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Brokers battle to beat the scourge of conditional selling ‒ analysis

  • 02/11/2022
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Brokers battle to beat the scourge of conditional selling ‒ analysis
Brokers have been urged to educate clients on the pressure tactics they are likely to experience from estate agents, pushing them to use the agent’s own mortgage adviser, in order to combat conditional selling.

The practice ‒ where clients are told that they must first have a meeting with the agent’s adviser before an offer can be made on a property ‒ has long provoked ire among brokers, and is not supposed to happen.

One brokerage, Access FS, has now launched a campaign against the tactic, developing a letter template which brokers can send to estate agents which highlights that conditional selling is against the sector’s code of practice.

And brokers told Mortgage Solutions that it is often the large estate agents who are most likely to employ such pressurising methods.

A questionable practice

Conditional selling is particularly rife among corporate estate agents, according to James Miles, director of The Mortgage Quarter, with the threat of not accepting an offer on a property without the in-house advisers being used.

He continued: “This can massively impact the buyer’s choice as their panels are reduced and brokers fees tend to be higher. The estate agents regularly get called out for this but act as they’re ignorantly unaware. This needs to stop and some strong consequences passed by the regulator.”

Rita Kohli, managing director at The Mortgage Stop, agreed that it tended to be the large estate agents who engage “in this questionable practice” rather than local agents.

She added: “We had a case where we worked with a poor credit client for months to help them get mortgage ready; when they were finally able to start their looking and found their dream home, the agent basically refused to pass on their offer unless the client used the services of their mortgage services and conveyancer. 

“Needless to say, the client felt unduly pressured into using those services.”

Exploiting active market

Forcing buyers to attend face-to-face meetings with in-house advisers should not be acceptable, argued Jamie Lennox, director at Dimora Mortgages.

He reported hearing cases of agents exploiting the activity in the housing market over the last 12 months, with potential buyers only allowed early viewings should they have been “financially qualified” by the estate agent.

“Sadly, I’m sure many customers would have fallen for this trick due to fear of losing out on their dream property.”

Lewis Shaw, owner of Riverside Mortgages, said that there was nothing wrong with trying to compete fairly, but suggested that some estate agents will not take no for an answer.

He added: “Since when has it been a condition of making and having an offer accepted that a buyer has to turn up with their payslips to be qualified? Pull the other one; we all know what you’re up to.”

It can be a “terrifying experience” for first-time buyers, according to Ian Hewett, founder of The Bearded Mortgage Broker, which is why he tries to prepare them for the “devious tactics” employed by some estate agents. 

“Buying a home is stressful enough without this type of tactic being used.”

Downturn will increase tactic use

With market activity likely to drop next year, Lennox said it’s likely that conditional selling will become more prevalent.

He explained: “Profit margins reduced from selling fewer houses and an easy win to boost any profits are ramping up the pressure on buyers to use their advisers.”

Paul Neal, mortgage and equity release specialist at Missing Element Mortgage Services, said that conditional selling was a huge problem within the industry, impacting buyers and sellers alike.

He continued: “Buyers may not be getting the best deal which could be very costly to them, but also the seller may not be getting the best buyer. We have had clients buy on completely different developments because they were being railroaded into using a developer’s broker.”

Educating clients around estate agents

Shaw argued that it was clear that self-regulation wasn’t working, so it should be something that the government looks at.

“It’s perhaps incumbent on whoever is the housing minister for the next 48 hours to draft a fix to this practice. However, I’m not holding my breath,” he concluded.

Kohli said that education of clients was an important way to tackle the underhand tactic, so that clients know in advance what to expect.

“For example, if an agent says you have to use their additional services, ask for this in writing, or if an offer is being held ransom, tell the agent you’ll be submitting the offer directly to vendor – more often than not, this gets them moving.”

She added: “It’s disappointing really as there are some very good estate agents out there, but their industry gets maligned by the poor behaviour of some of the larger agencies.” 

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