How can a sales authority influence a purchase outcome?

Buyers don’t often think about the vendor’s paperwork with the selling agent but unearthing some details can sometimes make the difference between missing out on, or securing a good property.

Our Victorian legislation requires a selling agency to hold a formalised Sales Authority with the vendor prior to marketing their property. The Sales Authority stipulates the agent’s appraised value, the vendor’s asking price, the format and amount of the sales commission, all marketing costs authorised by the vendor and the period of time that the authority is valid for (among other things). 

It’s important to note though that there are different types of authorities. 

Ranging from Auction Authorities to Private Sales Authorities, Conjunctional Sales Authorities and critically, whether the authority is General or Exclusive will potentially impact not just how the vendor approaches the sale process, but how the agent does.

Some sales campaigns are better suited to a specific type of sale authority and the following are just a few examples of such;

• A sought-after, popular style property in a healthy/strong market will probably benefit from a public auction approach. In this case an auction will likely attract competing buyers who are prepared to bid against each other for a figure that exceeds what could have been possible in a private sale situation. The social proof (ie. buyer justification to continue stretching above a comfortable or logical figure) often delivers a stronger result for vendors in this situation.
• A conjunctional authority approach could be a suitable method when the preferred agent believes that another industry colleague could assist with the sale to optimise the vendor’s chances of a good result. This is often (but not always) the case when a vendor selects an agent-friend who they trust whom is ‘out of area’. The agent will opt to partner with a local agent and a suitable commission split will be agreed upon, regardless of who introduces the buyer.
• A  General Authority may be contemplated in a regional town or remote area where the buyer reach is limited and/or the property is rare and unlikely to sell quickly. It could also be employed when a very rapid sale is absolutely necessary, although this is not a position that any vendor would like to see themselves in.

The General Authority basically enables the vendor to have multiple, hungry sales people working on their property at any one time and they only pay a commission to the agency that signs up an agreeable offer and executes the contract. Any others are not remunerated and the vendor pays just the one commission and any advertising they are liable for.

Unlike the Exclusive Authority, the vendor can have multiple agencies working on their property sale and they are not locked in to working with just the one agency.

Some vendors like this approach, but unless it is employed for specific reasons as noted above in the examples, it can actually result in a disservice.

First and foremost, once appointed, an agent likes to feel trusted. A vendor who ‘hedges their bets’ or ‘pits opposition agents against each other’ won’t win hearts.

More importantly, agents know the old saying “he who inspects, collects.” In the case of the General Authority, an agent can work tirelessly on their buyer list but if an opposition agent beats them to an acceptable offer, all of their work is in vain and they will miss out on any sales commission altogether.

What this does is impact agent behaviour.

Instead of taking their time with various buyers to identify the strongest buyer with the highest offer and best terms, an agent will be more motivated to just get the sale done before an opposition agent does.  With the clock ticking and the vendor letting the agents fight it out, they are more likely to be quickly presented with an acceptable offer (as opposed to an optimised offer).

Buyers won’t necessarily be aware of what is happening until upset bites.

They may have had keen interest in a property, only to find that in the final stages of formulating their offer or finalising their due diligence, the agent calls them with the disheartening news that unbeknown to her/him, the sale contract with another buyer via a different agency has been executed. 

Everyone loses in cases like this. 

….the disappointed buyer, the agent who could have workshopped the highest and best offer for the vendor, and the vendor who has dipped out on the differential that the stronger buyer may have been able to offer.

Not that this doesn’t sometimes happen in the same sales office under an Exclusive Sales Authority, because we all know of situations where it has happened, but in those cases it’s less acceptable, less likely and more broadly, quite frowned upon. A sales agency is meant to be committed to striving for the best possible price and terms for their vendor, regardless of individual salespersons’ greed. Some agencies manage this better than others, but in our travels as Buyers Agents we find that most agencies have clear and fair methods for inter-agent sales competition. With today’s sophisticated CRM and Buyer Tracking systems, it’s common for buyers to receive an SMS or a call when a property they have expressed an interest in receives an acceptable offer. Some agencies have a policy that the sale process is kept open for 24 hours in an effort to offer every interested buyer a chance to participate. From closed tender bids, to boardroom auctions, to phone calls back and forth, most agents have a defined policy.

Things are different when a General Authority reigns.

Any office principal will prefer to see their team get the sale – and buyers certainly won’t all be alerted when an offer is on the table.

There are some situations that trigger us to ask an agent “Do you hold an exclusive authority on this property?” They may include;

• An unadvertised ‘off market’ property,
• A property that languished on the market for a while and was later withdrawn and is now for sale ‘on the quiet’, or
• A property that another agent from a different agency has previously told us about.

While we treat any notice of a new listing as an opportunity, the type of authority will often dictate how we approach the offer process. Trust, speed to act, maintaining firm control of exactly when and how the offer is to be presented, and being mindful of the fact that competitive negotiating against other buyers is likely to be less rigorous, are all valuable ingredients to our tactical approach.

There are specific reasons for vendors to opt for a certain authority type but unless the reason is a valid one, a General Authority can be a costly path.

Buyers should ask the question if they are suspicious about the exclusivity of the listing, the strength of the relationship of the agent to their vendor, or if they are cognisant of the need to move quickly.

And they should remember that in situations like this, their agent definitely wants to make the sale and will be more likely to give them some pricing hints.

It is sometimes the one occasion when buyers and their agent are actually on the same team.