Sellers are losing thousands of pounds because estate agents are manipulating the offer process by failing to always notify them when an offer has been made for their property, Trading Standards has warned
The consumer body said buyers could end up hundreds out of pocket while sellers could lose thousands of pounds due to offers not being passed on because of the small print in a contract they have signed.
Trading Standards points to the commission earned by some estate agents – sometimes up to 60% – by referring buyers to partner firms which provide mortgage brokering, conveyancing and surveying services. They may even earn extra revenue by providing these services themselves through separate business arms.
Conditional selling – where an estate agent does not pass on an offer to a seller unless the buyer opts for their in-house services – is an ‘undesirable practice’, according to the law. However, it is not technically an ‘offence’.
There are exceptions to the rules. One way agents can get around this is if they have it in writing that the seller only wants offers of a particular type.
James Munro, of National Trading Standards, told The Telegraph: “Anecdotally, we’ve found agents can manipulate the offer process. One exception [to conditional selling] is if the seller says in writing that they don’t want certain offers.
“Agents get creative, shall we say, with the contracts they ask sellers to sign [before they list their properties]. We’ve seen them include lines such as ‘refuse buyers which have not been financially qualified by us’.
“If you went to a tribunal, it is likely the judge would decide that explicit consent was needed – and that an implied term of consent in a contract doesn’t count.”
Agents will often insist that buyers are financially qualified by an agent – even if they have already paid an independent broker and have a mortgage decision in principle, Munro said.
If a buyer refuses, their offer might not be passed on. But if the seller has signed a contract only agreeing to offers which have been ‘financially qualified’, then the agent is technically not breaking the law.
Munro said trying to catch agents in the act and evidence the practice can feel like “whacking moles” or “nailing jelly to a wall”.
Trading Standards is concerned that many unsuspecting buyers who opt for agents’ in-house services are gaining an advantage over those who do not.
Munro continued: “Big corporate factories referring out like this often employ agents earning more through commission than selling houses.
“We do receive data from Citizens Advice and the redress schemes, but we ultimately rely on people feeding us information which can trigger an investigation. We only have finite resources.”
Robert Sinclair, chief executive of the Association of Mortgage Intermediaries, said his greatest concern was that if agents financially qualify a buyer then they know just how much they can afford.
“This gives agents an unfair advantage, because they know what a buyer can spend even though they might be bidding for a smaller amount.
“It’s about segregation of duties. Agents transcend these boundaries at their peril.”
Agents forcing buyers to use their FS is rife. If James Munro and his team mystery shop all UK agents they will stop this. People have told me about agents near me who do this, an independent I can name and an agent part of Seqeunce UK who is owned by Connells who is owned by Skipton.
Some agents like Purple Bricks have built a business model based upon mortgage and conveyancing commission paying for the whole transaction.
James Munro needs to act on this. He says his resources are finite, maybe it would be easier if any fines go back to TS to pay for extra staff?
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Agreed Shaun. I will make as much public noise as possible about any provable instance of this happening. Without being publicly outed, the worst offenders will continue until stopped. They don’t care about the regulator, but I’m glad to see James Munro talking about it to the press.
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As a buyer you know that the in house mortgage person and solicitor will charge the most and provide the worst service, why would you use them?? They don’t have to be any good to attract business and they have to cover the cost of commission.
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Not always true, many great independent agents use very good local solicitors and brokers. Ones that they would actually use themselves, if not they shouldn’t be recommending them.
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Total and utter RUBBISH
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10 years ago I put a cash offer that wasn’t forwarded, knocked on vendors door “nobody told us” the agent said I was a messer so didn’t forward email-one more visit and production of a bank statement to vendor sorted the purchase.
Fortunately Agent out of business but I’d say 90% of agents are at it.
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Presumably, you reported the agent to stop this happening to others?
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90%? Can we see your evidence please?
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The statement; “Big corporate factories referring out like this often employ agents earning more through commission than selling houses’, is not true. It is also independent high street agents who are doing the same.
