Rory Joseph, Director, and Sebastian Murphy, Head of Mortgage Finance, JLM Mortgage Services wrote this article for Mortgage Solutions, who have kindly given us permission to reprint it in EYE. Both men are scathing in their criticism of the tactics of some real estate agencies to push buyers towards their tame mortgage advisers. No doubt EYE readers will also get a glimpse of it…
When it comes to some aspects of current housing market practice, it feels a bit like advisers should keep their friends close and their enemies closer.
Of course there is a lot of talk in our sector about the collaborative nature of the UK property market and how we are all part of a puzzle that only ends when all the pieces are in place, but there are still some sections of our marketplace who seem happy to sell that same puzzle without all the pieces there.
For example, there is no doubt that this is a seller’s market, which means that potential buyers, especially first-time buyers, are in many cases driven – or more literally are not driven – on the way to the garden by some estate agents. .
Pressure from real estate agents and “advisers” on buyers
Talk to any mortgage professional, and we guarantee they’ll have a story or a dozen to tell regarding recent attempts by agents to shove a client into the arms of their financial services division, suggesting that if they don’t use those services they won’t see, much less secure the property.
We constantly receive anecdotal and first-hand evidence of this. Agents have limited stock to sell, and when it comes to them, it tends to sell out very quickly. This means they can be ambitious about values, achieve those values – even though surveyors often lower the value – and get the property to ‘sell’.
However, for some agents, the money they earn from these sales is not enough for them, and they can often earn more if they drive buyers to their “financial advisors” to secure the mortgage/life insurance commission. , charge a fee, etc.
The problem they have is getting these people to their “advisors”. So what better way to do that than to scare them away. Telling them that if they don’t use their advisor, they won’t see the good and certainly won’t see their offer presented to the seller.
Most of the time, this is aimed at unknowing first-time buyers, who might think these heavy-handed tactics are part of the “punch” of buying a first home. Who accept it when an agent tells them that they sell properties to the first two or three people who visit each time, and that they have to be part of that first group – and the only way to do that is to use their advisor.
Sellers get scammed too
And what about the seller? Well, the agents just tell them that people who don’t use their counseling services are “not serious” or “playing games”. The seller accepts this version of events and is blissfully unaware that the right buyer for his property, the buyer who might be in the best position, was not even allowed to see or had his offer presented.
We recently had one of our buyer clients who had exactly this experience. They (thankfully) knew something was up and came back to us to see if they should go the agent-advisor route.
At that time, we were able to indicate what they would get from this adviser. Access to a restricted panel of half a dozen lenders for their mortgage product; hugely inflated counsel fees for their problems; a requirement to use the agent-advisor’s conveyancing service which was also exorbitantly priced; a range of life insurance policies with big premiums and big commissions. We could go on. Essentially, they would be sold an inch of their life while feeling like they have to put up with everything to be able to see a property that they like the look of.
Of course, the problem is that, although this is totally immoral, the agent puts it in terms that don’t seem to break any rules – and what can the potential buyer do? We suggested they knock on the seller’s door and let them know about the situation and what they were being asked to do, in hopes that the seller could vote with their feet. However, by then that house might already be on offer, at which point it becomes much less of a concern for the seller.
The main culprits are the big corporate agents who bully people into taking grossly substandard consultancy services with, quite frankly, crap mortgage offers.
Which means we have to be on our guard here. The nature of the market is always competitive – that’s a given – but these companies actively strive to put the client in a worse financial position than they would be if they went through reputable consulting practices.
So let’s make sure consumers are aware of these practices and their consequences, and let’s make sure salespeople don’t give instructions to agents who ‘prey’ on customers in this way.
It is a practice that should be relegated to the past but is very evident here and now.
The original article on the Mortgage Solutions website is here.