Find the right tenant: open vs sole agent mandates

Find the right tenant: open vs sole agent mandates

Private Property South Africa
Michelle Dickens

When it comes to finding the right tenant to place in your investment property, there are some important considerations to take into account when deciding on the type of mandate to give your rental agent. Michelle Dickens, managing director of registered credit bureau Tenant Profile Network (TPN), explains that there are some serious shortcomings to consider when issuing an open mandate, as opposed to a sole mandate.

Many property owners and landlords choose to approach a variety of different agencies with their request to place a suitable tenant in their property – known as an open mandate. “The assumption by landlords is normally that this method will be beneficial because it creates healthy competition between agents, and the landlord would then be able to take their pick from a set of highly considered options,” says Michelle.

High demand

“However, the high demand for rental stock right now means that it doesn’t take long to rent a property – there are a plethora of prospective tenants on the market. The result is that most agents only earn a commission on placements they secure,” Michelle continues. “Because agents know that their competition will be moving quickly, in many cases they end up recommending the first deal – as opposed the best deal – they come across, in order to keep up with the limited window of opportunity and avoid losing the deal completely. This ultimately means that the upside of finding a tenant quickly through an open mandate is far outweighed by the risk of placing a potentially bad tenant, which could end up being costly and frustrating for the landlord in the long run.”

On the other hand, when choosing to take a sole mandate approach with just one agent, the difficulty presented is that you won’t have the same competition between agents. “Many landlords assume that they will then not be able to negotiate on the commission offered. This isn’t actually the case, and landlords can in fact negotiate on the commission upfront, after which they give the agent the opportunity to go and source the best potential tenant for the property,” Michelle says. “Especially in the current market where demand for properties is so high, landlords think that it should be easy to find a tenant, but one in two South Africans have impaired credit so it isn’t as simple as just placing a tenant – you need to ensure you are placing the right tenant.”

Wait for the right one

“Don’t be misled by the fact that there are so many tenants seeming eager to submit their applications, deposits at the ready – this doesn’t necessarily mean they are the tenant you should choose. It is better in the long run to show your property to 10 different potential placements and take time to choose the right one, than to place the first person who has the right deposit amount and then end up dealing with the headaches of a delinquent tenant,” Michelle says. “It is definitely worth the wait for a good tenant, even if your property stands empty for a while during your search.” Landlords should also avoid placing someone who is trying to move urgently – this can raise questions marks, especially if it’s the middle of the month, such as the possibility that they are absconding from their current rental agreement, and the reasons behind it.

“You absolutely must receive a copy of a full credit report on the tenant before you go ahead and place a new tenant,” Michelle advises. “This simple action can save you from months, sometimes years, of financial, legal and time burdens on yourself.”

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