A seller is contacted by a purchaser who, upon seeing the seller’s property advertised on Property 24 through an agency, wants to make a private offer, excluding the agency from the deal.
The purchaser maintains they had found the property by using Google. However, the seller will still be liable for the agent’s commission. This is because the purchaser would not have found the property if the agency did not advertise on Property 24.
The scenario is the same if a purchaser sees a For Sale sign and knocks on the seller’s door.
The agency will still be entitled to their commission, as per their mandate agreement with the seller even if the agency itself does not conclude that sale.
But why is the agency still entitled to that commission? The answer, Effective Cause of Sale.
What Is Effective Cause Of Sale
In simple terms, an Effective Cause of Sale means that through the efforts of an agent/agency a successful sale of a property was concluded – this entitles said agent/ agency to a commission.
In our example, the marketing efforts of that agency effectively caused the private sale. Therefore they are still owed a commission.
Sellers need to understand the full implications of signing a mandate with an agent or agency. If a seller has decided on cancelling their mandate, they should still be aware of Effective Cause.
For example, if the seller concludes a private sale, after a mandate has expired, with a buyer that was introduced by an agent/agency – the agent can still claim commission.
To avoid this, sellers should procure a full list of clients that have been in touch with the agent regarding their property.
In some cases, potential buyers will visit a seller directly, and enter negotiations, without letting the seller know that they were introduced to the property via an agent.
Othertimes sellers are under the impression that they are free to enter a private sale once their mandate has expired, without paying commission.
This is why it is vital to understand your mandate agreement.
Are you planning on selling your property? Do you need expert advice on the transfer process? Get in touch with our conveyancing experts today, and we will help you navigate the sale of your home.