The Property Ombudsman has this morning issued a code of practice on Sale by Tender, by which buyers rather than sellers pay the agent’s fee.
The code makes it clear that the agent’s primary duty of care is to the seller – as the one who has instructed the agent – and not the buyer, and that this must be made clear to all parties at the outset.
Agents are warned that they must ensure that any conflict of interest which might compromise their relationship with the seller is avoided.
A further warning is that agents cannot charge buyers an “exploitative” fee – in other words, it should not be more than an agent’s normal fee charged to a seller.
The code also makes it clear that the fee charged to the buyer will count as part of the purchase price and might therefore bump up the Stamp Duty bill.
Sale by Tender, by which prospective buyers submit an offer through a sealed bid process and pay the agent’s fee while the vendor is usually charged much cheaper admin costs, is “causing confusion” says TPO.
The new TPO code means that if member agents breach it, they could face disciplinary action and possible expulsion from the scheme.
The code says that buyers must be made aware at the earliest opportunity, in all forms of media, that the property asking price is accompanied by a statement that “buyer’s fees apply”.
Websites must allow for a click-through to a tender pack and FAQs.
The practice of Sale by Tender has not itself been banned – although it has been discussed by Parliament.
Ombudsman Christopher Hamer said: “The process of ‘sale by tender’, where the buyer meets the liability for an agent’s fee when purchasing a property, has been the subject of much comment in the press and in Parliament.
“While I have no regulatory powers and cannot dictate whether this practice should be used or not, I wanted to produce best practice guidance, in consultation with the industry, to ensure there is consistency across those firms that use this approach for certain house sales.
“The guidance places the emphasis firmly on transparency and disclosure to assist both buyers and sellers to fully understand the process and any fees or associated risks.”
The guidance is here
Personally, I am pleased this has been looked into but surely this practice should have been outlawed. How can an agent expect to be paid a fee by the vendor and purchaser for doing the same job, without there being a conflict of interest?
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I may point out this is from TPO not any other redress scheme (at this time) and that's if the members of TPO choose to follow the guidelines. So pretty much pointless! – Also strange to see eye are not running a story about the NAEA president having his leadership challenged as he is on the board of AM – NAEA is suppose to be there for ALL estate agents including internet based ones. Yet AM is opposed to internet based agents joining – As much as I dislike the "Online" model that's not exactly fair! – Why is this story not being run? is it because NAEA are a major sponsor of eye?
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As a regular property buyer (landlord) I just ignore any property that is on the market by “modem action” as the charges are just too high.
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