Broker fees to agents should be scrutinised, says OFT
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The Office of Fair Trading has recommended that the government considers imposing new rules around referral fees paid to estate agents by mortgage brokers, as it says this practice may lead to agents favouring one buyer over another.
In a market study into home buying and selling published by the OFT today the regulator found no problem with existing legislation for estate agents, though called for the enforcement of current rules to be improved to prevent serious breaches by agents.
But the report also says: “The only area where the OFT recommends the government should consider additional rules is around fees received by estate agents for referring buyers to providers of ancillary services such as mortgage advice, surveys, and conveyancing.
“The OFT believes this could cause an estate agent to favour one buyer over another, to the seller’s disadvantage.”
The OFT is also encouraging more sellers to negotiate on estate agents’ commission.
It says that failing to shop around and negotiate could be costing sellers up to £570m a year.
The study also found that the housing market is dominated by traditional estate agents that do not compete strongly on price.
The OFT wants to see more innovation in the estate agency sector, particularly through the development of online services.
John Fingleton, chief executive of the OFT, says: “In the present economic climate it is more important than ever that consumers get a good deal when buying or selling a home.
“Encouraging new business models, online estate agents and private seller platforms could put useful competitive pressure on traditional models and lead to better value for buyers and sellers.
“The government can help this process by updating legislation and making sure regulation only applies where it is essential to protect consumers.
“We also encourage home sellers to negotiate hard on commission fees and consider using alternatives to traditional estate agents.”
Readers' comments (8)
Anonymous | 18 Feb 2010 4:26 pm
Does the government really need to tell people to "shop around"? I would love to see the amount of money charged to tax payers reduced by less of these cretins being in paid employment!!!
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Unlikely hero | 18 Feb 2010 5:12 pm
To annonymous at 4.26
Surprisingly all the research shows people don't shop around - imagine if they all did based on the IDD and KFI's and asked you to drop your price/rebate commission!
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Anonymous | 18 Feb 2010 5:57 pm
To unlikely hero...
I'm sorry - I don't believe their research!
I am not based in an estate agent and everyone I see has at least three agents out to value their property. Each agent quotes their fee and goes through their service.
I saw a client last week who had 4 valuations. They were quoted fees as low as £1500 + VAT and another at £2000 + VAT + 2 others at over £2,000. They made their decision based on the success the agent has had in actually selling property (as opposed to displaying "For Sale" signs outside property). There is also a difference in "service" (opening hours, accompanied viewings etc). They opted for the £2,000 agent.
I don't beleive the OFT research because they have their own agenda and have shown themselves to be inept at dealing with bank charges, 2nd Charges (First Plus) etc etc.
I suspect that there are ways of asking questions to ellicit an answer that justifies the existance of the OFT.
The market allows new entrants who can under cut each other. I've seen agents with fees as low as £500. I've seen those same agents go bust. I've seen new "online" agents come and go.
People want service and expertise - that's what they will pay for. Some people won't shop around, but who is government to tell them that they should?
Where the market is "over charging", new entrants enter and lower the price.
FYI #1 - no one can undercut me based on my IDD as I am whole of market and do not charge a fee.
FYI # 2 - from time to time I have rebated commission and I feel fine about it!
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Anonymous | 18 Feb 2010 6:06 pm
The Estate Agents practice of "giving" £2000 cash back to the purchaser for using Estate Agents Mortgage and Legal services must surely be investigated.
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Anonymous | 18 Feb 2010 6:54 pm
You only have to look at adverts by certain builders who make sales of properties conditional upon buyers using specific brokers and solicitors on their panel that demonstrates that the system of referrals in order to obtain additional income needs examining;also look how long estates agents have used the "excuse" that prospective purchasors must use the firms own financial advisors if they are to submit any bid to the vendor.
The system needs complete transparency and an elimination of the rogue practices of many of these Estate Agents many of whom pervade our high streets.
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Anonymous | 19 Feb 2010 9:58 am
I have an excellent Money saving tip:
Abolish HIPs. They are of no use to anyone, pushed through for political reasons and were created after a process akin to a negotiation in a primary school class.
Oh and whilst we are getting things done, lets get rid of oversized and over paid Government quangos. That would save us all £1000s per year!
Rant over...
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Anonymous | 20 Feb 2010 10:41 am
And how many brokers have experienced the "Home Buy Scheme" in action.
Having sat down and explained the scheme, got the client a DIP - clients are then forced by the builders to use "in house" advisors or they are told they can't have the property.
I wonder if the "in house" advisor has properly explained the 30% loan or the "New Build Premium" you pay?
The government has used public money to create a monopoly in the supply chain.
Nice secure jobs for the housing association, public money used to feather the builders nest, recommended advisors monopoly and then mortgage money likely to be given by a state owned bank such as RBoS.
Forgive me for thinking we live in Cuba or North Korea. OFT, where are you know?
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Calvin Oram | 20 Feb 2010 10:41 am
And how many brokers have experienced the "Home Buy Scheme" in action.
Having sat down and explained the scheme, got the client a DIP - clients are then forced by the builders to use "in house" advisors or they are told they can't have the property.
I wonder if the "in house" advisor has properly explained the 30% loan or the "New Build Premium" you pay?
The government has used public money to create a monopoly in the supply chain.
Nice secure jobs for the housing association, public money used to feather the builders nest, recommended advisors monopoly and then mortgage money likely to be given by a state owned bank such as RBoS.
Forgive me for thinking we live in Cuba or North Korea. OFT, where are you know?
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