Who can blame them when they are obtaining £500 per conveyancing referral. The reality is that on one listing £1,000 could go into the estate agents’ pocket if both the buyer and seller instructed the estate agent’s pet conveyancer. £1,000 for what……having the gift of the gab and the power to manipulate the situation?
The whole underlying issue is the payment of referral fees, if the government had an appetite to ban referral fees then this could be monitored by forensic accounting audits of both the estate agencies and conveyancing factories. It is not good enough to have to rely on the receipt of data from Citizens Advice and the redress schemes, nor people feeding information which can trigger an investigation. I am sure that many of the consumers have no idea that they have been a pawn in the game of putting more bunce into the agent’s pocket.
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Personally, and I say this as someone who has worked both corporate and independent agency, and am currently at one where there is a minimal amount paid to us if a client uses our FS partner, I don’t think referral fees are the issue necessarily. As long as the service being provided is good, an agent will refer to them anyway, so it is just a ‘thank you’.
Pressuring clients to use a service is the issue. Our FS partner is good at what they do. They find good rates, and keep on top of things to move everything along. The 3 local solicitors we refer to, again, excellent at what they do, and the closest we get to a referral payment there is some wine and biscuits at Christmas.
And I would argue that financially qualifying a buyer is a key part of the job, however that can be done by a copy of the mortgage AIP and proof of deposit being shown… There is no need to force someone to see another FA. Offer, certainly. big up their service, sure. But after 2-3 “no thank you” responses, you gracefully bow out.
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I am struggling to see the point of these comments by Mr. Munro and indeed to reconcile them with his actions and comments in respect of material information (MI). This regulator has gone rogue – reinterpreting the law as and when it suits and straying beyond its regulatory remit with reckless abandon. Simultaneously, stating that performing its actual function is too difficult. If NTSELAT cannot perform its core functions then it is an ineffective regulator and should be scrapped.
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It does seem strange to me that an organisation that admits to being incapable of resolving trading standards feels qualified to advise on a matter like TA forms for which it is not qualified. There are enough complaints about the performance of some estate agents; that is clear. Surely, these matters are something NTSELAT should be doing something about. That is the point of a regulatory body.
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Good to see James Munro raising this with the press. No one will make a direct accusation with evidence, so it will continue until something else stops it. I am not intimidated by legal threats (have seen off several including from Purplebricks, Vebra and the Easy Group) and will happily publicise any verifiable instance of this happening. It’s defrauding clients and harming their onward life opportunities.
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While we are looking at agents ignoring the laws. I just checked four listings on Purple Bricks website, none have the required Material Information on. Will this be another law never policed? If so, is there any point having these laws?
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The guidance isn’t law, it is non-statutory guidance.
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The two words Legal Duty in this are important also the words criminal offence. These are James Munro’s words on MI, not mine. “Since the introduction of the Consumer Protection from Unfair Trading Regulations in 2008, all businesses in the UK have been under a legal duty not to omit or hide information which is material to a consumer’s transactional decision.” also “The material information should be prominently and clearly displayed in the property listing and should not be hidden, unclear or ambiguous as any of these failures could cause liability for a misleading omission which is a criminal offence under the CPRs.”
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This is absolutely true, however NTSELAT’s idea of what “material information” is and is not, has no basis in law.
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NTSELAT’s view will be greater than yours in a Court of Law. Of that I am sure.
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The party whose view is supported by the relevant law will be the greater, that’s how a court works.
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My gut feeling is that MI is here to stay, as is the new TA6 form. Therefore, the sooner agents and conveyancers begin working together, earlier, the better.
I am in the process of carrying out a survey of the BLG membership on the TA6 form for our conference in June. Responses are flooding in as I type this. The first 100+ responses make for interesting reading.
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Was this the same “gut feeling” you had about HIPs, Rob?
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HIPs went as sellers didn’t want the extra £300 initial cost. We don’t charge sellers to collate the MI info.
