I thought this would be an interesting article as everyone has an opinion about this. I warn you, if you are easily offended then please don’t read this article as I am going to call this topic how I see it.
General agencies used to be quite popular up until the early 1990’s and were more commonly found. If you talk to agents that worked predominantly under general agencies, there are some interesting stories to say the least. It was in some ways a little bit like the wild west because it was “free for all” on the listing. You had to make sure you found the right buyer and then get that buyer to the property first (as it is an open listing). The drawback of this method, is that it effectively becomes a race to get an offer to the vendor (any offer), which is not what the process should be about (hint: it’s about getting the best offer.)
Another disadvantage as a vendor is that you never really have a fair opportunity to assess the market and make better-informed decisions because there is no single plan of attack for the marketing. Also, the Vendor does not know if there are any potential better offers out there, because there is no effective co-ordination of the property.
In essence the benefit of having a sole agency is that you have one professional to look after you (the client). Often a big misconception is that if you have more than one agent, then you’ll get lots more buyers. The reality is that there is only one pool of buyers for your property
The danger of segmenting your buyer pool is that you will have too many chef’s spoiling the broth. I have had the unfortunate experience of looking after clients on a general agency where another agent from another company was also working on the listing. I brought my clients a good offer from the market and the other agent told them that he was working on a better offer and not to take my offer. The other “better offer” never made it to paper and another “two better offers” never eventuated and the property was eventually sold for $20,000 less than the original offer that I had presented. If that property had been under sole agency, the vendor would have been able to make a more transparent decision know more facts about the 2nd buyer (which they held out for.)
The other important note with sole agency is often as the client you’ll be better resourced by the company, and you can also expect a higher level of service as a client. The cold hard reality of a general agency is you may have appointed 2 (or more) people to look after you, but you actually haven’t appointed anyone to be accountable for and responsible to you. Under a general agency many agents will bring buyers to that property if they get an enquiry on it. They won’t actively market it beyond the normal channels: Web, and office window.
Well the best analogy I have for this is one from my colleague Alan. He says “Imagine you go to work for a month. Then at the end of the month the boss calls you into the office and says ‘Look Andrew, you’ve worked hard this month but Dave has too, and I can only give this month’s wages to one of you. But I’ll tell you what. Let’s flip a coin and see who’s lucky.’ Would you go and work at a job for the promise of the flip of a coin for your wages at the end of the month?”
The biggest danger for Vendors on a general agency, is that the can make the wrong decision on an offer because they don’t have the full picture. I.e. What other perspective parties are doing relative to the offer they have received.
With sole agency the vendors get:
- Information on what all buyers are doing, and where their interest lies relative to any prospective offers made
- The benefit of better feedback from their chosen agent (as the agent knows what’s going on with all other parties)
- The security of knowing whatever decision they make, they make it knowing all the facts.
Sorry if it seems a little harsh, but I’m not pulling any punches here. General agencies generally are very general… if you get my drift.