A whistleblower has told the Telegraph of dodgy practices used by a large chain which she says mean only the agents win while both seller and buyer lose out.
One of the practices alleged is offering buyers a £1,000 incentive if they use ‘in-house’ conveyancing and mortgaging services.
In reality, the £1,000 is shaved off the offer price that vendors receive.
While it is well known that some agents do pressurise buyers into using financial and conveyancing services – and allegedly prioritise their offers – the payment of an incentive is less well known.
It appears from this weekend’s story that the whistleblower ‘Jenny’ – not her real name – still works for the chain, said to be in the south-east.
She told the paper that people put their ‘blind faith’ in agents, adding: “It’s all about selling mortgages these days.”
She alleged that although offers were being put through to vendors, they were being deterred from high bids from buyers with independent mortgages.
She said: “Most people for the sake of a couple of thousand pounds will go with the [offer] they’ve been told has more certainty.”
The Telegraph story states: “Sometimes a vendor agrees only to accept offers ‘financially verified’ by the estate agent, Jenny added, giving the estate agent free rein to reject independent buyers outright. And the tricks don’t stop there. Buyers at Jenny’s firm are told they can get a £1,000 ‘buyer’s incentive’ discount if they use in-house mortgage and conveyancing services – but in reality this is shaved off their bid to the seller.
“Buyers are also told they will become a ‘hot buyer’ if they see the estate agent’s mortgage broker, giving them special access to a ‘premium buyer’s list’ of houses only available to them.”
The Telegraph story alleged that Jenny’s firm makes £600 from each buyer who takes out a mortgage through the firm, as well as commission from the mortgage lender.
The unnamed firm is said by the Telegraph to have brokered £4.4bn of mortgages in 2014 – more than the £4.3bn it sold in property.
We all know the firm, and it is nothing new.
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Any fraudulent or criminal behaviour should be reported to The Police, Trading Standards, FCA etc.
Which part of that is not plain and simple.
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The bit where the police, TSA, FCA etc do the square root of nothing whatsoever about such reports……
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It’s not like this is somesort of secret:
https://www.sequencehome.co.uk/campaigns/1000-buyer-incentive/
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It’s so illegal that they advertise it on their website you lot on here genuinely make my day!!!!!!!
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ARC
You need to remember that EYE are simply publishing a report of an article in a major Daily.
You would therefore expect that such an eminent publication to have done ITS’ homework before potentially embarrassing itself – would you not?
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Not a criticism of EYE simply an acknowledgement of the fact that like the Daily Mail a lot of posters on this forum also don’t do their homework and check the facts before spouting accusations about illegal practices.
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AHHHH… I see!
Apologies – your post went over my head in that respect.
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No problem you’re forgiven!!
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Yes we do all know the firm, but to be honest, this practice is so well know, there may even not be a “whistleblower” the story could be completely made up. Even though we know this goes on, the rest of the “facts” are the things that buyers and sellers typically worry about and there is no evidence to support the claims in this piece.
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I agree – those in the industry know but consumers don’t.
The role of the panel manager is well known in the industry but consumers aren’t aware of the money that they take out of the process.
Especially when the use of panels actually results in a worse service to the consumer, according to agents we used to work with who have been forced to work with such organisations.
Surely it’s not a huge stretch to connect this rise of panel usage with the increase in transaction times and correspondingly high failure rates?
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“In reality, the £1,000 is shaved off the offer price that vendors receive.”
I don’t believe this part can be true. There would be discrepancy in the offer figures in the offer letters and Memo of Sale. The buyer would pick this up.
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I’m sure I have seen a contract in the past where the vendor signed to agree to this £1,000 ‘gift’ to the buyer.
We all know what goes on within certain ‘corporates’ where potential buyers are not allowed to see properties before they have had an appointment with the agent’s broker, they then are allowed ‘private viewings’ of houses before these are openly marketed (for which they sometimes pay) and their offers are favoured against other higher ones not using in house services.
At the end of the day it is cheating their vendor customers, in order to maximise their own profits…..cynical business, and also, I believe, illegal conditional selling!!
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I was given priority in Tesco the other day. As soon as they knew i had money they let me in! The beggar on the street couldn’t go shopping though, odd that innit.
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? and the point is?
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As others have said above, this isn’t a new story. But it is against practice and many consumers don’t not know before they are put in that position to make a decision. And when they are, they are so keen to ageee a sale that they will do what this agent is telling them to agree a purchase. Completely wrong.
A vendor of mine recently agreed a purchase through them. The agent wouldn’t take it off the market, even when the sale was agreed as they were not using their on house mortgage broker or solicitor. After a few threatening calls to pull out, it was finally made SSTC.
What I don’t understand is that the agent is in that small space of time, lost that buyer from ever using or recommending their services forever. It can’t be worth that surely?
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We all know it goes on and we all know the firms that do it. It isn’t ‘dodgy’ as the paper calls it, it’s illegal, plain and simple. Proving it will always be difficult unless the likes of “Jenny” go to the police/ trading standards as well as, the press.
If you work for a firm that does this, search your conscience and do the right thing: report your firm to your local TSO/ the police. Protection is now mandatory for whistleblowers.
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As I pointed out above if it’s so illegal how come they are advertising it on their website and as we all know have been for years as it’s nothing new and no one seems to have been bothered until this morning? Perhaps you could report them to the ASA!
