MPs will be asked today to ban ‘double charging’ by estate agents.
In practice, this could outlaw so-called For Sale by Tender arrangements whereby sellers pay an admin fee, usually of around £300, and the successful purchaser pays the estate agents ‘an introductory fee’ which is usually some 2% of the price.
An amendment to the Consumer Rights Bill is being tabled by Stella Creasy, the outspoken shadow consumer affairs minister and MP for Walthamstow.
Her proposed reform would make it illegal for an agent charging a seller also to charge fees to a buyer.
She has been leading a campaign to make the practice illegal, saying she saw it first in her own constituency and has had complaints from around the country.
An earlier amendment to the Bill, which would have banned letting agents’ fees charged to tenants, was tabled by Creasy and was defeated.
That defeat was along political party lines, with the vote being whipped. Labour has said it will ban fees if it wins power at the next election.
It is not clear whether there will be a whipped or free vote today, or whether – as happened with the letting agents fees issues – the Government will step in with a last-minute amendment of its own.
If it does, it is likely simply to demand clarity.
It is also not clear whether Creasy’s amendment, if successful, would allow a loophole by which agents using tender arrangements would charge sellers nothing at all.
The Consumer Rights Bill will be debated at the Report Stage and Third Reading this afternoon. It will then move to the House of Lords.
Comments (9)
It may be interesting to read the clause regarding fees in the tender pack of one agent using this method. It's pretty generic and little different from others I have seen.
" An introduction fee of 2% + VAT of the contracted sale price or £2,000.00 + VAT (whichever is greater) will be payable if the tender bid is accepted and a sale results at any time. This fee is payable for execution of the introduction
only, not for any advice or service to the buyer.
XXXXXXX Estate Agents Limited remains duty bound to their client seller at
all times. This fee becomes due for payment on exchange of contracts. The total fee will be confirmed in our memorandum of sale and must be lodged with the purchaser’s legal representative prior to exchange of contracts and
settled by the purchaser’s legal representative within 10 days of completion of the sale."
Another point is that most vendors are unaware that they duty of care falls to the client paying the fees. So if an agent is charging varying fees to the buyers, they will be more inclined to put forward offers that are paying them the most in fees.
I am seeing a considerable number of vendors and buyers who expressly dislike the new format of this tender and opt for the more common vendor-client.
I don't understand what more "admin" is needed above what we are required to do for a Private Treaty offer. If this passes, it won't affect me as we don't charge the prospective buyers anyway.
Excellent news the double charging of the seller client in a private treaty sale is unacceptable and will lead to abuse if allowed to continue. Clearly as EW points out nothing wrong in the principle behind sales by tender full or sealed bids. The auction scenario is somewhat different in that the bidding process is open and transparent and the premium paid by the buyer is on top of the price set at the fall of the hammer. Any premium is after the event.
Hugh – you are of course correct, however one of the principle complains is that the seller isn't getting the best price if the buyer has to factor this into the offer. This applies to the auction process whether on top of the sale price or not – they still have to find the money. We agree, however, on the underlying principle of transparency rather than outlawing a label. 🙂
Whether the practice is right or wrong nothing should not be decided without a thorough, industry lead report. This is another case of Stella Creasy picking up something she has seen being debated by agents and immediately looking to table an amendment about it. Not so much aimed at protection of consumers more about a spotlight on her!
Whilst I agree that double charging should be outlawed, I am not sure that informal tender is the process that should be attacked, rather the double charging element. I have come across many situations where informal tender has been a great benefit to the seller and we marketed the property as 'Sale by Informal tender' detailing clearly the fact that the buyer would be required to pay our fee. This has benefiting those in negative equity, IVA's and imminent repossessions. On every occasion, we provided an information sheet which was attached to the memorandum of sale and copied to the Lawyers. It didn't make us greedy or dishonest, rather finding a solution to a clients problem. The only difference was that we didn't charge a 'marketing fee' as on most occasions, the seller really couldn't afford that either.
Tender, formal or otherwise as well as auction results in charges to both parties by a single agent.
If you sell a painting, the auctioneer gets around 15-20% from the seller, and another 10-15% from the buyer. I recall a decade ago when Sotherby's and Christies were accused of commission fixing as well. That's one thing agents don't do.
I agree some agents are using it as a quick win and applying the practice simply to generate instructions. The blanket "we will sell your house for £200" is wrong as much as it would be wrong to put every house to auction.
Surely the key issue is one of transparency. Rather like tenant fees, these knee jerk reactions where politicians lead agent haters with burning torches to head offices around the country are seemingly headline grabbing. They really need to engage with industry and understand the practical applications.
Worked right it can benefit buyers who say 'Im nothing any buyers fee, but you'd best put my offer forward under the Estate Agents Act'
The catch could be used to in fact to catch out crafty agents. This new term for sale by tender is very different to the for sale by tender of not too many years ago. …….
Whilst I welcome the intervention, the fall out will be yet more finger pointing at "greedy agents". Sale by tender is nothing new but this evolution was ill thought out and has the potential to hurt all in the industry.