What is your view of agents charging prospecting buyers a pre-contract or reservation fee – and do you see any difference?
According to the Guardian, “growing numbers of home buyers are in effect being charged for the privilege of having their offer accepted” – a practice banned in Scotland but not illegal in England and Wales.
The Property Ombudsman code did state that agents should not take pre-contract deposits, other than when new homes were being sold, where developers commonly take non-refundable deposits. However, the code preventing agents taking such fees changed last October.
The code now reads: “Unless requested by a property developer, you should not generally facilitate pre-contract deposits. However, if you do, you must take into account specific instructions from sellers.”
There must be written agreements provided by agents which set out the circumstances in which the money would be used towards the purchase, returned to the buyer or kept by the seller.
Under the code, agents who take pre-contact deposits must have insurance and hold the money in a separate client account.
The Guardian now says it has been contacted by “a number of angry would-be home buyers who handed over cash to an estate agent and are now battling to get it back” after they withdrew from their purchases, typically on legal advice or because of poor surveys.
It cites two cases where potential purchasers handed over money before the TPO code was revised.
The Guardian quotes one of the agents involved as saying that it was not a pre-contract fee but a “non-refundable reservation fee”.
According to TPO Katrine Sporle, the updated code of conduct reflects market conditions where there are more buyers than properties.
She said that a pre-contract deposit “has the potential to give a buyer and a seller the confidence that the transaction is likely to complete – the potential for gazumping is significantly reduced, as is the risk of last-minute price negotiations”.
It’s something I have long thought a good idea but resisted to implement.
Especially in the market we are now in buyers and sellers are changing their minds.
There are a number of reasons to this.
1. Panic buyer due to lack of stock.
2. Sellers who have a buyer cannot find a suitable purchase.
3. Surveys are make terrible reading due to surveyors needing to cover themselves and advising purchasers to get individual reports on a host of points. The surveyors not taking the time to explain to their clients and finally clients not bright enough to read a survey.
4. Solicitors taking far too long to get a property to exchange meaning more issues are created.
5. Solicitors not problem solving just sending a letter and awaiting responses.
6. Internet agents who do not progress sales so a link is more likely to fall through.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
The most challenging aspect we face is buyers having an Agreement in Principle for the amount of mortgage needed…and then subsequently not getting through the ‘affordability checks’ after they have found their choice of property. Wonder where they would stand for getting there money back.
Surely the risk of doing just one of these and it then going wrong with all the assosciated adverse publicity, makes it a risk too far for most of us.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Their money back not there
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
While I have a degree of sympathy for selling agents wanting to make a charge for constantly having to sort out the purchasers ability to purchase with the various checks, that surely is what they are paid to do ( via the success based commission) by their vendor client? Similar to letting agents charging fees for prospective tenants and that could be outlawed in the future.
If a purchaser pays an agent for various checks does that purchaser then think that the agent will be acting for them?
Lack of knowledge of the law of contract understandably common with the buying public, and many agents.
I think another sensible discussion would be to consider charging vendors to register with a selling agent to handle their sale and this fee to be deducted from the final commission account so that only the serious vendors come into the market place and get rid of time wasters. Problem is that there will always be an agent who will take on properties with no up front fee. Discuss?
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
There is nothing wrong with deposits and ‘non’ returnable deposits so long as conditions are clear, fair and balanced.
Even non returnables have to have some ‘get out of jail’ clauses should sellers withdrawer or change from what was fair.
Sadly, the Guardian again appears anti property people and again has failed to do its research.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Careful, we’ll end up in the same kind of bind as letting agents.
Let’s assume a charge of £1,000 and a 25% fall through rate.
Unless the money is a purchase deposit that is transferred to the owner upon exchange (which could be fair I suppose) then all this is is a way to earn extra commission, and outside London at least, this would be an appreciable boost to office income.
Buyers who are desperate to buy will comply.
Then in a few years, politicians will get involved and curse “dodgy estate agents” once again.
I’ve never seen the point – I’ve been selling houses for 25 years and can only imagine how much harder and stressful this job would have been if I’d had to argue the toss every time someone pulled out because a property was downvalued or work that a layman could not be expected to account for was discovered by the surveyor and then the owner wouldn’t negotiate.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
As a buyer £100 would not put me off, if it resulted in the property being removed from the market and no other offers being able to be considered for 60 days. However when an agent is asking for 5% with a minimal of £5K, I just discount the property and look for somewhere else to buy.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register