Recent warnings from Trading Standards show a concerning trend among some estate agents involving “manipulating property sales” through cleverly crafted contract clauses. This manipulation could prevent higher offers from reaching sellers, potentially costing them thousands of pounds.
How Do These Clauses Work?
The crux of the issue lies in what is known as “conditional selling.” This practice occurs when estate agents withhold higher bids from sellers unless those buyers choose to use in-house services provided by the estate agent, such as mortgage brokering, conveyancing, or surveying. These services often carry hefty commissions, sometimes up to 60%, thereby incentivising agents to push their own services over better financial deals for the seller.
James Munro from National Trading Standards highlighted that some contracts include specific lines requiring buyers to be “financially qualified” by the agents themselves. This term can mislead sellers into thinking they are merely vetting buyers for financial stability, but in reality, it restricts offers to those who engage with the agent’s additional services.
Legal Gray Areas and Loopholes
Interestingly, while this behavior borders on unethical, it is not currently classified as an illegal act. Agents found practicing conditional selling might face a business ban by regulators, yet there are legal loopholes. For instance, if a seller explicitly agrees in writing to only receive certain types of offers, agents can legally omit other bids.
The Challenge of Enforcement
Enforcing these regulations proves complex. Munro describes it as akin to “whacking moles” or “nailing jelly to a wall,” highlighting the difficulty in catching and proving such practices. The enforcement largely relies on complaints and evidence provided by buyers, who often don’t realise the implications of opting for agents’ in-house services.
The Impact on Sellers and Buyers
For sellers, the financial implications are severe. They might lose out on thousands of pounds if higher offers are not presented to them. Buyers, on the other hand, face an unfair disadvantage if they do not choose to use the agent’s services, as their offers might not even reach the seller.
Robert Sinclair, chief executive of the Association of Mortgage Intermediaries, points out another disturbing advantage for agents. By financially qualifying a buyer, agents gain insider knowledge on the maximum amount a buyer can afford, potentially influencing the negotiation process unfairly.
The Need for Vigilance and Action
This scenario underscores a crucial need for vigilance among both buyers and sellers. Sellers should scrutinise the fine print of any contract with an estate agent, specifically clauses about buyer qualifications and offer conditions. Buyers should be wary of being pushed into using in-house services that might not necessarily be in their best interest.
Ultimately, the integrity of the property market depends on clear, fair practices and the vigilance of those involved to uphold these standards. As this issue continues to surface, potential regulatory changes and stricter enforcement might be necessary to protect both sellers and buyers from being manipulated in property transactions.