Paying one commission is tough ... but two?
In the current property market, where stock is generally limited, sellers should protect themselves from a double commission claim, according to an attorney from a leading law firm.
This warning does not apply only to sellers with an open mandate. Even those with a sole mandate are at risk of a double commission claim, says Melanie Coetzee, a director at Smith Tabata Buchanan Boyes.
Double claims arise when a property is sold by Agent A to a buyer, Mr Jones, who was introduced to the property by Agent B. When Agent B hears that Mr Jones has bought the property, this agent claims commission on the basis that they were "the cause of the successful sale".
The seller would be liable to pay both agents, even if the seller's sole mandate with Agent B has long expired. Coetzee says double claims are not uncommon. And in tough economic times, sellers tend to favour open mandates, where the risk of such claims is even higher.
The appeal of an open mandate is that the seller gets multiple agencies marketing their property and therefore exposure to more buyers and potentially a quicker sale.
Coetzee says that in this market buyers go from agency to agency looking for the best deals, and with numerous agents listing the same properties, there's a good chance more than one agent will take a buyer to view the same property.
Coetzee says sellers should insist that every agent who has marketed the property furnish them with a list of all the prospective buyers who viewed it. This enables the seller to exclude those buyers should they put in offers through anyone but the agent who introduced them to the property first.
Crispin Inglis, CEO of online property agency PropertyFox, says an open mandate with too many agents is almost as bad as a sole mandate, which is restrictive and expensive. With a sole mandate you are tied into a contract with one agent for a set period.
"An agent may offer to drop their commission to 5.5% to secure exclusivity, which may sound like a good deal, but it is our contention that the industry is significantly overcharging."
PropertyFox charges a commission of 1.5% or a minimum of R35,000. Sellers enter into an open mandate with PropertyFox for a R5,000 registration fee, which entitles the seller to photographs of their homes, a valuation from Lightstone, online advertising on a host of portals and one year of sales and marketing support.
Instead of a sole mandate, Inglis advises sellers to engage one agency - but with no contractual obligations.
But Adrian Goslett, CEO of RE/MAX, says a sole mandate ensures more effective marketing of a property and the orderly conclusion of a sale.
"The agent should provide the seller with a marketing plan, and if the agent fails to follow the plan, the seller will have the right to cancel the mandate."
* PropertyFox’s registration fee has subsequently been reduced to R2,500.