"Buyers are being told their offer to purchase the property will not be put forward for consideration to the seller unless they agree to additional in-house services offered, such as mortgage advice or legal services."
According to the reports, negotiators at these agencies are essentially intimating to prospective buyers that their offers to purchase a property will not be put forward for consideration to the seller unless they agree to additional in-house services offered, such as mortgage advice or legal services.
After speaking to brokers, Newspage says it seems some corporate estate agents are using people's desperation to buy and the sheer strength of demand in the market to sell in-house advice.
However, most brokers are keen to stress that the majority of estate agents, especially small independent ones, do not use these ‘conditional selling’ tactics.
Rhys Schofield, managing director at Peak Mortgages and Protection, said: "I won't mince my words: many agents are repeatedly breaking the law and don't give a damn about it because clients are too scared to complain for fear of missing out on properties. Connells in particular crop up time and time again on the broker forums. In fact, I have been collecting evidence for a contact to take to the Association of Mortgage Intermediaries meeting next month and have an inbox of unethical and in some case illegal examples from other brokers as well from our own clients.
"The most shocking story I have been sent is: "I suspect it’s the same old story but I have a client that found a house they loved. They put an offer in through Connells but didn’t hear anything. They called to chase to be told that the vendor had gone with someone else. Strange as they are first-time buyers living with parents and they offered full asking price. A few things didn’t add up so I encouraged them to put a note through the front door of the house. The vendor called them and said that they had only had one offer from a buyer that was using Connells to do their mortgage and they said no-one else had made an offer. He thought this was strange as my clients had spoken to him on the day about how much they loved his house and he was waiting for their offer. The vendor withdrew the property from sale with Connells and is selling to my clients and now I’m the go-between for the vendor and the client who are are going to the property ombudsman. They totally lied about putting my clients' offer forward and they also, prior to this, told them that they would be on the ‘A List’ if they used their in-house mortgage broker and the ‘B List’ if they didn’t and therefore would never get first dibs on a property even if someone came in after them. So wrong. This client is willing to go on record as well as others."
Rob Peters, principal at Simple Fast Mortgage, commented: "The key issue is that some estate agents appear to be misleading potential buyers, and at the potential financial detriment of those selling a property. Buyers are being told their offer to purchase the property will not be put forward for consideration to the seller unless they agree to additional in-house services offered, such as mortgage advice or legal services. Clearly, by the time a buyer gets to the estate agent, they've usually already checked they can get a mortgage and for how much. There's often an existing relationship with a mortgage adviser, supported with paperwork to evidence this, known as a Decision in Principle. High volumes of feedback from both customers and brokers indicates some estate agents are refusing to accept confirmation or documents provided which evidence the buyer is 'fit' to proceed, instead insisting they speak with their preferred in-house mortgage adviser. This is often followed by the unlikely justification that 'the seller has requested this' specific method. The unfortunate result is that buyers are being misled into using services they would not have otherwise wanted or needed, with potential additional cost, in order to have their purchase offer put forward. Sellers, meanwhile, are not benefiting from higher sales offers they might otherwise have received, resulting in a lower price achieved. At best, these practices are unethical and irresponsible, at worst, illegal.
"As someone who has spent many years ensuring customers get the right outcome (and enforcing a correction when they don't), it's very disappointing to learn this type of thing is still going on. It's reminiscent of archaic sales tactics best left in the past; tactics that resulted in widespread customer reviews and billions of pounds in financial compensation being paid. This behaviour needs to be stamped out as it it penalises buyers and sellers alike and gives the majority of what is a professional industry a bad name.
"Estate agents are bound by the rules such as the Code of Practice for Residential Estate Agents and The Property Ombudsman. Both of these are very clear that making a service, such as mortgage advice, conditional on presenting a property purchase offer is not allowed. It's not a new issue, but one that seems to have become worse. If the industry can't work together to resolve it, a closer look at regulation needs to be taken to ensure consumers are protected and bring the industry forward and away from practices that belong in the dark ages.
"It's equally important to understand that this does not apply to all estate agents, most do an excellent job for their clients but, as ever, it is the minority that is tarnishing the reputation of the many. However, there do appear to be big company names that are repeatedly mentioned as culprits."
Lewis Shaw, founder of Shaw Financial Services, added: "I've had numerous cases of estate agents trying to push financial services onto my customers; in the last three instances, they've all been part of the Connells or Countrywide groups, specifically Bairstow Eves, Frank Innes and Burchell Edwards. They're pushing this idiotic line of 'we have to financially qualify them' even though all the customers in question had agreements in principle. I spoke to the estate agents and said you don't need to do anything of the sort, and their reply was 'It's company policy'. I'm waiting for the 'no we didn't say that' so I can download the recorded phone call and it can be used as evidence for all to hear. It's illegal, unethical and a violation of consumer rights. These corporate estate agencies aren't good enough to win business by providing a great proposition and service, so they use blackmail and coercion instead. Often these in-house mortgage services have limited panels, are never whole of market or independent and push heavily loaded life insurance premiums, often from only one insurer - you guessed it - the one that will pay them the highest commission rates and that rinses the consumer. It's time this practice was banned, and a proper punishment was put in place."
Financial Reporter has contacted Countrywide for comment.
