The Property Ombdusman has said that agents who sell through the modern method of auction must declare to sellers at the outset not only that purchasers pay, but that this could be a drawback.
A TPO spokesperson said yesterday evening that sellers should be made aware if it is buyers who pay the fee, that “this is a potential disadvantage of that recommended method of transaction, given that a buyer may vary their offer accordingly”.
The TPO said its advice was in line with its newly updated Codes of Practice, where 4a states: “When you give advice to someone selling their property, that advice must be in the consumer’s best interests and within the law.
“The potential benefits and disadvantages of any recommended method of sale must be explained in clear terms and taken into account.”
EYE had put queries to TPO after an agent contacted us with his concerns.
TPO updated its codes towards the end of last month, and in a covering press release, which was widely used, said: “Advice obligations have been strengthened to require agents to explain both the benefits and disadvantages of their recommended method of transaction at market appraisal stage, for example, modern auctions.”
However, the agent who does offer the modern method of auction yesterday said he could find nothing in the new code that specifically relates to this type of auction where buyers, rather than sellers, pay commission. Nor could he find in TPO’s codes what relevant pros and cons he should warn sellers about.
He was also unclear as how he should reveal the referral fee paid by his firm’s modern method of auction provider.
We could not find the specific guidance either and asked TPO.
On referral fees Peter Habert, head of policy at TPO, referred us to 2d of the Code of Practice, which is applicable in all cases.
This states: “If you intend to offer or recommend to consumers surveying, financial, investment, insurance, conveyancing or other services, or those of an associate or connected person, where the service provider rewards you for the referral by way of money, gifts or any other form of benefit, you must disclose this arrangement to consumers in accordance with the National Trading Standards Estate Agency Team’s ‘Guidance On Transparency of Fees Involving Property Sales’ 2.”
On the section in the new code about appraisals, there is also no mention of the modern method of auction.
However Habert told us that this was deliberate: “The wording for paragraph 4a has been kept generic because it takes into account any potential new or inventive ways agents may choose to transact property.
“The key point is that whatever form of transaction is being recommended, the agent must explain the advantages and disadvantages to the consumer so that they can make an informed transactional decision.
“This also leads on to 2e of the Codes which requires agents to complete a consumer fact find to ensure that any specific requirements are taken into consideration before a method of transaction is recommended.”
TPO emphasised: “There is not a separate section on auctions – the codes apply to all types of sale.”