Let’s begin by explaining what exactly a ‘Sole Mandate’ is. When you decide to sell your home with a real estate agent, one of the first decisions you’ll have to make is deciding whether you want to work with the agent under a ‘Sole’ or ‘Open’ mandate contract
A ‘Sole’ mandate contract means that you’ve legally given the agent you’re working with, the sole right to work towards selling your home. No other real estate agents can work with you towards selling your home during the period of the contract.
An ‘Open’ mandate contract freely allows you to approach as many real estate agents as you want to work towards bringing in a buyer for your home. No single agent has proprietor rights to the selling of your home.
How To Pick An Agent That Works For You.
Essentially, the pick between mandates usually comes down to a Quality over Quantity (‘Sole’ Mandate) or Quantity over Quality (‘open’ Mandate) decision.
Part 1: The ‘Sole’ Mandate Environment
The following 5 points will detail What you should expect from an agent with a sole mandate and Why that’s the case:
1. Frequent Attentive Open House Events
Open Houses and Showings can be argued to be the most influential marketing aspect to getting a sales-offer from a buyer. A prospective buyer is given the chance to walk around their possible home and envision what it would be like to live there.
You can expect an agent with a sole mandate to be more diligent in running more high-quality open houses and showings. Why?
This is because an open house event is essentially laying out bait for a prospective buyer; the risk/reward balance of running one changes immensely against an agent in an ‘open’ mandate.
With a sole mandate; the realtor is assured that there is zero chance of doing all the work needed to run an effective open house to only be poached by another agent when the buyer decides to associate with another agency to fulfill the sale.
2. Adaptive and Periodic Internal Marketing
Internal marketing in real-estate has to do with the assets available to the agency and agent to expose your property to the public. Their website, listing pages, magazines, flyers, blogs, etc.
You can expect both ‘open’ and ‘sole’ mandate agents to advertise your property through whatever channels they have at their disposal. Though, the sole mandate agent has more incentive to adapt and seek to improve his marketing strategy if the old one doesn’t seem to be producing results.
This is because a sole mandate contract has a legal time window before ends and you as a seller either renew it, give another agency the contract or make it open to all agents.
It’s in the interest of the sole mandate agent to do whatever it takes to produce a qualified buyer within that time frame.
3. Pro-active and Re-active Problem solving and reports.
A sole mandate agent will likely be more obsessive in finding out the reason why your home isn’t generating qualified interest in the market.
Doting over and reporting recommendations on appropriate pricing, required renovations, open house strategies and much more are all to be expected.
All in all, you can expect far more communication with your agent if you work within a sole mandate contract.
4. Higher Selling Price Bargaining Power
Whether or not you have a sole or open mandate; working with an agent will on average result in selling your home at a higher selling price than you would have managed to on your own.
This result stems from the economic principle of demand and supply. You are more likely to attract more qualified buyers for your home through an agent who has an established advertising base and channels. The more buyers attracted and qualified to buy your home the more power you have to sell at a premium/the higher the offer you can expect from buyers wanting to secure your home.
When it comes to the difference in selling power of sole and open mandate agents, it boils down to the probable result that a sole mandate agent will more likely run effective open houses than an open mandate agent who will focus more on private viewings.
Open houses bring in more prospects with the potential to compete in an auction-like manner of buying your home.
5. The Win-Win Paradox of a Sole Mandate
Regardless of whether or not you manage to attain qualified offers for your home during the sole mandate time-frame, you are more likely to come out in a better situation if you start with a sole mandate than if you hadn’t.
In the event of a sale, you are more likely to be able to negotiate a higher selling price for your home in a shorter time frame, this due to the increased incentive for the agent to work harder due to the contract deadline as well the likely focus on open house strategies.
In the event of a no sale, you will likely come out the contract with a detailed list of factors that hurt the ability of the home to sell as well as maintain a large portion of the benefits of having been in the sole mandate contract such as the lingering effects of the exposure generated from open house events and advertisements.