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HIPs went Shaun, because they didn’t do what they were supposed to.
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Rob – The Conservative Party, when in Opposition, stated that they planned to scrap the legislation, calling it ‘expensive and deficient red tape’.
On 12 May 2010 the incoming Conservative – Liberal Democrat coalition government announced an intention to scrap Home Information Packs. The requirement for property sellers to provide HIPs was suspended on 20 May.
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HIPs weren’t a gut feeling Colin they were introduced by The Housing Act 2004. And, therefore, as you put it earlier, “had a basis in law”.
You can block me on LinkedIn, but not here, unless the editor so deems. However, it really is about time you moved on from our little feud, and grew up a bit.
I’m off out now, have a pleasant evening.
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As always Rob, there is no feud. If you consider us to be feuding then it is entirely one way traffic. Publicly, I only criticise the things that you say, as they are often incorrect or harmful, just as I would criticise anyone else for the same offences. I do not attack your character or insult you as you just have me. You should learn not to take offence to people disagreeing with you.
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After 2 years of trying to buy somewhere in my hometown I would say they are all crooked.
So many times vendors went with lower offers or someone supposedly came in with cash offers.
One particular occasion we had an offer accepted on a lovely house but because it was of non-standard construction we couldn’t get a mortgage. We made a cash offer that was obviously less than the original offer and the estate agent told us the offer below our original offer was a cash, and that was that.
It being a small town I found out who I was bidding against. It wasn’t cash and they didn’t but it. I gather it went to someone else for considerably less.
It still annoys me because it would have being the perfect family home for us. But I eventually got another house, without the involvement of estate agents.
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What’s the deal here then Colin? the law isn’t actually the law till some muggins client has been convinced to take their case all the way to appeal where the legality of a change in legislation is finally tested?
The practical reality of CPR material information legislation is that an aggrieved buyer with a change of circumstance or a deceived purchaser who genuinely wasn’t given information they could or would have relied on to make an informed decision to view, offer or buy a property will most likely take their complaint to the redress schemes where someone will decide the merits of the claim based on what NTSELAT have set out as guidance.
Its going to be a foolish agent who decides to ignore NTSELAT guidelines given that providing material information reduces frustrated or abandoned transactions and educes the time between memo of sale and completion.
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I somewhat agree, Robert. My point was not that agents should ignore material information, and I do not profess to be an expert in consumer protection law. However, I have read the CPRs and spoken with some actual legal experts, and NTS seem to have widely overstepped the mark. As to whether or not NTS’ authority as a regulator would be sufficient to command a reinterpretation of the law I cannot say, but it does seem rather unlikely that NTS will be enforcing the guidance in light of the shaky legal ground that it stands upon, as well as Mr. Munro’s previous indication of reluctance to do so.
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The advantages of going beyond what NTSELAT are suggesting might be overstepping their authority but with over 1500 completions and anther 1400 agreed sales of properties that were made contract ready from instruction I am aware that a minimum 3 weeks ( an average 8 weeks) can be taken of the average time to exchange. With fewer aborted sales and a notable increase in market share I don’t care if NTSELAT’s guidance is not to everyone’s considered liking. It helps agents help consumers and significantly improve the house transaction process.
When consumers get wind they can whinge about most anything they can think of, it will be a very foolish agent who wants to run the gauntlet of the not very legal process of a complaint to their redress scheme.
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I am not an agent, so I will leave those decisions to agents. But it occurs to me that agents who ignore the guidance will get their clients’ properties to market faster and without cost, compared to agents who adhere rigidly to the guidance, who would need to (for example) obtain local searches, have a conveyancer check the title, and so forth, before even listing the property.
Again I’m not advising anyone to ignore the guidance, but I don’t buy the argument that agents will be better off for following it.
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Being compliant in any business will make processes slower and more expensive. The nature of the beast.
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Agreed.
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I have the numbers to prove they will, a rise in market share from 19% of completions to 37% and a significant reduction in aborted sales proved the system well before NTSELAT published Part A MI
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