The Authority to Sell
This article serves as a basic introduction to the Authority to Sell. What it is? Why is it needed? What are the basic pros and cons of doing an Exclusive Authority to Sell vs. a Non-Exclusive Authority to Sell?
What is an Authority to Sell?
The Authority to Sell, also known as Authority to Offer to Sell or Authority to Negotiate for Sale, is written approval by an owner/seller for his/her property to be marketed and sold.
Is it important to have an Authority to Sell?
Aside from the mutual protections provided to both the owner/seller and the Licensed Real Estate Broker, having a written, valid Authority to Sell is imposed by the Civil Code of the Philippines and mandated by the Professional Regulatory Board of Real Estate Service (PRBRES) of the Professional Regulation Commission (PRC).
Republic Act No. 386 – The Civil Code of the Philippines
Article 1874. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void.
PRBRES Memorandum – June 19, 2019
On June 19, 2019, PRBRES issued a memorandum mandating all Licensed Real Estate Brokers to first secure a written Authority to Negotiate for Sale or Authority to Sell from the owner prior to selling.
RE: MANDATORY COMPLIANCE FOR AUTHORITY TO NEGOTIATE FOR SALE OF REAL ESTATE / REAL PROPERTY
It has been reported to the Profesional Regulatory Board of Real Estate Service (PRBRES) that some licensed Real Estate Broker were selling real estate/real property(ies) without first (1st) securing a written Authority to Negotiate for Sale or Authority to Sell real estate/real property(ies).
Relative thereto, all licensed Real Estate Brokers shall be mandatorily required to secure first (1st) a written Authority to Negotate for Sale or Authority to Sell real estate/real property(ies) from the registered owner(s) or from his/her/its Attorney-in-Fact prior to selling thereof.
Failure to comply hereof, shall be subjected to adminstrative sanction with a penalty of suspension/revocation of license after due process.
Please be guided accordingly.
Components of the Authority to Sell
The Authority to Sell should contain the following:
- The date when the Authority was signed.
- Details about the property – location & address, title number, land area, floor area, inclusions, the selling price, and other pertinent details.
- Who is responsible for what: (a) notarial fees, (b) taxes payable to the Bureau of Internal Revenue (BIR) – Capital Gains Taxes, Value Added Tax, Creditable Withholding Tax, Documentary Stamp Taxes. (c) transfer tax to be paid to the Local Government Unit (d) the title registration cost, etc.
- The Broker’s professional fees or broker’s commission
- The expiry of the Authority
- A hold-over clause that recognizes buyers registered with the owner/seller during the period of the authority who proceed with a purchase after the expiry of the authority. The hold-over clause is usually granted for six (6) months from the expiry of the authority.
- The Seller’s signature that proves the granting of authority.
Exclusive or Non-Exclusive Authority to Sell
The Authority can be Non-Exclusive or Exclusive.
Non-Exclusive Authority to Sell
A Non-Exclusive Authority to Sell is used when a listing is shared with two, or more, Licensed Real Estate Brokers. If a listing is given by a seller to many brokers, veteran brokers sometimes refer to this listing, in derision, as a Listing ng Bayan. This is usually done by owner/sellers with the expectation that sharing it with as many brokers as possible can lead to a faster sale.
Pros: More potential eyes on the property.
(1) The sellers have to deal with many Licensed Real Estate Brokers.
(2) Licensed Real Estate Brokers do not invest effort and marketing funds to advertise the property since there is no exclusivity.
Exclusive Authority to Sell
An Exclusive Authority to Sell, on the other hand, grants only one Licensed Real Estate Broker the authority to sell the listing on an exclusive basis.
(1) The owner/seller only needs to talk to one Licensed Real Estate Broker. There will be no strange phone numbers calling your phone.
(2) Most established Licensed Real Estate Brokers are members of professional broker organizations like PAREB and REBAP or are members of private broker networking groups that share listings. These multiple listing systems (MLS) allow the listing broker to share the listing with the network. Licensed Real Estate Brokers with buyers for the listing can then collaborate with the listing broker. So even though the owner is just talking to one broker – it is possible to still get the same exposure to the property. (Important: Broker organizations require all members to secure a signed Authority to Sell before sharing a listing.)
(3) Important: the Licensed Real Estate Broker is incentivized and encouraged to spend on advertising and promoting the property since it is an exclusive listing.
(4) Exclusivity allows the licensed broker to have peace of mind in sharing the details of the property. Even in the MLS, most licensed brokers are very cautious before sharing the location details of the property since other less scrupulous brokers, and “colorum” agents, can try to contact the seller directly and “poach” or “pirate” the listing. Having exclusivity in place allows the licensed broker to provide details of the property freely – ensuring a faster information outflow that can result in a faster sale.
Cons: It could happen that you pick the inappropriate Licensed Real Estate Broker to list your property exclusively and there’s no assurance that it will be marketed properly.
So, it is best to begin the sales process of your property correctly – find the right Licensed Real Estate Broker, execute an Authority to Sell, and go with an Exclusive authority.
Talk to the broker – ask the broker how he or she will go about marketing your property. Check the brokers’ background and credentials.
And as we always say in PropertyMart – Get Professionals to Sell Your Property.