Home sellers are being duped by real estate agents seeking additional financial kickbacks, experts warn.
Some real estate agents reportedly only submit offers from buyers who have been “financially qualified” by the recommended mortgage broker.
Sometimes these may be in-house mortgage advisors or an independent brokerage firm that the real estate agent is associated with.
The practice, known as conditional sale, allows real estate agents to benefit from referral fees, which are paid to them by mortgage brokers, but sometimes also by lawyers.
Sharp Practice: Some real estate agents choose which offer they present based on whether the buyer will provide them with financial kickbacks
Given their role as intermediaries in the sales process, it means that sellers may not be alerted to offers from buyers who choose to use a mortgage service unrelated to the agent.
Paula Higgins, chief executive of the HomeOwners Alliance, said: “We have always believed that estate agents should not be able to make money from both the buyer and the seller in the same transaction. “There is a real conflict of interest.
‘Although it is an illegal practice, law enforcement is non-existent, so estate agents get away with it.
“Sellers are taken for granted when they accept that buyers are ‘financially qualified,’ but what they don’t realize is that they are limiting the number of buyers, which is not in their best interest.”
This tactic by real estate agents also means that buyers who refuse to be “qualified by an agent’s mortgage advisors” could be unfairly missing out on the homes they offer.
“Conditional selling has been around for years and we are regularly contacted by buyers who are pressured to use in-house services or are not even allowed to view a property or make an offer,” adds Higgins.
“In one case, the seller ended up losing £5,000 because the ‘preferred’ buyer pulled out and ended up having to remarket the property for less.”
Estate agents who do not pass offers to sellers for these reasons are breaching their professional duties and may face sanctions, according to James Munro, senior manager of the National Trading Standards Real Estate and Letting Agencies Team.
He said: ‘We view this practice as unacceptable and are aware that it is a significant issue which can cause considerable financial loss and emotional upheaval for buyers.
“This practice often goes unnoticed and unreported, as home offers can be rejected for many reasons and most prospective buyers rightly assume that if an agent tells them their offer has been rejected, the process has been honest.”
Talk to our mortgage broker: Buyers are pressured to use a few mortgage advisors recommended by real estate agents.
How do agents get away with this?
Estate agents are writing clauses into their contracts with sellers that justify them blocking offers, according to National Trading Standards.
James Munro told the Telegraph: ‘Anecdotally, we have found that agents can manipulate the offer process. An exception (to a conditional sale) is if the seller says in writing that he does not want certain offers.
‘Agents get creative, say, with the contracts they ask sellers to sign (before listing their properties for sale). We’ve seen them include lines like “junk buyers who have not been financially qualified by us.”
This way, real estate agents can claim that they have not done anything technically illegal.
However, Munro believes that a judge would ultimately side with the seller if such a legal claim were made.
He added: “If I went to court, the judge would likely decide that explicit consent is needed and that an implied consent term in a contract does not count.”
Jeremy Leaf, a north London estate agent and former residential chairman of Rics, says buyers and sellers should be wary of these agent tactics.
‘We hear of these agreements, which clearly do not necessarily benefit the buyer or the seller.
‘As with any contract or agreement, it is up to the parties to read the fine print. The most obvious disadvantage is that the seller will not receive a better offer from a buyer who has made separate agreements with a broker, while a buyer may waste time, money and effort on a property that he has little chance of acquiring.
Simply sign on the dotted line: Some agents include clauses in their contracts that may technically justify blocking offers.
What can sellers and buyers do if they are victims?
It is important that people report any misconduct or manipulation of the bidding process, in accordance with National Trading Standards.
James Munro adds: ‘We encourage anyone who believes their offer on a home has been rejected simply because they chose not to use the services recommended by the agent to report this via Citizens Advice Consumer Service (England and Wales), counsel.scot (Scotland). or Consumerline (Northern Ireland).
‘These organizations will provide advice and refer the complaint to the local authority’s trading standards team, helping to gain a comprehensive understanding of the issue and initiate investigations.
“If the agent is registered with the Property Ombudsman or the Property Redress Scheme, consumers should also tell them about the agent, as these bodies can investigate the complaint and award compensation.”
Some links in this article may be affiliate links. If you click on them, we may earn a small commission. That helps us fund This Is Money and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.
