Estate agents tell buyers their offers won’t be accepted unless they use the agency’s in-house mortgage brokers – an illegal practice that drives up profits.
Known as a conditional sale, it is against the law under the Estate Agents Act 1979, which states that buyers cannot be subject to discrimination or misrepresentation, and that agents are required to submit all offers to the seller in writing within 24 hours, unless the seller has told them otherwise.
Although agents can be prosecuted by Trading Standards for conditional selling, this does not appear to be an effective deterrent. Real estate professionals report that this practice is now more common as agents struggle to make the same money with fewer sales in a slowing real estate market.
If not all offers are passed on to sellers, it may cause them to accept less money for their home. Buyers may also be at a disadvantage and end up paying higher mortgage rates because they haven’t received the best advice.
Realtors make more money if a buyer uses their in-house broker as they receive a referral commission from the broker, or if they employ the broker directly they may receive a commission from the lender the client goes with.
Craig Fish, director of Lodestone Mortgages and Protection, said: ‘In the past month I’ve had two clients I’ve lost because they felt compelled to use the agent’s broker.
Kylie-Ann Gatecliffe, Principal at KAG Financial Mortgage Advisors, added: “I’ve lost count of how many of my clients this year were told by agents, ‘Your offer will only be offered if you use our broker.’ ”
The Property Ombudsman said a buyer’s refusal of additional services should not prejudice any offers or viewings made through the agent.
Nathan Emerson, CEO of Propertymark, the professional body for estate agents, said: “If an agent has an in-house broker or adviser, it makes sense that they carry out these checks. But an agent absolutely cannot withhold or block an offer made.
A potential buyer, Teona Jgerenaia, 33, said she recently felt compelled to use the services of an agent when looking to buy a house in Harringey, north London.
She said I“When we first started arranging viewings, our real estate agent said he offered a mortgage adviser and a lawyer. We said we weren’t interested, but they pressured us into taking a call from their adviser, they kept saying we needed a “second opinion”.
Despite an increase in recent times, this has long been a problem in the industry. Jonathan Rolande, spokesperson for the National Association of Property Buyers, said: “It is becoming more and more common. My advice to anyone is to beware. You have to ask yourself, why is it necessary and who is it for? »
Mark Harris, managing director of mortgage broker SPF Private Clients, added: “Buyers need to stand firm and refuse to be told which broker to use. Although the agent may recommend that the buyer seek in-house counsel, as many companies do, it is illegal to insist. The agent has the right to qualify the buyer on behalf of his client, the seller, but that is all he can do.
A broker said I that in one instance where they found out this had happened to their client, they went to the real estate agent and spoke to him directly about it.
David Hollingworth, a mortgage broker at L&C, said the downsides of going with an agent’s broker could be “they may not have access to the widest range of products and may also charge expenses.
“If there is an inference that the offer would not be presented to the supplier, this should be challenged and citing the code of practice could help here.”