an opportunity to make the process of selling simpler and is the best way to motivate an agent to give the home their undivided attention.”
It’s practical
Logistically, a sole mandate is also a safer option while the threat of Covid-19 still exists because you’ll only have to liaise and deal with one agent, not several, says Goslett.
“This simplifies the process, with far less time spent coordinating your schedule with the various agents and their buyers. From a safety perspective, only one agent will have access to your property.”
Open mandate
“If an agent is working on an open mandate, however, they may be less inclined to spend as much time marketing the property, which will reduce chances of selling. This is worsened during a buyers’ market when agents have even more listings vying for their attention than usual, which means that your home may get even less of their time unless you have signed a sole mandate,” Goslett says.
Having multiple estate agencies or agents marketing your home often means the agents are not as committed to the sale of the property and are less likely to spend more marketing rand on the property, a statement on the Chas Everitt International website reads.
Confusing buyers
Many South African property buyers have commented that when they see a host of property for sale boards outside a property it creates the impression that the seller is desperate or in need of a quick sale.
“This problem is often exacerbated by the fact that in an open mandate environment the seller has little or no control over what price the property is being o ered at – the nett result is often a lower selling price than what should have been achieved on the property,” Chas Everitt states.
In an open mandate, it’s also o -putting for buyers to see the same property advertised in the same online space, but with conflicting images, prices and details, says Steward.
“It’s almost like launching a new product and allowing di erent sales teams to package, price and market it di erently, leading to confusion in the marketplace. Besides that, buyers should be able to rest assured that the agent wants to close the deal as much as they do, but has an ethical obligation, as outlined by the Estate Agents Code of Conduct, to represent the correct market-related value with integrity,” she says.
Be careful, though
Unfortunately, agents sometimes overvalue properties to get an exclusive mandate. Steward says sellers should be really careful of this motivation.
“If you have been presented with two or more radically di erent prices from agents, interrogate them on how they got to that price – because, usually, one of them is wrong. Find out how they obtained their market condition information.”
Market rallies with record sales
South Africa’s real estate agents came out of lockdown with modest expectations that pent-up demand and historic low interest rates would encourage market activity – what they got were the busiest months they’ve seen this year with record sales in some cases
WORDS: HELÉNE MEISSENHEIMER • IMAGES: SUPPLIED & SHUTTERSTOCK
After the previous rate cut in April, property experts cautiously predicted an increase in market activity in June due to pent-up demand after two months of lockdown and the best conditions to buy property in years.
However, all were aware of the reality that millions had lost their jobs or had seen their monthly income reduced and thousands of businesses faced an uncertain future.
The fact that their company had a record sales month in June while the country is facing the toughest time ever, greatly surprised Adrian Goslett, regional director and CEO, RE/MAX of Southern Africa.
“RE/MAX just had R2,38bn in reported sales in one month; it seems contrived to say congratulations and well done. I actually don’t know how to put it into words. It’s absolutely spectacular.”
For Rawson Property managing director Tony Clarke, their high increase in sales activity was just as unexpected. “After a long period of not being able to finalise any property transactions, we were all hopeful for a small rebound when lockdown restrictions on real estate were lifted,” he says. “What we didn’t expect was for June to be our best sales month
in over three years and the second best sales month in the history of Rawson Property.”
It’s not only the bigger agencies that report being busy. Cynthia Machaba, principal, Cyn Mac Properties in Soshanguve near Pretoria, says they’ve also seen improved activity in the residential market since June, as does Lee Ellis, principal, Tyson Properties Westville oce in KZN, who says sales in Westville and Cowies Hill have been brisk.
When the real estate industry went into lockdown following months of constrained activity, the outlook for the industry was bleak. Thousands of estate agents were predicted to leave the profession unless relief came soon.
Then three things happened. The Reserve Bank brought interest rates to record lows with another rate cut in April. The deeds oces reopened during May, and in June estate agents could operate again.
The uptick in the market is not unexpected according to Samuel See , chairman, See Property Group. Buyers are eager to conclude deals that have been in the pipeline since the beginning of lockdown more than two months ago and to take advantage of the significant interest rate cuts this year – currently at a five-decade low. Banks have also been supportive with home loan approvals.
“So, the conditions have created the ‘perfect storm’ for buyers. The result has been that for many areas, it has been the busiest period this year, and in some instances, activity has been on par with the same period last year,” he explains.
More home loans approved
Bond originators confirm that June has seen a higher than expected increase in home loan applications but, more importantly, banks have responded positively, even approving 100% bonds.
Carl Coetzee, CEO, BetterBond, says the volume of home loan applications for June were well above pre-lockdown levels. This may be due in part to pentup demand but Coetzee adds that the pre-lockdown lowering of house price inflation and the record-low interest rate have created the ideal opportunity for buyers to invest in the property market.
ooba reports an increase of 67.5% in applications for 100% bonds in June with an approval rate of 79.9%. More than half (54.7%) of the home loans extended during June were to first-time buyers.
The primary housing market in the price band below R1,5m has been the busiest, especially below R1m where buyers benefit from the exemption of transfer duty, says See . Clarke agrees, saying the
ADRIAN GOSLETT
HERSCHEL JAWITZ
TONY CLARKE
under R1m price bracket made up 42% of their sales in June. Second was the R1m to R2m range (38.4%) with sales in the higher price brackets making up the rest.
Reasons for buying and selling
Not surprisingly, first-time buyers in the lower price brackets are one of the biggest groups of buyers.
Nondumiso Mthwa, principal, Idwala Properties in KZN, says this is because the lowered interest rates have made entering the market possible for many buyers who previously were not able to do so due to insucient earnings. “Then one also finds that the reduced interest rates support those who were already property owners in the middle class wishing to upgrade,” she adds.
Machaba says they’re also seeing people prioritising property as an investment because of the improved a ordability. “This is as a result of low interest rates which leave potential buyers with some surplus cash. This is supported by more people wishing to invest in a second property to create passive income.”
SAMUEL SEEFF
CYNTHIA MACHABA
NONDUMISO MTHWA
CARL COETZEE
Herschel Jawitz, CEO of Jawitz Properties, says they also see more tenants applying to become homeowners. “For tenants in the lower price ranges who are paying rent, the latest rate cut may mean that renting is more expensive than repaying a mortgage.”
Sadly, there are also many sellers who need to downgrade to more a ordable accommodation or need the finance. “Although this is generally not a new phenomenon, it seems to be gaining momentum,” says Mthwa.
How long will it continue?
Property leaders are cautiously hopeful that the current upward trend in property sales may continue.
“With the further decrease in the interest rates, I believe this level of activity will continue into August,” says Mthwa. She believes there are many potential purchasers “who are still scrambling to clear their credit profiles, as most believe this is their only chance to enter the property market and they don’t want to miss out”.
