The suggestion that buying a house is one of the most stressful experiences in life is universally accepted. But brokers say stress levels are often being pushed to the extreme — unnecessarily — by overly forceful estate agents.
Conditional selling is by no means a new concept. An estate agent tells a prospective buyer they must use the agent’s in-house services (such as a broker or a solicitor) in order for their offer to be put forward on a property.
However, brokers are reporting that lack of housing stock and intense competition for clients have increased the prevalence of this shady practice.
UK Moneyman mortgage broker and managing director Malcolm Davidson agrees that the challenging market environment has intensified the use of conditional selling — something that has long been a bugbear of independent brokers.
I’m not sure what can be done other than bringing in tougher legislation, but is there any serious benefit for the government in doing so?
But some dubious practices have been identified as new and perturbing variations on this hard-selling theme.
Davidson points to a recent example of an agent’s claim to a client that the mortgage in question was an exclusive deal, which simply was not the case.
“The phrasing can often be misleading. For instance, the likes of NatWest offer dual pricing; so a market-wide offering and one to brokers. In some instances, therefore, you can see why the ‘exclusive’ tag is used. As a broker you can sometimes obtain a deal that an individual could not get direct from a lender. However, this is typically offered to a host of brokers, not just one.”
But, in the case that Davidson highlights, the deal was open to everyone, so the ‘exclusive’ claim had no basis in truth. It was just a tactic used to secure a sale and maximise commission.
Brokers vent their spleen
Adviser community platform Cherry has received widespread postings on this topic in recent months — with brokers’ horror stories of estate agents piling pressure onto housebuyers. The following are just a few examples.
A Panorama-style investigation, blowing the lid on what is an appalling mistreatment of customers, is what is required
– “The agent said: ‘If you don’t use our adviser, the sale process will be much slower and you could lose the house.’”
– “An agent insisted one of my clients (who had already sold his main residence and was buying another by porting 1.5% fixed for another two years) had to sit with their adviser to make sure that was the best deal. This was 12 months ago when rates were nearly 6%.”
– “The purchaser was not given the opportunity by the selling agent to increase their offer when declining ‘in house’ mortgage services; just a vague, ‘The sellers have accepted another offer.’ This practice is rife!”
Another case, also highlighted on Cherry, concerns a broker who had received a decision in principle for a client, which they gave to the estate agent before viewing it. The client was effectively ‘forced’ to see the agent’s broker and came away crying because she had been told that, unless that broker handled the mortgage, the agent could not guarantee the success of the purchase.
It is the larger agents that are usually worse; but it is smaller agents too
The reason given was that the estate agent’s broker could oversee the whole process through to a swift conclusion whereas a third party (the independent broker) would be unable to do so.
To compound the unpleasant experience for the client, it appears the agent’s broker had a limited panel and missed the mortgage recommended by the client’s original broker. They subsequently put forward a more expensive product.
The upshot is that the client has lost out, but she is afraid she will lose the purchase and has refrained from making a complaint.
One broker on Cherry cannot fathom why anyone purchasing from an estate agent would choose to use a mortgage broker employed by the same firm.
“It would be like trying to use the same solicitor that the seller is using; a conflict of interest where basically the estate agent in question is ‘employed’ to get the best price for their client, who is the seller!”
First-time buyers most vulnerable
Any reference to a ‘selling agent’ is significant and this is something picked up by Association of Mortgage Intermediaries chief executive Robert Sinclair.
“The agent is always acting for the seller and this is not always made clear nor fully understood by the buyer,” he says.
I’ve asked brokers to speak to their customers about whistleblowing. But clients are worried that whistleblowing will make the agent pull the property
This lack of understanding applies particularly to first-time buyers.
“I think first-time buyers are more vulnerable as they have not been through the process before, which is why all communication has to be as clear as possible,” insists Sinclair.
Marchwood IFA director and mortgage specialist James Gordon agrees that first-time buyers are vulnerable.
“I would say that the majority of our clients are experienced, pretty savvy and clued in to any sort of strong-arm tactic from an agent.
