Types of Agency Instruction

Published on 2015-07-06

Estate agency is organised into two distinct types of agency, namely sole agency and multiple agency, depending on the way in which instructions are received. There are advantages and disadvantages to both systems and they need to be assessed from both the viewpoint of the seller and the agent.

Sole Agency

Sole agency is when the seller gives instructions to one agency only to act in the disposal of land or property. These instructions will usually last for a specified period of time, usually a few weeks or a few months. Once sole agency instructions are confirmed, any buyer using an estate agency must buy the land or property through the appointed agency and the agent is entitled to be paid the agreed fee by the seller. It would be possible for the seller to avoid paying a fee if, for example, the seller found a buyer themselves without the help of the estate agency.

If an agreement is reached by a seller with two agencies, where both work together on behalf of the seller, they act as joint sole agents. The seller pays only one fee and the agents usually agree between them how the fee, which is usually higher than a sole agency fee, is split. Joint sole agency may be appropriate when a property lies between two towns.

As well as lower commission rates with sole agency, there is often a better relationship between seller and agent. Plus, the seller only has contact with one agent. However, an agent may not actively promote a sole agency property, knowing they will be paid regardless of when it actually sells. The agent may not be motivated to obtain the maximum price and sole agency may result in less exposure of the property.

Multiple Agency

Multiple agency, more prevalent in the south of England and parts of South Wales, is where the seller appoints more than one agency to act, with each agency acting independent of the others and thus in competition with one another. The successful agency is paid whilst the unsuccessful agency is not. Multiple agency instructions are usually more expensive than sole agency. Even if a sale is agreed with one agent, another agent can continue to offer the property in case that sale falls through. The quickest sale may not always be on the best terms for the seller. Also, there may be an inconsistency in the property details supplied by different agents potentially confusing buyers.

Sub-Agency

The practice of appointing other agents to act in a sub-agency capacity can occur in both sole agency and multiple agency areas, although it is rare. It is only possible to appoint a sub-agent with the authority of the seller. A sub-agent is instructed by the agent, not by the seller, and contracted to the instructed agent so there is no contractual relationship between the sub-agent and the seller. Sub-agencies can be used as an alternative to joint agencies where they offer a particular advantage such as greater coverage for the seller.

Categories: Residential Sales Best Practice