No-one can deny that multi-listing services (mls) in South Africa sell a whole lot of South African real estate. These multi-listing services (mls) are organisations that band together various real estate agents and real estate agencies in a orgaisational structure where the mandates of the members are shared and open for any other member to market.
Multi Listing Mandates
In order to market your home through most multi listing services or "mls", you are required by these organisations to sign a "letter of authorisation". This is in fact an exclusive mandate of sorts. Some multi-listing services are very up-front about this, and print the word, "Mandate", in big bold letters at the top of the document. But it is still surprising how many multi-listing service clients are unaware that they have in fact given a sole and exclusive mandate in favour of the multi-listing service.
The difference between this mls mandate and a proper exclusive mandate is that it brings with it many of the disadvantages of an open mandate and more - with none of the advantages of an exclusive mandate!
Let me explain:
You have to sign a mandate that gives real estate agencies affiliated with the mls the exclusive right to market your home. Sellers are often told that all agencies will market the property, which is a lie!They should say, "all mls agencies", or something to that effect. The majority of real estate agencies are not affiliated with any mls and are therefore forbidden to market the property! An mls mandate signed because of such a creative relation of the truth, is not worth the paper it is written on.
South African common law requires that the mandate giver have the intention to give a sole and exclusive mandate. So, people who were duped into signing any mandate, including an mls mandate, will have strong grounds to declare the mandate null and void.
I have to say, and I'll probably end up saying this a few times throughout this article: Not all multi-listing service agents are like that. As in any area of life, you will find a number of bad and crooked apples!
Pricing Honesty
Mls agents compete against each other to be the first real estate agent in the multi-listing service to list your property. The listing agent receives a part of the commission from a successful sale. I have no problem with sharing commission, in fact, there are huge advantages to the buyer and seller, but many unscrupulous agents will take the listing at an inflated price just to secure this share of commission.
It is true that the seller decides on the asking price, but a real estate agent has to give an opinion on the market value of a property, if asked. This value opinion has to be based on statistics of comparable properties that have recently sold (if such sales have occurred). An agent should never quote an inflated price in order to get a listing. Such deception is a transgression of the Code of Conduct for estate agents.
Sellers, NEVER EVER appoint a real estate agent on the basis of the price they quote for your home. This high price might seem attractive and flattering at first, but the true horrors of overpricing soon become apparent. The worst part is that the crooked real estate agent doesn't even care! He knows that, in order to sell, your price will have to drop over time. The price will drop and drop and drop and drop and eventually sell. It might sell well below the actual market value, but the crooked real estate agent eventually gets paid - No matter what! How nice for him.
No, not all mls agents are crooked.
OK, you've avoided the first pitfall and listed your property with an multi-listing service (mls) at a market related price. What happens now?
Open Hour
Open hour or Open day! On this joyous occasion legions of mls agents are herded through your home. The real estate agents have a quick look around and write a price on a little card. The host agent, or someone else frome the multi-listing service, will gather up these price cards and either compile a neat list of the various price opinions, or you will simply be informed about the average price opinion. This price is based on thumb-suck! Too few of those mls agents are area experts who based their price on actual recent sales that are relevant to your property. OK, ok, ill stop moaning about that.
Some sellers love the idea of open day and hordes of agents, because they feel it gives the property great "market exposure". But they are agents; open days give "agent exposure", not market exposure! Often very little actually happens after this. The price might be too high to interest buyers to view and offer, but the seller doesn't know that, because the next disadvantage of multi-listing service real estate mandates come into play:
Who Is Responsible?
When hoards of real estate agents and real estate agencies all have a stake in selling a property, who is responsible for being frank and open with the responses buyers have? No one! Why would one real estate agent reveal buyers' arguments about your asking price. This might prompt you to lower your asking price, and unless that real estate agent can get an offer in soon, another mls agent might swoop in and sell it from right under his/her nose!
Who is responsible for selling the property? Everyone...no one... When hoards of real estate agents and real estate agencies are all allowed to sell a property, who do you grab by the collar to get some answers about the unsuccessfull sale? Remember, they told you, "All the real estate agencies will market the property!"
As with open mandates, the agents compete to find the first acceptable offer, not neccisarily the best one. An agent with an offer to purchase in hand will most probably much more motivated to "sell" you that offer than he/she was to "sell" your house to prospective buyers!
Control over the multi listing selling process is weak at best, but negotiating a favourable commission is much trickier with an mls mandate. The mls mandate very clearly states an agreed commission of approximately 8% (usually 7% plus VAT). To change the commission cut is near impossible, because at least two agencies have a vested interest in the commission. The listing agent doesn't have to be flexible - Someone else will bring an offer at full commission...eventually...
No, not all mls agents will leave their sellers in a bind like that...
You Will Lose Control
What happened to the control, security, accountability, feedback and favourable commission that an exclusive mandate should bring? To me, it seems that there are many pitfalls to the multi-listing service phenomenon in South Africa.
Many real estate agents LOVE their multi-listing services, because this arrangement offers them some very attractive opportunities and advantages. But real estate agents are sales people, and I wonder if their sales-pitch to property sellers kinda gloss over some of the negative aspects of selling with an mls agent...