Part 2: The ‘Open’ Mandate Environment
The following 7 points will detail What you should expect from an agent with an open mandate and Why that’s the case:
Let me begin by completely bringing my bias against open mandates into the open; the open mandate strategy is essentially a quantity over quality strategy when done right but even in that situation it offers an uncomfortable environment for your agent to work in which leads to an uncomfortable and tense means of marketing your property.
This is not to say that there aren’t effective means to use an open mandate or that there isn’t an appropriate time to use one. Both sides of the coin will be presented below.
1. A focus on direct private viewings
It’s unlikely that an open house strategy will be used by an agent in the event of an open mandate; there is far too much risk as a result of buyer poaching that can lead to the efforts of one agents’ open house leading to the sale for another agent.
It is more likely that agents will take a more passive advertising avenue of relying on the natural reach of their channels (placing your property on their website and listing areas). This leads to generating prospective buyers who are tied to the agent and removes the risk of poaching
The agent will then proceed with the private viewings of the property with the qualified prospect.
2. An increase in the passive reach of an audience.
As stated above, agents are unlikely to utilize more proactive reach strategies within an open mandate due to the poaching risk attached to such an effort.
Passive reach is a numbers game in which you’re aiming to cover enough space to compete with or beat the depth factor that results from a sole mandate.
That is to say, the most effective way to use an open mandate is to provide it to as many agents as possible to occupy as much passive advertising space through the agents’ website and listing pages.
An open mandate with one or two companies is a waste of the largest advantage you get with it. If you go open, open it for everyone.
3. Unhealthy competition.
We’ve addressed the largest benefit of an open mandate and now we have to weigh it against the elephant in the room.
As we hinted above while sole mandates; the best-case scenario for you as a property buyer is raising the buyer demand for your property, whereby you spark good competition in which buyers bid amongst themselves for your property. A situation in which you can now charge a premium for your property.
Open mandates are capable of creating this positive competition environment if the multiple agents generate qualified buyers at the same time who then begin to compete for your property,
The issue arises from the fact that the healthy competition environment in the case of an open mandate only occurs if by chance multiple agents generate qualified buyers at the same time to compete with each other.
To add to this, an open mandate generates a form of unhealthy competition from the onset and this unhealthy competition is only magnified as you add more agents to the open mandate list. From the start, an open mandate encourages competition between agents which is rarely a good thing for both parties. Why!?
An open mandate prioritizes speed of sale above all else for the agent and when selling property, the faster you sell; the more likely you sell cheap.
In an open mandate environment, the longer an agent with a qualified buyer waits to sell; the higher the risk of being poached by an agent with a qualified buyer with deeper pockets.
Where in a sole mandate; the agent and the seller are on the same team to get the highest price for a property as both agent and seller benefit from selling high. In an open mandate; the agent is on the buyers’ team to just guarantee a sale – while a percentage of something small is something smaller; a percentage of nothing is nothing at all.
Part 3 – Conclusion To ‘Sole’ vs ‘Open’ Mandates
Allow me to not beat around the bush; 10 times out of 10 I would recommend a starting prospective seller to engage in a sole mandate contract.
Objectively speaking; you are far more likely to get results from working with one dedicated and driven agent who is working towards not just selling but selling high for both your sakes than ten passive agents more focused on not being poached, wasting their resources or losing a sale from waiting too long.
So is there no place for open mandates!?
Most Definitely not!!
I wouldn’t recommend a seller to ever start with an open mandate when selling their property but I would recommend a buyer who’s had their sole mandate expire once, twice or thrice take a shot at fully opening their home to bolster the reach of the property.
An open mandate often traps sellers in a loop of inactivity where you have a whole lot of people actively doing nothing to help you. A sole mandate, on the other hand, is always on a deadline on which results, reviews, and recommendations are always expected.
With the right agent, you should never leave a sole mandate without something worthwhile to take out of it. Whether its awareness of an incorrect pricing strategy, knowledge on essential renovations needed to make the property more attractive or simply knowing what type of agent works best with you on a personal level to get you the best results.
If your first second and third sole mandates don’t work, go open and repeat the cycle.