Pressure on to open up the sales process
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The OFT thinks the property transaction system would benefit from a healthy dose of competition, and one way of providing that would be to ditch some outdated rules that are limiting access to the market
KEVIN PATERSON: SALES AND MARKETING DIRECTOR ASSURANT INTERMEDIARY
A recent report by the Office of Fair Trading suggests that the property transaction system in this country could do with a shake-up. It has put forward a series of recommendations that could open the gates to a flood of new entrants.
It has been known for some time that many big consumer names have been looking to enter the property sales sector but the OFT believes existing rules are preventing many of these players from taking the plunge, in particular the 1991 Property Misdescriptions Act which makes it a criminal offence for those acting as estate agents to make false or misleading statements about properties put on the market.
The OFT believes that many of the big players that have shown an interest in entering the market via online offerings are effectively being prevented from doing so by these rules and believes it’s about time that situation was changed.
It feels rules are stifling competition as they stand, encouraging a closed shop situation to continue with little or no choice given to consumers.
Current rules allow a monopoly situation to continue, with little choice being given to consumers
am pretty sure the two top players known to be looking to get into the property market - Google and Tesco - have been lobbying to get these seemingly archaic rules changed and would sell properties online for a flat fee rather than a percentage of the sale price as is currently the case.
Last year Tesco was forced to close a website that allowed customers to sell their homes for a flat fee of £199 because of the restrictions imposed by this law. Estate agents are generally able to charge fees of between 2% and 3% of the sale price by effectively matching sellers with buyers. But as we increasingly look to the web for solutions the value-added aspect of the service offered by agents has slowly eroded.
Today there are a few large property portals used by agents and in many cases the internet is now the first place would-be buyers turn to rather than trawling around the shops.
Even the dark art of valuing a property is much easier today with the amount of information available online, whether this is through property portals or the Land Registry. And getting comparisons to set reasonable prices is no longer a process shrouded in mystery.
The OFT does not believe that everybody will abandon the traditional agency route.
But it does want to shake things up and put pressure on the model to encourage greater competition.
When websites don’t have all the answers
Which? recently carried out a survey of the main price comparison websites and found that none were delivering a reliable service, with only three in 10 consumers trusting the leading brands.
Two-thirds believe the sites are promoting deals that earn them the most commission.
Research firm Defaqto has also found that there are significant flaws in comparison sites that consumers should be aware of. The most important of these is that no single site covers the whole market, despite claims they might make to the contrary.
Both organisations criticise price comparison sites for being inflexible when it comes to choosing excess periods in comparing providers.
Excess periods can have a significant effect on the premiums clients pay. This means that quotations with high voluntary excesses can appear cheaper, just to manipulate their position up the comparison table.
Equally, some quotes have default settings that could reduce premiums but not offer the right cover for clients. This could leave them exposed in the event of a claim.
For example, some buildings and contents quotations make the assumption that the house is occupied all day, which is unlikely to be the case in reality.
And a number of sites still have technical difficulties in getting quotations from providers so they can return differing results for the same details.
The reports from Which? and Defaqto highlight what we have all known for some time - that face-to-face advice takes some beating.
’80s revival
I remember selling mortgages in the early 1980s when we didn’t get proc fees and rates were set by the Building Societies Association.
At the time lenders insisted that existing customers got the best deals. Anyone applying for a new mortgage had to open a current account before being considered.
A recent report shows that more than a quarter of deals from high street lenders are only available to existing clients and almost half are reserved for those with current accounts.
