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Get myself involved in Commercial and Industrial Estate Agency Business
By arlene | June 8, 2008
I introduce the discussion with some relevant generalizations about the commercial and industrial estate agency business.
An exclusive mandate from the seller is the bread-and-butter mandate of the commercial and industrial estate agency business. A survey of highly successful salespeople shows that only a small percentage of their mandates are open or sole mandates and that their mandates are predominantly received from sellers. Experienced, successful salespeople work largely with properties they can control in terms of an exclusive mandate from the seller. An exclusive mandate from the seller seems to be the preferred way of setting up a successful marketing system with reasonable risk control built into it. With open and sole mandates the probability of earning a commission is less than in the case of an exclusive mandate. Real control over a property is achieved by obtaining an exclusive mandate from the seller.
You will usually have less control over the outcome of your work when you represent the buyer. Buyers will only buy if you can offer them a suitable property, whereas a seller will instruct you to sell a specific property. Buyers will frequently buy a desirable property from anyone who offers it to them and will be reluctant to give you an exclusive mandate. This does not mean that you cannot successfully represent the buyer. You could enter into an exclusive mandate with the buyer. The mandate must be in writing. If in terms of such a mandate the buyer is obliged to pay your commission, this must be disclosed to the seller in terms of the Estate Agents Act.
I have worked successfully with buyers on an open mandate, requiring them to make a contribution to my costs. This contribution is then offset against commission payable by the buyer if a property is in fact purchased.
Although an exclusive mandate from the seller is preferred, there will be occasions when you will accept an open or sole mandate from either buyer or seller. Your decision in this respect will be a trade-off between considerations such as your own standing and experience in the industry, the amounts of commission, the degree of risk you will have to take, the time and cost involved and the possibility of your, already, having an almost definite buyer or seller for the property.
It is advisable to keep the number of open and sole mandates low relative to the total number that you are working if you wish to be consistently successful.
Generally, sellers are more inclined to give exclusive mandates to leading estate agents than to unknown newcomers. Thus, a newcomer wishing to break into the market may have to spend a great deal of time and effort obtaining exclusive mandates, and may therefore initially have to accept far more open mandates than is desirable, in order to get started.
An exclusive mandate has many advantages over an open or sole mandate. For example you will, in all probability
- earn more commission;
- receive commission on a more continuous and regular basis;
- have few, if any, disputes regarding commission;
- develop excellent long-term client relationships; and
- establish yourself in the market place as an agent with a professional approach.
Where a seller owns a property which is in great demand he will, frequently, be reluctant to obtain professional assistance in the marketing of his property, especially if he has to pay a substantial commission. His property is obviously in great demand if, almost daily, he has to fight off potential buyers and estate agents who wish to sell his property. People are not willing to pay when they believe that they can easily solve their own problems. It is, therefore, advisable to look for a seller who is motivated to sell, who has a problem in selling, and who therefore believes that he needs professional assistance. This is the type of owner who will give you an exclusive mandate. If you wish to work almost exclusively on properties under your control, continue looking for properties that are relatively difficult to sell, require in-depth knowledge and skill and are owned by a seller who is motivated to sell, sees a need for your professional services and is willing to cooperate with you. This may be difficult and discouraging to a new agent. The new agent may find it necessary, initially, to work predominantly on open mandates and properties which are in high demand, in order to earn commission.
Some successful commercial and industrial salespeople specialize in the sale of “problem” properties. A problem property is any property that is difficult to sell. Vacant land is often a problem property. A vacant shopping centre site in a buyer’s market can often only be sold successfully after you have been able to convince a buyer on the strength of a complete set of architectural drawings, feasibility studies, cash flow analyses, cost estimates and letters of intent from prospective tenants, that you are offering him a worthwhile purchase. Once you have acquired the reputation of being a problem-solver, your referral business can become very profitable. I believe that the top commercial and industrial salesperson is paid for his ability to solve problems and not merely for his sales skills or ability to communicate, although these attributes will always be important
It is true that a salesperson who works only with properties under his control will find it more difficult to obtain exclusive right-to-sell mandates in a buoyant seller’s market. However, whatever the market in which you are working, there will always be problem properties which require your professional skills in order to be marketed successfully.
The salesperson who specializes in open mandates and who has only a limited understanding of the estate agency business, is, despite his ability to communicate well, bound to lose out against the professional who markets only properties under his control. In a strong buyers market the open mandate salesperson is likely to suffer a substantial decline in commission and may even have to move to a new job.
As an estate agent one of your most difficult decisions will be whether or not to accept a property for marketing. You will simply not be able to market all available properties. In my opinion, you should only accept a property if you represent the seller exclusively or have a satisfactory mandate from a buyer. I recommend that you politely refuse open mandates and invitations to share an open mandate with other estate agencies. The sales cycle starts with an exclusive mandate which is given to you by a motivated and cooperative seller. Cooperation with another estate agency business on exclusive mandates may be a profitable proposition for you. There is no absolutely right or wrong philosophy.
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Topics: Agent, Commercial, International, Job, Land, Market, Property, Rental, Residential |
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