“But in the current climate where agents are likely after every inch they can gain — and with the market being quite a good one for first-time buyers, who are more susceptible to this kind of tactic — I’m sure it’s quite prevalent.”
However, it is not always a case of the buyer being hoodwinked; in many instances they are forewarned. But a seed of doubt is sown by the agent and fear of losing the prospective new home over-rides every other reservation.
The agent said: ‘If you don’t use our adviser, the sale process will be much slower and you could lose the house’
Gordon illustrates the point: “If a client tells us that an agent has said they ‘have to speak to their mortgage adviser’ to ‘qualify’ an offer, or even as far as they have to use their adviser to secure the property (hopefully that’s pretty rare), we will always tell them that they are under no obligation to do so and the agent isn’t technically allowed to do that.
“But ultimately, if they want the house, sometimes they will do what they feel they need to do.”
No real means of redress
Davidson is keen to emphasise that the estate agent’s in-house adviser is often blameless in this. The referral is pushed by the agent because typically there is a commission benefit.
And, since the estate agent is not regulated — by the Financial Conduct Authority, at least — there is limited course for redress. This, he thinks, has emboldened some agents to act dishonestly.
The majority of our clients are experienced, pretty savvy and clued in to any sort of strong-arm tactic from an agent
Given how few agents are ever challenged on this business ‘practice’, it could become the norm rather than the exception.
Sinclair points out that, although there are no regulations as such, there are industry-recognised codes of practice for estate agents. And, in his experience, when many of the big national agencies come across bad practice within their ranks, they are aware of the reputational damage and come down heavily on it.
Access FS chief executive Karl Wilkinson agrees that it is a minority of rogue agents who are damaging the sector’s reputation. Nevertheless, the distress being caused is significant and widespread.
“Other than for financial qualification, it is a breach of The Property Ombudsman’s Code of Practice for residential estate agents to enforce a conditional sale by mandating their own services. But the code has little effect on stamping out this illegal practice, leaving many brokers feeling helpless.
First-time buyers are more vulnerable as they have not been through the process before, which is why all communication has to be as clear as possible
“I’ve asked brokers to speak to their customers about whistleblowing. But clients are worried that whistleblowing will make the agent pull the property. It happens all the time and seems to be getting worse, not better.”
Davidson also acknowledges that, although there are some large estate agencies that encourage transparency, there are still plenty of high-profile names that feature on broker message boards for all the wrong reasons.
“It is the larger agents that are usually worse; but it is smaller agents too. In some instances, the culture supporting conditional selling comes from the top down; in other instances it is an agent who directly goes against the best practice laid down by their company.”
Wherever the sharp practices are being perpetrated, the question is: how can they be stopped?
Gordon says: “I’m not sure what can be done other than bringing in tougher legislation for agents, but ultimately is there any serious interest or benefit for the government in doing that?”
In the current climate, where agents are likely after every inch they can gain, I’m sure this practice is quite prevalent
Davidson agrees that, as things stand, there seems little motivation for the government to act.
Nor have there been any noises from the Labour Party on this issue and, regardless of political persuasion, it is unlikely to feature prominently on any party’s campaigning list for the next election.
TV exposé
What is called for, says Davidson, is a national TV exposé to bring estate agents to task for what he regards as a widespread abuse.
“A Panorama-style investigation, blowing the lid on what is an appalling mistreatment of customers, is what is required.”
Is there much hope of this? Well, the great and the good of financial services campaigners are starting to sit up and take note. Moneyexpert.com founder and TV presenter Martin Lewis recently conducted a poll on conditional selling and, alarmed by the response, promised to investigate the practice.
The agent is always acting for the seller and this is not always made clear nor fully understood by the buyer, especially first-time buyers
The power of the media when an injustice or malpractice is exposed can be game changing. Some of the horror stories detailed above may not hit the heights of the Post Office IT scandal but they still make the jaw drop and the hackles rise.
The ultimate objective is for housebuyers to not receive a raw deal — they face enough challenges as it is in the current market.
The more they understand the ground rules, and the more agents feel under the microscope on how they conduct their business, the fairer the market is likely to be.
This article featured in the February 2024 edition of MS.
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