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It wouldn’t be the ASA it would be the TSO and I have, in the past, reported this activity with certain firms to them and NTSEAT. The problem is proving it. Whistleblowers needed.
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Well it’s not an issue though is it as they are publicly advertising the fact.
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The incentive itself isnt the issue as such it is the restriction placed on those that choose to independently get financial advice not being shown properties or being negatively impacted because of it.
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The whole matter of referral fees and FS income to agents is a stain on the industry. It is the lasting legacy of the 1970s/80s entry of financial corporations into what was once the profession of estate agency. It is dressed up as being of benefit to the buyer and seller and an aid to making a sale go through more quickly and more certainly. Sometimes it does. Most times it is simply about enhancing the agents’ income. Nothing wrong with that except for the smoke and mirrors surrounding the whole thing – and the exploitation of the gullible public.
An estate agent should act solely for the vendor and derive nothing more from the transaction than the agreed fee/commission from the vendor. Anything else is a conflict of interest.
Puts on tin hat and ducks for cover.
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As fees get squeezed, more agents will turn to this sort of behaviour
I oppose all intro fees, including those from conveyancers, as we are here to get the best deal for our client not ourselves
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well that just makes them ******* & thieves
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Over a decade ago a certain corporate franchise was exposed on a TV watchdog programme in Wales for the practice of gazumping and gazundering its client for the same reasons. TS investigation disappeared into a very big confidential hole? The chain of agents changed their vendor contracts making it easy to hide what they are doing under “Qualifying buyers”. The practice is illegal under the Estate Agents Act and TPO code of practice as the “intent” is not in the best interest of the customer.
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Its only on selective properties – They obv have an agreement with the vendors. Non story if you ask me.
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And no doubt if their ‘gullible’ (pensioner?) potential vendor doesn’t like the sound of it and cant immediately agree, there is a ‘discount’ off our fee from 2% to 1.5% to cover the £1000 you will be discounting…. you couldn’t make up this stuff.
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Just for clarity it’s the agent that foots the bill for the £1000 not the vendor! The offer is agreed at say £200000 which the vendor accepts and receives but it ties the buyer in for the services which the agent in question will make more than the £1000 that the buyer receives.
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Have you got proof of it being the agent who foots the £1,000?
Like I have said, I have seen a contract where the vendor agrees to pay the £1,000 by reducing the buyer’s offer accordingly.
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Nice to see the comments above from J1 and Agency Insider reiterating the basics of estate agency and the obligations between agent and principal – a fact that so so many youngsters and possibly those not so yound fail to understand or even know about.
Our duty to our client comes first and foremost.
Having read the article on Saturday and then again just now is ‘Jenny’ fictitious, is the story made up by the journalist or is there a naivety about it. It seemed to infer that the agent was wrong to get a buyer to increase their initial offer ( albeit the knowledge that the buyer could afford was possibly obtained illigally)
Certainly nothing that anyone in the business would be surprised about but possibly the public maybe so its right to publicise the rogue goings on out there.
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Would it not be possible for the agent to provide a statement of income to the vendor on completion showing where they made their money.
i.e.
Commission £4,000
Mortgage referral fee £500
Legal referral fee £400
Total income generated from sale of property £4900
Obviously this doesn’t stop bad practice but it makes the agent accountable and a bit more transparent.
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I think you will find there is total transparency, as when ANY referral fees are paid the parties affected are notified in writing.
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As it stands, the Law requires you to disclose that you are receiving a ‘commission’ as a result of an introduction to a service supplier, but it does not require you to disclose how much.
TPOS Code clause 2c covers this – note the use of the word ‘should’. “If you intend to offer buyers surveying, financial, investment, insurance, conveyancing or other services or those of an associate (*) or connected person (*), you must by law advise the seller either separately in writing or within your Terms of Business (for example, but not only, in circumstances where a commission or referral fee could be earned). Any fee earned should be declared.”
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The estate agency act and New orders and regulations state that all reasonable care must be taken to ensure the purchasing ability.
As i understand it that means that phases like It should be ok or probably don’t carry much weight.
Lenders are more finicky than they have ever been as buyers are maxed out on credit and income multipliers in an inflated property price era. If you think that because they wear a suit and talk posh they must have cash your a numpty.
Oh by the way proc fee is about 0.45% so average mortgage in the south is 212k so fee is 954£ plus of course the arrangement fee generally £400 but often more and then the life sales commission approx £1000.. I would suggest that around £2500 is helping the lights stay on in many agents.
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Spoken like a true ex CW employee!
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Someone from CW knowing the Estate agents act, how rude!
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Lol not these days!
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Hello-Skipton ??
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Great Article, About time we start making the general public think twice about these con artists and scammers. Its an Illegal practice – discriminating against buyers who aren’t taking up additional services provided by the agent – where is the enforcement about this? A true shame that there is no governing body that regulates the industry.
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It is not illegal to offer an inducement. It is illegal-fraudulent-to lie to someone about the service on offer or the purported benefits of that service.
The point is that if what is said is a lie or misleading then the transaction is illegal.
It is also illegal to suggest to a seller that she can leave £1000 at the estate agent’s office so it can be handed to the buyer on completion.
Unless large sums are involved I bet the Police won’t care. Trading Standards should care and will usually act.
The real question is: “Why lie?”
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