According to Trading Standards, estate agents may be costing sellers a large amount of money by withholding offers and not alerting them to all offers on their properties. This kind of manipulation in the property sales process is concerning.
This behaviour could severely impact both buyers and sellers financially. Buyers could spend hundreds more, and sellers could lose thousands because of certain terms within their contracts with agents.
Some estate agents make substantial commission, at times up to 60%, by referring buyers to associated companies for services such as mortgage brokering, conveyancing, and surveying. Some agents also make extra money by offering these services directly through other divisions of their business.
By law, withholding offers unless a buyer agrees to use the estate agent’s in-house services, known as “conditional selling,” is frowned upon. However, this practice is not technically illegal.
There are specific scenarios where agents can legally refrain from passing on an offer by having written agreements with sellers to only consider offers of a certain nature.
James Munro from National Trading Standards has mentioned that some estate agents are manipulating the system. Agents might include clauses in contracts that only accept buyers who have been financially vetted by them, which is a creative way of control.
Munro suggests that a judge would likely require explicit consent from the seller for such conditions to be valid and that assumptions made within a contract are insufficient.
Agents tend to require buyers to demonstrate financial qualification through their services, even if they have already secured a mortgage in principle through independent means.
A buyer’s offer may not be passed along if they decline to be financially vetted by the agent, especially if the seller’s contract stipulates acceptance of only “financially qualified” offers, thus allowing the agent to operate within the legal framework.
Tracking these practices and proving them can be quite challenging. Munro likens it to playing an endless game of whack-a-mole.
Trading Standards is worried that buyers who use an agent’s in-house services may unfairly benefit compared to those who do not.
Munro pointed out that some agents, particularly in larger firms, often earn more from referral commissions than from actual property sales.
Although they do receive information from organizations like Citizens Advice and various redress schemes, Trading Standards mainly relies on tips from the public to initiate investigations, limited by their resources.
Robert Sinclair, from the Association of Mortgage Intermediaries, expressed that when agents financially pre-qualify a buyer, they gain insight into the buyer’s maximum budget. This knowledge could give agents an upper hand as it might influence the sale process where they know a buyer can afford more than they are bidding.
Sinclair emphasized the importance of separating duties, warning that agents cross a line when they blur these distinctions.
For the original source of this information, please visit Property Industry Eye.
