Buyers mandates in any formal sense of the word, are an almost unknown entity in the South African property market – despite the fact that the concept is well established in other developing countries.
If you have read the section on understanding mandates, then you will grasp the fact that almost all mandates to seek a property for a buyer are “open” mandates and that the buyer will skip from one agent to another as they please going through lists of properties.
The South African property market functions primarily on a seller agency model – despite experiencing the strongest buyers market in living memory. Buyers are never really represented to the same level as sellers with a properly constructed and executed sole mandate and according to a buying plan.
TYPICAL SCENARIO
Mr Smith, a buyer meets an agent, by referral from another client, from an advert, a show house and so on. Mr Smith informs the agent that they are in the market and are looking for a house with the characteristics of xyz.
He then asks the agent if they have anything available. At that point, a buyers mandate has been given and it is an open buyers mandate.
The agent responds to say that no, they do not have xyz property on their own listing but will do the necessary homework and check what is available on the market. They have now accepted the mandate and there is, albeit very loosely, a contractual agreement in place.
The agent, if professional, now proceeds to contact their affiliates in the industry, check MLS listings, browse adverts etc etc to see if any property matches the buyers criteria. In addition, if they are doing there work properly, they will do a Comparative Market Analysis on each to see if pricing is within market value. They will also do suburb reviews, consider current trends etc etc, so that when they advise the buyer, they can do so with confidence knowing they are giving the best advise possible.
Additionally, they will have contacted the selling agents to get some “inside” information about the seller. How negotiable are they? Is the sale urgent, and so on.
Then begins the viewing process – and after numerous viewing and hours of appointments, phone calls and research the buyer is ready to make a decision. If the agent is lucky, the buyer end up taking one of the properties shown.
Typically however, the buyer suddenly lets them know that they viewed another property last night, with another agent and have decided to take that one. Not a very pleasant experience for a professional agent who has given the buyer their all.
REDUCED EFFORT AND PROFESSIONALISM
As a result of the above scenario, many agents work on an ad hoc basis with buyers and do not give them 100% of what they could offer in terms of service and knowledge. And justifiably so – they are not guaranteed any return on their investment of time and money.
This approach forces estate agents into working “at their own risk” for buyers – constantly incurring costs without any payment security. This is why generally, complaints about agents come from buyers and not sellers.
Agents are hesitant to commit when there is no reciprocal commitment from the buyers.
ACCOUNTABILITY ISSUES
Because most buyers are just out there looking on their own, they in general are dealing with sellers agents. And these agents have one priority – their seller.
Who in the transaction is taking into consideration, the buyers needs and circumstances? Who in the entire transaction will be acting in the buyers interests?
For many truly ethical and professional agents, this does not pose a major problem, as they will ensure that the deal is a win win situation with no party being ripped off. But what about the myriad of agents out there who perhaps are not so ethical or are only concerned about commission.
When this conflict of interest type of situation arises, the buyer needs to know they have someone on their side.
The absence of a contractual relationship with a specific buyer's agent could not only damage their position in the negotiations, but might cost them a lot of money if they do not know the market as well as local estate agents.
We make it a point to notify our buyers when we are showing them one of our own listings, so that they are fully aware of the fact that we am also mandated to the seller – this allows them at least the choice of getting someone else to act on their behalf if they wish to do so.
LACK OF RELATIONSHIP
This improperly constructed business relationship very rarely flowers into a lifelong informal business relationship – where the estate agent becomes the buyer’s entrusted confidante in all matters relating to the property.
A culture of almost distrust is unfortunately created with this loose relationship – with at times vastly different experiences. The property buyer who “employs” different informal buyer agents often creates confusion – as each buyer agent will try to introduce the buyer first to his or her own mandates and only after that to other agent’s mandates where he or she earns less commission.
If the buyer would end up working with an agent whose agency does not have a good working relationship with other agencies due to their e.g. unfair commission sharing policies, the buyer will not be introduced to all properties on the market.
AN EXCLUSIVE BUYING MANDATE
The solution for both buyers in terms of being represented effectively and agent in terms of security of earnings, is for buyers to appoint a Buying Agent by means of an exclusive mandate.
This in reality will mean that the buyer agrees to appoint an agent to actively seek and research properties on their behalf, but also that they will not view any other properties without this agent. If the buyer therefore hears of or sees another property they are interested in they will arrange all viewing through their mandated agent.
The benefits, other than those broad principles discussed above, are numerous, such as the buyer having access to expert advice purely for their benefit, no need to make appointments and calls themselves etc etc. Your buyer mandate will pledge absolute confidentiality to you are well as advise you swiftly if you should seek legal advice. They will ensure the contract suits you, the buyer and advise you on negotiation key points. Consider that there is no cost to the buyer as the seller is paying the commission, and you have a package deal that makes sense to all parties involved.
Even if there is no written mandate in place, buyers would be wise to act as if one is in place. PROPERTY NETWORK agents are extensively and fully trained to work with buyers and can make your house hunting experience a pleasant instead of a stressful one. All they ask in return for their dedication to you, is loyalty. To understand more about using a buying agent go here.
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