What is a sole mandate?
A sole mandate in commercial or residential property is a written agreement between a seller and an agency giving that particular agency the right to market and sell a particular property. The mandate usually specifies specific conditions including the property details, the price expectation, and how long the mandate will be in effect for.
What is the difference between a sole mandate and an exclusive mandate?
In the event of a seller awarding an agency with a sole mandate, the seller can still sell the property in their own private capacity. With an exclusive mandate any interested party has to deal with the appointed agency, the seller foregoes their right to deal with any buyers they may have and allows the agency to negotiate with all parties.
Are there sole mandates in commercial property?
Sole mandates are far more common when dealing with residential property, it is not uncommon for many homeowners to rather appoint one agency to handle the sale of their property.
Why are they less common?
Commercial property is often owned by listed or large corporate funds. These corporates own one or many portfolios of properties and have specific broker liaisons and marketing departments whose function is to market their vacant properties to the market directly and indirectly via corporate real estate brokers in order to reduce their vacancies and maximise revenue. Vacancy schedules are generally sent out to brokers with details regarding rental expectations and other conditions of lease or sale. The brokers then list the properties and market them to their clients and to the open market. Deals are secured by brokers who deliver acceptable offers to the landlords and in turn earn commission based on the deal value.
Situations that may call for a sole mandate
Sole mandates are usually appointed by private sellers or much smaller commercial property companies when they are more comfortable dealing with a specific agency or agent, or a relationship has already been established with an agency.
They can also be used for new or specialized developments which entail working on a project that can be complicated and timeous, in which case one agency will handle all the marketing and negotiations and report to the developer regularly.
Sole mandates can also be used when selling investment properties when sensitive, confidential information is involved. The agency and its clients may need to sign a non-disclosure in order to protect the privacy of the information.
Advantages to awarding a sole mandate
A broker working on a sole mandate can invest more time and money on the property with less risk than on an open mandate. They know that the risk of wasted time or expense is minimal and the odds of them securing a deal are much higher.
The landlord only has to deal with one agency or agent. On an open mandate there may be dozens of agents needing to view a property in order to market it, and then still arrange viewings with clients. This can also be very disruptive if the property is still occupied by a tenant.
A broker working on a sole mandate knows that he/she can negotiate to achieve a good deal for a landlord, without another broker promising the client that they can get them a better price. Landlords look at each offer at face value and will negotiate based on the strength of the tenant/buyer, and the terms of the agreement. Not based on which agency/agent submitted the offer.
Properties on open mandates are often marketed the same way, with a board on the property, on the agency’s own website, and on property portals like Property 24 and Private Property. It becomes a numbers game with brokers wanting to list as much stock as possible and each property receives limited attention, in the hope that something bites.
Points to consider when deciding what mandate to opt for
There is a preconceived idea to cast the net as wide as possible in order to secure a purchaser/tenant. The reality is that if the property is marketed properly by the right agent, then that client will be picked up anyway.
Whether or not you decide to work with an agent on a sole or an open mandate, the most important thing is to vet them properly. Not all agents are equally qualified or experienced.
A good broker will advise you on a realistic and achievable price and will bring in offers that support that pricing, as opposed to promising a high price just to secure a mandate. A property that is priced too high will often end up being sold or let at a lower price than could have been achieved if priced properly initially.
If you opt for a sole mandate then make sure the agent commits in writing to certain marketing efforts and make sure they are held to them.
Some mandate agreements can automatically renew unless cancelled within a certain time, rather don’t agree to this. If a mandate has expired and a deal hasn’t been concluded then you can decide based on the agents efforts whether you want to continue with them.
There are other options to consider other than sole or open mandates, you can choose to only work with a few select brokers, you can also offer an open mandate but give one agency board rights meaning that only they can erect a board on the property.
There is most certainly a place for sole mandates in commercial property. Different transactions, different properties, and different situations call for different mandates. Real estate is an expensive asset class and you want to be working with professionals who understand and value the nature of the transaction. Contact us to discuss the marketing of your property today. We are fully qualified Master Practitioners in Real Estate with 18 years experience in the industry.