An agent has reportedly stopped taking holding deposits from buyers when they have offers accepted.
The agent had earlier claimed that taking deposits cut fall-throughs markedly.
Guardian Money featured a purchaser, Jessica Rose, who said she was asked to hand over £2,000 to west London agent Brian Cox, who would then take the property off the market.
The newspaper reports that Rose and her partner found a semi in Greenford. They put in an offer for the full asking price of £400,000 saying they were cash buyers.
They were then asked to pay £2,000. On querying it, they were sent a contract stating that the deposit “is to be held by Brian Cox … in respect of your purchase”.
The couple’s solicitor advised them not to pay the £2,000 and the agent advised them that while their offer had been accepted, the house had not been taken off the market.
They say they were then phoned by the firm, told there had been another offer, for £402,000, and advised to match this and pay the deposit in order to continue to be considered.
They decided to walk away from the deal after Rose went on Facebook to ask what others thought. She was apparently advised to steer clear.
According to Guardian Money, she received a letter from one of Brian Cox’s directors.
The director told her: “Not all agents take deposits, but in a marketplace where offers are made and withdrawn without good reason on a regular basis, this system helps ensure we are agreeing a sale to a committed buyer that wants to proceed with a particular property, not carry on viewing and pulling out without giving a second thought to the seller (our client) …
“As a company, our abortive sale ratio has gone from 40% to 15% since implementing the deposit scheme.”
The couple have now raised the matter with The Property Ombudsman scheme, whose code of practice says that agents must not take pre-contract deposits.
A spokesman for Brian Cox told Guardian Money: “I’ve told the ombudsman we are stopping the scheme and are in the process of giving everyone their deposits back …
“It was an oversight. No one else has complained.”
Eye did contact Brian Cox to leave a message requesting a call back from a director.
Notably on Twitter, one person asked what was wrong with taking deposits on sales, when it is common practice to take holding deposits to secure rental properties.
The new anti fall-through product Gazeal hinges on both purchaser and vendor paying amounts into a fund that locks the deal.
The full Guardian report is here
“Not all agents take deposits, but in a marketplace where offers are made and withdrawn without good reason on a regular basis, this system helps ensure we are agreeing a sale to a committed buyer that wants to proceed with a particular property, not carry on viewing and pulling out without giving a second thought to the seller (our client) …”
Sorry Brian Cox but if your fall through rate was at 40% it’s time to stop blaming the buyers and start looking closer to home to try and address this problem. If you check that both buyer and sellers timeframes marry up before conducting a viewing, do thorough checks before putting forward an offer and finally chuck in some decent sales progression you could cut your 40% in half straight away without tarnishing your reputation by taking large deposits from already hard up FTBs.
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We occasionally ask for a deposit – usually £5000 0r £10000 depending up the price of the property however, we ask the buyer to lodge the deposit with their solicitor who will then give an undertaking to the sellers solicitor to hand over the deposit if the buyer changes their mind or withdraws without any reason (i.e. adverse survey or search). The benefit is that a fall through is very unlikely although we have had one, the downside is the length of time it takes for solicitors to agree to the conditions of the deposit. This discussion takes place before any searches are done or enquiries are raised so for quick sales its not really practical.
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We used to do this years ago, but it’s not worth the hassle. It will only hold up the sale by two or so weeks whilst the solicitors begrudgingly put in place a ‘lock out’ agreement, both in the knowledge that the buyers solicitor can quite easily get their clients money back should they not agree with anything in the contract, like an ‘i’ not being dotted correctly or a spelling mistake on page 33, section 4.24 of the lease.
I’d steer well clear personally.
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“It was an oversight” – “we signed up to the Property Ombudsman but weren’t aware of their code of practice”. Genius.
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Don’t be too hard on him, very few Agents read the terms sent to them by service suppliers. A number of agents have signed away protecting their data and their clients’ data through not reading order confirmation paperwork.
It is fine not reading detail that only affects one’s own business interests but when it come to compromising one’s client interest that is a different game again.
I have to say without wading through my copy of the RICS Blue book this seems to throw up a clash in what is and isn’t allowed.
I thought deposits were fine as long as interest over £500 was passed to the applicant. The Blue book has a whole section on the subject which I haven’t got time to read in full this morning although a quick glance at page 178 implies pre contract deposits are acceptable.
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WELL DONE, Robert – you’ve clicked another two ‘Dislikes’ and I can’t for the life of me figure which part of your post got you the votes.
And I guess we will never know.
Those that hit the ‘Dislike’ button think they are making a statement – and in fairness, they are.
They are saying that they have no argument to the contrary – they just don’t like something and want us all to know.
Better to snort before burying your heads in the sand, eh, folks – makes one feel all gooey inside. Dunnit…?
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I think Brian Cox had the right idea,if it was a refundable deposit. i agree with them that it’s too easy just to “chuck an offer” at something with no real intent. the mistake they made was insisting on holding it themselves. If they had had there vendor’s solicitor hold the deposit, it would have looked more credible. Mind you if they has a 40% fall through rate, they should review the strategy the adopt for qualifying buyers before their sale are out together. That would take it down by half.
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Why not just call it a reservation fee that will be deducted from the purchase price?
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We were working on a multi with another agent – our buyer put in a higher offer that theirs, they got butt hurt and demanded that we ask our buyer for a deposit of £10k! Needless to say our buyer didn’t like their demands and pulled out because of it, leaving the vendor with £20k less in their pocket after completion. This ‘other agent’ has just recently been bought by Hamptons International – I wonder if they’ll carry on these practices on their new Countrywide banner?
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Deposits work for new homes but not on re – sales.
That’s how it has been since the the late 80’s early 90’s when, I thought, most agents gave up bothering with pre contract deposits?
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If they are taking a deposit to ensure buyers are serious and want to reduce fall through rates, don’t book the sale until the buyer has spent money on solicitors, searches and surveys. When the buyer has paid money and both sets of solicitors are instructed in a complete chain, then book it. Fall throughs will reduce drastically and no falling foul of the TPO. All offers being qualified by the in-house financial advisor is also a pre-requisite. Most problems like high fall throughs are due to sales not being set up properly in the first place.
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