Estate agents and financial advice
Martin Reynolds is chief executive of SimplyBiz Mortgages
Last night Channel 4’s Dispatches went undercover to investigate the “property market boom”.
Reporter Antony Barnett secretly filmed the latest tactics used by estate agents to secure sales and commissions and asked whether some agents are even willing to lie to seal the deal.
Back in September I penned a piece for Mortgage Introducer magazine which I’m publishing again below. It should make for timely reading…
There is one niggle that seems to re-appear on a frequent basis without any real resolution and this is the link between estate agents and financial services.
A few commentators have mentioned it in articles recently and I have seen twitter feeds discussing it. That is the perceived inference that an estate agency will not submit an offer unless the prospective purchaser is seen by their in-house mortgage adviser.
Without wishing to get into the debate about whether this really happens or is a myth from a disgruntled adviser who has lost a client, I thought it may be worth setting out a few facts so that we are all aware of the process and procedures.
There is a code of practice for residential estate agents that is published and monitored by The Property Ombudsman.
The latest code came into force in August 2011. Within this there are guidelines and specific procedures for all aspects of the sales process. Section 7 deals with the offer process. I have included clause 7c in full below for clarity:
7c. By law you must not discriminate, or threaten to discriminate, against a prospective buyer of the seller’s property because that person declines to accept that you will (directly or indirectly) provide related services to them. Discrimination includes but is not limited to the following:
• Failing to tell the seller of an offer to buy the property.
• Telling the seller of an offer less quickly than other offers you have received.
• Misrepresenting the nature of the offer or that of rival offers.
• Giving details of properties for sale first to those who have indicated they are prepared to let you provide services to them.
• Making it a condition that the person wanting to buy the property must use any other service provided by you or anyone else.
The above is very clear in that the two parts of the business should not be linked. Section 8 covers financial evaluation.
8a. At the time that an offer has been made and is being considered by the seller, you must take reasonable steps to find out from the prospective buyer the source and availability of his funds for buying the property and pass this information to the seller. Such information will include whether the prospective buyer needs to sell a property, requires a mortgage, claims to be a cash buyer or a combination of these. Such relevant information that is available should be included in the Memorandum of Sale having regard to the provisions of the Data Protection Act.
Whilst it is important to understand how a potential purchaser intends to raise funds to purchase the property, this should be carried out in the spirit of section 7.
If your clients do get the feeling that any of the above are being breached then they should raise their concerns and with your help quote the relevant clauses.
Copies of the code are available on request from the estate agent. The house buying process is a stressful and at times fragile process so a clear, helpful path for both buyer and seller are required. As an industry we do not need to muddy the waters.
It’s important you to ensure you help your clients know their rights.