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Buyers Mandate: What You Need to Know about Brokers Working for Buyers

The Real Estate Agents Authority (REAA) mandates that brokers working for the seller put the seller's best interests ahead of buyer desires, which means those brokers work to get the highest possible price for their clients. REAA rules also state that brokers can't quote properties they don't have a listing for, which can put the buyer in a riskier position, especially if they are new to the process of real estate or business transactions. One thing that can help buyers in such situations is working with a broker of their own via what's called a buyers mandate.

The Buyers Mandate Is Helpful in Niche Transactions

While it's rare in New Zealand for brokers to work on behalf of buyers, it's becoming more common in certain niches. Buyers mandates are agreements between brokers and buyers that ensure the broker works on behalf of the purchaser's interests. Some areas where a buyer's broker might be helpful include:

  • Locating properties or businesses that match the buyer or renter's needs
  • Inspecting properties or assisting the buyer in obtaining information necessary for the transaction
  • Acting as a proxy for the buyer at auction for bidding purposes
  • Acting as a proxy for the buyer during negotiations with the seller

The buyer's broker can't also be the seller's broker. However, the buyer's broker can work for a company where the seller has a property listed as long as another broker is handling that listing.

In the accommodation sector, the buyers mandate lets brokers provide expert assistance to those looking for a new business, which can be helpful regardless of the buyer's comfort level within the industry. Brokers have access to more information than is usually available publicly, making the search for a new hotel or motel business easier. Professionals who work regularly in the accommodation industry are also more likely to spot potential pitfalls or problems with businesses, bolstering buyer ability to negotiate for the best possible price. When buying a motel, a buyer's broker ensures that details such as rent reviews, lease tenures, age and condition of chattels and maintenance concerns are all discussed and accounted for in negotiations.

Possible Disadvantages of the Buyers Mandate

For the broker, buyers mandates do come with a few caveats. First, the broker must be careful to avoid any conflicts of interest, as they put his or her license on the line. That might mean taking extra steps to ensure a figurative wall between the selling activity and the buying activity of the transaction — particularly if the broker works for the same company as the seller's broker. Second, because the commission from the sale always goes to the seller's agent, the buyer's broker must negotiate a separate fee with his or her client and collect that fee via separate business processes. The benefits often outweigh the disadvantages, though, especially in niche industries. Specifically, the broker is able to market his or her services to even more clients.

While buyers mandates offer plentiful benefits for the buyer, including the fact that brokers must be licensed by the REAA and comply with the Code of Professional Conduct and Client Care, there are some disadvantages. Most notably, the buyer must pay for those expert services, bringing up the overall costs associated with purchasing a new business. In many cases, the added expense is well offset by the savings obtained through professional negotiation or educated buying decisions supported by broker knowledge.

The buyers mandate can be an ideal tool for both brokers and buyers looking to get a little more out of transactions in the accommodation sector.


For further information about this article, contact your nearest LINK Business Broking office at: