Understanding Mandates in Real Estate

In the world of real estate, the term "mandate" often pops up in discussions between sellers, buyers, and agents. But what exactly does it mean? And why are there different types of mandates? Let’s dive into the basics and explore the nuances of mandates in real estate.

What is a Mandate in Real Estate? 

A mandate in real estate refers to an agreement or authorization given by a property owner to a real estate agent. This agreement specifies the terms under which the agent is authorized to act on behalf of the property owner in various capacities, primarily related to the sale, rental, or management of the property. Section 3 of the PPRA (Property Practitioners Regulatory Authority) code of conduct states that property practitioners are unable to perform many, if not any, tasks without a mandate thereby making a mandate a legal requirement for all parties involved. As part of the mandate, the seller will be required to provide several documentation in terms of FICA. The documents include

• Copy of the seller/s ID
• A utility bill (not older than 3 months)
• Documents pertaining to the property. 

Section 48 of the Consumer Protection Act (CPA), a mandate agreement needs to be fair, reasonable, and clear. This ensures that the terms governing the mandate are correctly outlined, leaving no room for confusion when it comes to canceling or renewing the agreement. A mandate should include the following terms: 

• Scope of services to be rendered by the Estate Agent in terms of the mandate
• Type of mandate entered into (e.g. sole, open, or multi-listing)
• Duration of the mandate (Section 14 of the CPA dictates that mandates may only run for a fixed and specified term, of not more than 24 months.
• Purchase Price
• Estate Agent's commission and payment terms in respect thereof
• Any other specific terms that are applicable to the mandate

Types of Mandates in Real Estate

• Sole and Exclusive Mandate.

An exclusive mandate grants a single real estate agent or agency the sole right to market and sell the property within a specified timeframe. During this period, the property owner cannot appoint another agent or sell the property privately without breaching the agreement. Exclusive mandates are often favoured by agents because they ensure focused marketing efforts and potentially quicker sales due to reduced competition.

• Open Mandate

Contrary to an exclusive mandate, an open mandate allows the property owner to engage multiple agents simultaneously. The agent who finds a buyer or tenant is entitled to the commission. Open mandates provide property owners with more flexibility and broader market exposure but can sometimes lead to diluted marketing efforts and confusion if not managed properly.

Why Mandates Matter

Mandates are crucial in real estate transactions because they define the scope of authority and responsibilities between the property owner and the agent. They help streamline the sales process, clarify expectations, and protect both parties in potential legal disputes.

Choosing the Right Mandate

Deciding on the type of mandate depends on various factors such as market conditions, the urgency of the sale, personal preferences, and trust in the selected agent. Property owners should carefully consider their goals and discuss the pros and cons of each type of mandate with their agents before making a decision. Working with your agent/s is key in any mandate. Asking agents for a CMA (Comparative Market Analysis) to determine the correct price of your home will ensure that your agent will achieve the goals set in the mandate. While some agents may charge for a CMA of your home, Smiths Property Group believes in offering free CMA to our clients as knowledge is key. Contact us if you would like to know more about this service.

Understanding mandates in real estate empowers property owners and agents alike to navigate transactions effectively. Whether opting for a sole & exclusive, or an open mandate, clarity and communication are key to ensuring a smooth and successful real estate experience. To find out why pricing your home is important, CLICK HERE.