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Government to enforce estate agent-broker referral fee disclosure as ban considered

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  • 09/04/2018
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Government to enforce estate agent-broker referral fee disclosure as ban considered
Estate agents must disclose any fees they receive for referring borrowers to mortgage brokers, as part of government plans to shake-up the sector and stamp out ‘rogue’ agents.

 

The Ministry of Housing is also considering the case for banning estate agent referral fees altogether, especially for new build properties.

Agents will now be required to hold a professional qualification and be transparent about any financial gains made from passing clients to solicitors and surveyors.

It comes after it was found a quarter of sellers would use a different agent if they were to go through the process again.

As part of plans to crack down on gazumping, the use of voluntary reservation agreements will be encouraged and buyers will be strongly encouraged to get a mortgage decision in principle before they start home hunting.

There will also be a timeline for local authority searches to give buyers the information they need within 10 days.

And managing agents and freeholders will have to provide up-to-date lease information for a set fee and to an agreed timetable in an effort to eradicate leaseholders being left at “the mercy of freeholders and their agents”.

The government said it will now work with industry to standardise the presentation of estate agent referral fees so that customers are aware of financial arrangements before they purchase.

 

Changes do ‘not go far enough’

 

Brokers were divided over the government plans.

Dan White, managing director at broker White Financial Services, said: “I think the government plans are very positive and proactive.

“It is only right that the agent is transparent about the referral schemes they are involved with, especially if it results in them benefitting commercially from recommended services.

“For far too long certain agents have forced upon clients their own recommended services, using ‘specialist products’ or ‘we can ensure the process runs smoother’ as an excuse to hide behind their commercial arrangements and in-house targets.”

Nathan Stacey, Independent Financial Adviser at Continuum, added: “I think this is a very good development, more transparency in the industry can only be a good thing for clients.

“Potential buyers have often felt pressurised to use the ‘in-house’ broker; I have had many examples where an estate agent will not accept an offer unless their mortgage broker has personally issued a decision in principle.”

But the changes to the estate agent sector will not solve the key issue of referring customers from one side of the company to another, said adviser Sebastian Riemann from Libra Financial Planning.

He said: “The largest concern surrounding the referrals between estate agents and mortgage advisers is where these are owned by the same company.

“In every case the estate agent, solicitor and broker benefit from a purchase completing, however it should be in the best interest of the clients.

“As such the disclosure of referral fees addresses the issue partly.

“All in all, the new plans aren’t overly new and don’t go anywhere near far enough.

“Unless radical change is introduced the outcome will be largely unchanged.”

 

Rogue agent clampdown

 

The government said the changes will drive up standards and bring an end to so-called rogue agents.

The National Trading Standards’ estate agency team is to be strengthened so they can carry out more enforcement activity, including banning agents.

Housing Secretary Sajid Javid said: “Buying a home is one of the biggest and most important purchases someone will make in their life.

“But for far too long buyers and sellers have been trapped in a stressful system full of delays and uncertainty.

“So we’re going to put the consumers back in the driving seat.

“We will require estate agents to hold a qualification so that people are no longer at risk from a minority of ‘rogue agents’ and can trust the process when buying or selling their home.”

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