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Sole Selling Mandates Part 1
By arlene | March 2, 2008
Just what is a sole selling mandate? In effect, a seller appoints one estate agent (sole agent) for an agreed period of time to sell a property, thereby excluding other estate agents or the seller from trying to find a buyer for it.
Many estate agents, however, use a form of contract called “Sole Agency” which, because of ill-defined wording, allows the seller to either sell the property privately or withdraw it from the market without paying commission to the estate agent who was “contracted” to negotiate a sale. All mandates (instructions) should be in writing or confirmed in writing so as to avoid disputes.
Because one cannot in common law force a seller to sell, and in order to prevent any misunderstanding and possible dispute, the contract between the seller and estate agent must include a clause which says that the seller will pay the estate agent, as liquidated damages, the commission which would have been earned had he/she effected the sale, based on the price written in the mandate if, during the period of mandate, the seller:
- refuses to accept an offer that accords with or exceeds the terms and conditions of the mandate;
- sells the property through another estate agent;
- sells the property to somebody introduced privately;
- withdraws the property from the market; or
- does anything which effectively prevents or hinders the estate
agent from selling the property. Example: lets the property.
The purchase price, the amount of the initial deposit, the date of occupation and the date by which guarantees must be furnished should also be clearly stated. In addition, it should contain a provision relating to any mortgage bond requirement and other
conditions that may be deemed reasonable. A sole mandate must clearly state the date on which the agreement expires. The EAB Code of Conduct imposes certain obligations on an estate agent when taking sole mandates.
Such an agreement is called a sole authority to sell,which means that the appointed estate agent has the sole and irrevocable authority to do just that. This does not allow the estate agent to sign an Agreement of Sale on the seller’s behalf, although it is legally possible to make such provision.
The Authority to Sell form of contract should:
- clearly set out all the terms and conditions under which the estate agent may sell the property;
- give a clear definition of what is expected of the estate agent;
- protect and ensure that the estate agent will earn the commission if the mandate is fulfilled.
- prohibit the seller from arbitrarily deciding not to sell the property without paying commission.
It should be noted that the estate agent can, at his/her discretion, waive any or all of their rights in terms of the Authority to Sell. It is not a one-sided document since it also affords the seller a measure of protection. Sellers will not be liable for costs unless the estate agent meets the terms and conditions. Should the seller have a change of mind about selling, the liability for costs is known in advance.
Some of the most frequently asked questions about this important aspect of the real estate business are:
- Why should an estate agent want such authority?
- For what period of time should it extend?
- Why are so many sellers reluctant to give a sole authority to an estate agent?
- Why should a seller grant a sole authority to an estate agent?
- Why should an estate agent want a sole authority?
- Get myself involved in Commercial and Industrial Estate Agency Business
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Topics: Agent, Contract, Form, Market, Property, Sale |
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