Buyers Vulnerable to Estate Agent Pressure
Jeremy Gates
ESTATE agents, already facing a big drop in commission income this year
from the slowdown in the housing market, may try to stem losses by pressurising
buyers into taking a mortgage with their in-house financial advisors.
Such an arrangement, claims John Mills of Hampshire-based independent mortgage broker
Westpoint, can leave buyers thousands of pounds worse off from inferior mortgage
deals.
Mr Mills, whose fee-free brokerage handles applications from Scotland to South-West
England, says first time buyers are "especially vulnerable" in the current
market and "easy prey" to high pressure tactics from agents who warn
they may lose the property if they get a loan elsewhere.
Says Mr Mills: "We are seeing an increasing number of home buyers visiting
us after being bamboozled by estate agents offering financial advice. They are
typically led to believe they will lose the property unless they sign up right
away for mortgage and life cover.
"In one case, in Plymouth, a buyer was told his offer would not be put forward
unless he accepted a mortgage through the agent. He very firmly pointed out to
the agent that he would cause trouble if the offer was not submitted - and it was."
Mr Mills says the Estate Agents Ombudsman's code of practice specifically warns agents
not to discriminate against would-be purchasers who fix finance elsewhere.
The code says discrimination can include giving details of properties only to those
buyers who have indicated they will take a mortgage, and other services, from the
same agent.
Mr Mills points out the Government's City watchdog, the Financial Services Authority
(FSA), does not currently regulate agents and admits it is unlikely a would-be
buyer will take agents to court over a mortgage "hard sell".
However, Trevor Kent, a Gerrards Cross, Buckinghamshire-based agent, says agents
are clearly forbidden - by the Estate Agents Act of 1979 - to select buyers on the
basis of other commissions which they might earn from them.
Says Mr Kent: "In the current climate, agents are facing a sharp drop in
commission income, and I imagine they are looking to every possible earnings
stream to help balance the books.
"But the 1979 Act says clearly you cannot discriminate against purchasers
on the basis of additional services which you might sell to them, and you can't
have two lists of applicants receiving details of properties at different times.
"To say you will not put an offer through because you can't fix the mortgage
too is illegal, and there have been a number of prosecutions by local authority
Trading Standards Offices working with the Office Of Fair Trading."
Mr Kent says agents must also tell vendors if they will earn a second commission
on a sale by arranging the mortgage.
"Sellers ought to take notice of the fact", says Mr Kent, "because
they need to ask themselves if a higher offer is not being submitted because
the agent wants to collect the mortgage commission too."
In many cases, said Mr Kent,
agents might earn more from mortgage commission than from selling the property.
