The consumer representation group also highlighted the continuing pressurising of buyers to use in-house services such as tied mortgage brokers, and their failure to share basic property information.
HOA founder and chief executive Paula Higgins slammed many practices and asked estate agents whether they were fairly representing their client or just “working for themselves?”
It highlighted that consumers were left with nowhere to turn if they wanted the property because the agent was working for the seller.
Under extreme pressure
Speaking at the Westminster Legal Policy Forum seminar, The future for the home buying process, Higgins said: “We hear day-in day-out, and from our research, that buyers when they go to an estate agent they are under extreme pressure to use those in-house services.
“We know it’s not supposed to happen, but it happens, and buyers have nowhere to turn to because the contract with the estate agent is with the seller – there’s nowhere for them to go.
“They want that property, they don’t really want to get into an argument.
“So that is a real gap that is under-reported that I’m not sure the ombudsman will be able to take account of, which is why it’s really important estate agents get this basic information to buyers,” she added.
8% auction commission
Higgins continued by emphasising how important it was that the incoming regulation would have teeth and force estate agents to improve.
“It’s great we’ve got this estate agent regulation coming through – let’s hope it’s not just something on paper that they go and do a little online test, but that it is about enforcement,” she said.
“Where is this enforcement? Where are the third of buyers being pressurised into using [tied] mortgage brokers and not being allowed to look at properties – how are we going to support them?
“We have a situation we’re looking into where some of these auctions, and these are becoming more prevalent, where people are paying 8% commission.
“Let’s not have a system that the trade associations are very happy with, that protects them. Let’s have a continuous improvement,” she added.
Overall Higgins welcomed the incoming regulations and concluded that more transparency for estate agents was one of the biggest solutions, but questioned their potential conflict of interests.
“Estate agents, can you really make money off the buyer and seller in the transaction, or are you just working for yourself? I think that really makes things confusing for people,” she said.
The issue here is that nobody is policing the estate agents as when they take on a seller, they ask if they want them to ‘financially qualify’ all applicants and then they feel they have the ability to force them to speak to the in house advisor whether they want to or not. Clients feel they have no choice as otherwise they cant get the property. Agents are very much abusing their position in the transaction process.
Paul Smulovitch is quite right in his comments but the issues go even further. Estate agents suggest “financial qualification” of buyers to sellers as if it is a service to protect them, when in fact it is just a way of forcing the buyer to see their advisor even if they have an AIP elsewhere. These advisors often work from a small panel so have limited range and I have found often have limited knowledge. One Peterborough based estate agent uses this trick. They accept an offer for a property on agreement from the seller but insist the buyer has to see their advisor for financial qualification if they want to move forward, refusal means they recommend the seller reverses their acceptance of the offer. However their advisors are sooooo busy, that it will be 10 days or more before they can be seen. An appointment is booked but the buyer is not asked to take in any proof of income or bank statements, so how can they be qualified? Instead the meeting is a simple “type into the computer” exercise, showing the buyer the fantastic mortgages they can get them. When they are refused, they book another appointment again over a week away to check documents. In the case of my client ensuring it was 2 days after the expiry of his AIP. At that time, they said to my client who had the AIP I supplied, that no one could get him a mortgage and so refused to progress his purchase. The client has now found a property through a more reputable agent and the refreshed AIP with the same company has offered and is about to complete.
I have also lost mortgages to a national agent who advises the buyers that if they use their mortgage advisor the seller has agreed to reduce the price by £500. Would you reduce the price of your house so your agent can have that business. There is obviously some interesting influence be imposed on the seller to get them to sign that contract.
I have said it before in relation to lenders as well as estate agents, when will they all be expected to apply to the exacting standards that reputable mortgage have to meet?