View more on these topics

NAEA and Property Ombudsman call on estate agents to be upfront about informal tenders

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.

Recommended

Blackwell

Letters: Asset-backed products are the answer for lending into retirement

I was interested to read the comments made by FCA mortgage and mutual sector head Lynda Blackwell at the recent Financial Services Expo in Manchester about lending into retirement. Blackwell said that following the Budget announcement on pension freedoms, it made it harder for lenders to determine whether a borrower can afford a mortgage in […]

coverscot

Cover: All quiet on the Scotland front

The referendum on an independent Scotland is looming but many lenders are shying away from discussing the effect a yes vote would have on mortgages 

stats
1

Brokers say MMR is already tempering lending

Brokers and economists have clashed over whether policymakers should step in to cool the housing market after a seasonal dip in mortgage approvals. Last week the Bank of England published its latest money and lending statistics, which show total approvals rose 6.7 per cent year-on-year from 99,807 to 106,497 in April. But while approvals rose […]

Time for a new approach to asset allocation

Trevor Greetham, RLAM’s head of multi asset, introduces the recentlylaunched RL GMAPs. Asset allocation has become an increasingly difficult challenge for investors and advisers in the years since the financial crisis. Sometimes violent price swings in stock and commodity markets coupled with the collapse in the rate of interest on bonds have made it harder […]

Newsletter

News and expert analysis straight to your inbox

Sign up
Comments
  • Post a comment
  • The Cynical Broker 12th June 2014 at 5:24 pm

    As an ex-estate agent from some years past, it grieves me that the profession has fallen so low! “Boy with a thorn in his side” should try a level playing field and see how many cases he’d win if buyers weren’t encouraged to use the agents in-house adviser, with thinly veiled threats “that you’re more likely to have your offer accepted if you use our broker,” and if they refuse, being told that the property will stay on the market until they have received their mortgage offer.

    I still wonder how an in-house adviser can be seen to act for the borrower, when the company employing them is working for the vendor ? No conflict of interest there then!

  • Boy with a thorn in his side 11th June 2014 at 9:05 pm

    There are some good estate agency based brokers there are some bad ones. There are some good non estate agency based brokers and then there are some bad ones. Some customers should have a five year fixed rate others should have a cheaper two year deal. Some brokers are bad losers and feel they own their customers. If you do a good job, explain all the options and provide all the time and support they need why would they go anywhere else.

  • Derek Frost 11th June 2014 at 8:32 am

    Added to this “indefensible” tactic is the re-emerged practice of intimidating buyers in to arranging the mortgage through the agent on the premise “this will greatly improve the chances of your offer being accepted!”. We have hands on experience of this, our client describing it as “apalling, but what can we do?”.
    Greed is alive & well in estate agency!

  • The Cynical Broker 11th June 2014 at 8:19 am

    When o when will estate agents be formally regulated ? Until they are, their cowboy antics will continue, and nobody should be surprised at the depths they will sink to, to make ever larger sums of money.

    One area that buyers can protect themselves though, is by not using the agents in house (invariably panel based) mortgage adviser. Using a proper broker and getting decent advice is crucial and vendors of the property should do this as well. The quality of agency based advisers is not high and they tend to focus on cheap two year deals, rather than what’s the best option for the borrower!

  • Kevin Fairey 11th June 2014 at 7:50 am

    It is time Estate Agents were fully regulated like everybody else in the house buying process. Why haven’t they been ? They earn the most money for doing the least work. They need to be forced to adopt and aspire to professional practices.

  • Simon Town 10th June 2014 at 6:57 pm

    I’m with Mr Boulger on this one….just another example of why estate agents should be regulated….there are some real professionals out there, but unfortunately there is an element that is purely interested in making a quick buck….

    This method of sale is a nightmare for hard pressed FTB who are already struggling to find a deposit!

    Time for the minority to check their moral compass!

  • Malcolm Brogan 10th June 2014 at 6:50 pm

    As usual Haart are using underhand and aggressive tactics in their marketing, as a professional mortgage broker and estate agent for over twenty years and dealing with the likes of Haart and other nationals I can understand why we have such a terrible reputation with the public.

Close

Why register with Mortgage Strategy?

Mortgage Strategy continues to be the market-leading B2B mortgage publication in the UK, and provides trusted, independent insight with the aim of helping, promoting and analysing the latest developments for mortgage professionals.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Mortgage Strategy Events
Be the first to hear about our industry leading conferences, awards, webinars and more.

Research and insight
Take part in and see the results of Mortgage Strategy's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now