Both the National Association of Estate Agents and The Property Ombudsman Christopher Hamer have demanded that estate agents make the practice of sale by informal tender common knowledge to potential bidders.
The controversial practice whereby buyers are footing the agent’s fee rather than sellers, means that buyers can expect to pay more in agent’s fees than in stamp duty.
While the seller still pays a small fee, this is normally no more than £300, whereas the buyer is charged a rate as high as 2.4 per cent.
Speaking to Mortgage Strategy a NAEA spokesman says: “In whatever instance a fee is levied our Code of Conduct is clear that all agents must be upfront and transparent about the fee being charged.
“Agents must highlight at the earliest opportunity any additional or unforeseen fees that may affect transactional decisions.
And Hamer says: “full disclosure of how the concept works and transparency need to be applied.
“There should also always be the option for a traditional transaction to take place.”
Leading estate agents including Haarts, Arun Estates and Waterfords have all come under fire from a number of industry experts for adopting the practice.
Sole broker Jonathan Burridge says the practice is deliberately contributing to rapidly increasing house prices, while John Charcol senior technical manager Ray Boulger says the practice “highly dubious”.
Estate agency industry trainer Adam Walker says the practice is “utterly indefensible” and undermines the basic principles of estate agency.
He says sellers are being hooked by the prospect of not having to pay a fee. But when prospective buyers are then snagged by the condition that they will have to foot the bill, the agent is setting up a massive conflict of interests.
While sellers may be incentivised by the prospect of a great deal, Walker questions whose interests the agent will actually be working for.
The answer according to shadow consumer minister Stella Creasey is the agents themselves, as informal tender provides them with “a nice fat fee from the buyer and the seller.”
The NAEA’s former chief executive Hugh Dunsmore-Hardy says the practice is going to restrict the market as many buyers would not wish to add agents’ fees to all the other costs associated with buying.
He says: “Equally, I would be interested to know if these agents make it clear in their online property adverts that it is the buyer who is expected to pay their fee.”
If estate agents are found to be selling properties using this form of informal tender unadvertised, either online or in branch, then they will be in breach of both the Advertising Standard Authorities requirements, and the Consumer Protection from Unfair Trading Regulations 2008.