Why Estate Agents

Buying and/or selling fixed property is complicated and risky and all is not always what it seems. It is to your benefit to engage a properly qualified and certified agent to work with so that you have legal protection.

The moment you put your property on the market for sale or rent, you potentially open yourself up to having strangers in your house. For your safety and security, you need to carefully manage these interactions. If you are a private seller, this means that you deal with this risk on your own. If you use a reputable estate agent, this process is managed by the agent and they will ensure the safety and security around viewings. Firstly, they will check the credentials of the potential buyer before they arrive at your house, secondly, they will accompany the buyer during their visit and make sure that your precious valuables stay where they belong and that you are safe. The agent will have all of the contact details of the buyer so that they can easily follow up.

All properly registered and qualified estate agents must meet minimum educational and experience criteria and have what is called a Fidelity Fund Certificate, issued annually and to be produced on request by a seller. This means that the agent is associated with a properly registered estate agency, registered with the Estate Agency Affairs Board (EAAB) that has a trust account where your funds are protected. If you are dealing with an agent that does not have a Fidelity Fund Certificate or one that is not registered with the EAAB, you are potentially at risk of being defrauded. Registered agents are bound to comply with the regulations and this gives you legal recourse and protection.

The Fidelity Fund is administered by the EAAB in terms of the Estate Agency Affairs Act (soon this will be replaced by the Property Practitioner’s Act).

Additionally, properly registered agents will ensure that the seller is the actual owner of the property and that he or she is authorised to sell the property. This includes the confirmation of the seller and buyer’s FICA information.

Private sales do not enjoy this protection.

Sellers need to be aware of the benefits of working with a qualified estate agent and understand the different types of agents, mandates and associated risks

The different roles of agents

In order to sell a property on behalf of an owner, the agent needs a mandate (permission) to sell. This is typically in writing and is for a specific period of time at a specific asking price. If the mandate is to be opened to a number of agents, it is a good idea to have all agents list and advertise the property at the same price. This shows that the seller is serious and is not negotiable. If there are a lot of different prices advertised, there is the danger of a “price war” and the seller is normally the loser.

Seller’s Agent 

The agent who is mandated by the seller to market and sell a property is known as the seller’s agent. This agent guides the seller through the process, provides reliable market related recent sales information, recommends a listing price based on the specific attributes of the property, lists the property on its company website and other recognised sales portals introduces qualified buyers and presents Offers to Purchase to the seller. 

Security when buyers are viewing and buyer qualification are key elements of this service.

The seller’s agent earns commission (a percentage of the selling price) on the sale of a property, payable by the seller and this is clearly stated in the Offer to Purchase. Buyers have to work through the agent and are not permitted to go directly to the seller (if introduced through the efforts of the agent), especially not in an effort to cut down on the price.

Buyer’s Agent 

Buyers who are looking for a property with very specific attributes that do not want to waste time looking at numerous properties that do not meet their criteria, or live in a different place to where they are looking, engage a buyer’s agent to work on their behalf. The buyer’s agent identifies suitable properties for the buyer, works with seller’s agents to arrange viewings, handles price negotiations and guides the buyer throughout the process. Typically, a set fee or percentage of the purchase price which is payable directly by the buyer and is not be included in the Offer to Purchase is charged.

Once again, security when buyers are viewing and buyer qualification are key elements of this service.

Rental Agent 

Rental agents must have the same attributes as the other agents, registered with the EAAB and have a Fidelity Fund certificate, and they specialise in the leasing of property to clients on behalf of landlords. They are local experts and can provide market-related pricing information about what rental amount to expect to the landlord. Security when lessees are viewing and lessee qualification are key elements of this service.

Generally, the rental agent’s role then becomes one of a managing agent and the lease is managed by the agent. Fee charges vary depending on the extent of the management. 

Here it is imperative that the rental agent’s agency has a properly manages trust account to manage deposits, municipal payments and rental payments received from clients, otherwise the tenant and landlord can be exposed to significant risk.

Selling Mandates that you have available to you

A mandate is a legal agreement between an agent and a seller which sets out the terms upon which the agent would market and sell the property as well as the commission. There are three types of mandates and sellers should note the differences and potential risks, specifically the risk of double commission where more than one agent is mandated to sell a property.

Exclusive Mandate - This is an exclusive mandate with a single agent for a fixed period, usually three to six months. The agent is entitled to a commission regardless of who sourced the buyer. The seller is able to introduce buyers, but the agent is entitled to commission regardless. This type of mandate provides for a single agent and their agency with a marketing plan and significant effort and focus. 

Sole Mandate - this is like an exclusive mandate with a single agent for a fixed period, usually three to six months. The agent is entitled to a commission if they source the buyer. The seller is also entitled to introduce buyers during the mandate period. There is a pre-agreed process to list such buyers to avoid confusion and unhappiness. 

Dual Mandate - this is a sole mandate, signed with two agencies who will agree conditions and possible commission splits. Typically, the agent that sources the buyer will be entitled to commission. Because multiple agencies are working on the property, it is less likely to receive the deeply focused attention that a single agency provides.

Open Mandate - with open mandates the seller appoints many agents to sell the property. The seller signs an open mandate with each agency and the agent who brings the buyer gets the commission. In cases like this, and in direct conflict with what the seller is looking to achieve, huge exposure, the agents may not devote much effort on marketing or give it focus beyond listing it. 

The seller may risk double commission as a potential conflict about who introduced the buyer and was the “effective cause” of the sale can become an issue. 

If the mandate is to be opened to a number of agents, it is a good idea to have all agents list and advertise the property at the same price. This shows that the seller is serious and is not negotiable. If there are a lot of different prices advertised, there is the danger of a “price war” and the seller is normally the looser.

For more information contact Pam Golding Properties Gansbaai.