Estate agents have been accused by Trading Standards of hiding best offers from vendors and failing to disclose commission fees up front, with the head of the enforcement office, James Munro, bemoaning “a lack of resources to go out and police this effectively”.
The National Trading Standards Estate and Letting Agency Team says it has investigated cases of agents allegedly failing to pass on best offers because of commission fees earned, but warned that this type of illegal behaviour is likely to go undetected.
Many estate agents receive referral fees by recommending mortgage brokers, solicitors, surveyors and other third-party services, and this, Trading Standards claim, is causing this type of illegal behaviour.
Munro told The Telegraph: “We’ve seen commissions of 50% of the price, which is just ridiculous really. In some cases, the consumer’s getting no benefit from them.”
He issued this warning to homebuyers: “If you’re thinking of buying a property, and you go in and they say, ‘Would you like to speak to our financial adviser or mortgage adviser?’ And you say, ‘No, I’ll sort all that myself. Here’s my offer for the property’.
“Well, that employee, sometimes on the bigger agencies, is on a commission, so if they can get those referral fees they will put that offer forward. But then there may be another offer which is lower, but that person is using all of the connected services, and mysteriously the higher offer just gets lost on the system.”
He said the cases were detected by purchasers who had offers declined, checked publicly available Land Registry data and noticed that a lower offer had been accepted.
But the vast majority of buyers move on after their offers are rejected so these instances are “difficult to find out about”, says Munro.
He pointed out that the government considered banning these commissions around three years ago but said they would wait and assess the impact of putting in tougher rules for transparency instead.
However, Munro said it would “take quite a lot of resources and quite a lot of people to go out and actually investigate to give a realistic market assessment”.
He continued: “The problem is that a lot of the time they’re not displayed. It’s a difficult one to enforce because you don’t know that they’re taking fees if they’re not displaying the fact that they’re taking fees.”
