Broker warns that purchasers risk a legal bill if they switch lenders
Broker Shelley Walker claims that more and more buyers are feeling pushed towards solicitors too early in the home buying process, only to face “unnecessary” fees if they need to change later.
Estate agents can receive a financial benefit for referring a homebuyer to a particular solicitor, but should a buyer secure a better mortgage deal, they may not be able to use their original legal representation, if they are not on the new lender’s conveyancing panel. They could potentially be hit with a legal bill, even so.
Walker (pictured left), who is managing director of The Mortgage Mum Specialist Finance, is questioning whether these are truly client-led or commission-led decisions and suggests there should be a review of the process. “Estate agents often appear to be very keen to get a solicitor named and locked in,” she told Mortgage Introducer. “I've had three clients in the last month where they have = been encouraged to sign up to a solicitor, pay an admin fee and get the ball rolling very quickly before we've even finalised their mortgage option. So, then, we're having to undo that instruction, which can take hours of work, start with a new solicitor and in some cases they're losing money. I had one client lose nearly £300.”
Walker continued: “We have to find the right solicitor that fits with the lender that you're going with - I've even had an estate agent suggest that I should change mortgage option for a client, because it was a hassle to change a solicitor, but I'd already submitted the full mortgage application. We need to review the way that we do things in the UK – it isn’t like this in other countries.”
Kasia Makarewicz (pictured second from left), a senior mortgage and protection adviser at ClearView Mortgages, agrees that too many buyers are instructing solicitors or selecting lenders before everything is in place. “This can sometimes lead to unnecessary pressure and stress,” said Makarewicz. “It would be far more efficient if everything aligned properly, ensuring that decisions aren't made prematurely in the process. Personally, I strive to submit applications promptly to begin underwriting and obtain a valuation to confirm the property’s suitability for mortgage purposes. However, I prefer to wait on the legal side until the chain is fully completed.”
She continued: “It would also be beneficial if clients were empowered to choose their own professionals based on their needs, rather than feeling like they’re being steered toward specific options that benefit others financially. If decisions regarding lenders and solicitors are being influenced by commissions or incentives, this could result in recommendations that don't fully prioritise the client's best interests and this is not acceptable.”
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How quickly should conveyancers be instructed?
Broker Thomas Boughton (pictured second from right), of Artillium Finance Partners, considers that conveyancers should be instructed as early as possible, due to the legal work being the longest part of the process. “I've changed mortgage offers or switched lenders in most mortgages that I've done and it has never normally been too much of an issue,” he said. “I understand that some lawyers aren't on some lenders' panels but they are few and far between and usually the ones that aren't on a lenders panel are not the sort of firm the clients should be using anyway, from my experience. The conveyancing process is still so archaic and takes an unacceptable amount of time. Where I do have a major issue is with new build agents forcing buyers to deal with their in-house broker, which is classed as conditional selling and is illegal, yet it still goes on. That, to me, is an abuse of power and just obvious commission chasing from the agents, not for the benefit of anyone except themselves and their payslip.”
Sheena Campbell (pictured right), managing director of Campbell Financial, considers the process to be ‘pretty seamless’. She requests the client's credit check report and income documents for their first appointment, to determine if they are eligible for a mortgage. “They search for properties and make offers - no DIP needed - and when they are ‘sale agreed’, I'll book them in for their mortgage application meeting,” she said. “The advice is given with respect to the lender, product, etc. that day - never before - so there aren't issues with lenders changing, and I don't need to redo any work or have any difficult conversations about a deal discussed months ago that isn't available any more. You have the meeting, provide the recommendation and process the application all in the same 24hr period.” Solicitors should be instructed at the earliest opportunity to get things moving quicker, Ferguson believes.
Mark Valentine, director of MV Mortgages, also doesn’t see a huge problem with solicitors being instructed too early in the process. “If we end up moving the lender due to rate decreases, then we will check to ensure the solicitor is on the lender’s panel before doing so, especially if they've already paid fees,” Valentine said. “When conducting new build business it is often the case that clients are already instructed to use certain conveyancers and it is already on their deposit and memorandum of sale forms. I'd personally take away the opportunity for all kickback possibilities. Estate agents shouldn't get kickbacks for recommending brokers or solicitors, brokers shouldn't get kickbacks for recommending surveyors or conveyancers and so the circle continues. Everyone should be recommending local solicitors to the house purchases they are dealing with.”
Broker Joela Jenvey, from Nurture FS understands the frustration, but questions whether the process is really as out of sync as it seems. “Estate agents instructing solicitors early on, even before the lender is fully confirmed or the chain is complete, might seem counterproductive, but could it actually be in the best interest of the client to get the ball rolling as early as possible?” Jenvey asked. “After all, a Decision in Principle (DIP) can offer some certainty, and by getting the solicitor on board early, you’re not delaying anything once the mortgage lender is finally secured. We as brokers need to be communicating clearly with the client and agent early on and if you use a solicitors panel referral portal you will maintain control of the solicitors and ensure that you are providing these details to the agent when the offer is accepted and before the memorandum of sale is sent to the buyers’ conveyancer.”
She continued: “Yes, the market does shift, and sometimes we may need to switch lenders to get a better deal for our clients—but isn’t that just part of the job? Isn’t the fact that different lenders have different panels simply a matter of efficiency?” It ensures a streamlined process, even if it does mean clients sometimes need to adjust their solicitor later. This does not impact the client unless they have started to hand money over to the conveyancing firm. When you’re buying a home, there are plenty of moving parts, and sometimes things need to be lined up quickly to avoid unnecessary delays. Sure, switching solicitors may come with fees, but could this really be a major issue when the overall process is being managed properly? The reality is, we’re in a competitive industry, and sometimes the incentives align. Maybe the system isn’t perfect, but does it need a complete overhaul, or could we just be looking at a few tweaks to make it work a bit more smoothly?”
Meanwhile, Carol Brown, who heads up First Choice Mortgage Company, does not recommend changing solicitors once instructed. “There could be fees which have been paid which cannot be recouped and could potentially delay a chain,” Brown warned. “Estate agents can often get a kickback from the solicitors they instruct, hence the speed. Rate chasing can potentially be more costly when taking into account all fees and the client or property may not meet the criteria of the new lender. A broker can monitor the rates with the lender which was most appropriate for their circumstances on application and if the rates drop, they can usually request the new rate.”
Brown’s fellow broker Sofie Collins agreed that this is an issue in the industry. “With the market changing almost daily, this is causing issues and confusion - particularly amongst first time buyers,” Collins said. “The process is daunting enough without them being pulled every which way to make decisions on solicitors etc before a mortgage lender has been recommended. Let’s get our ducks in a row: offer accepted, mortgage recommended, solicitors choose in accordance with the panel approved by that lender, mortgage applied for in full, solicitors instructed, valuation/survey booked.” She added: “Decisions are commission lead - that is fact. I work alongside clients for sometimes up to year with budget planning and renewing mortgage figures and feasibility with them only for the estate agents to ‘insist’ they speak to their recommended mortgage company as this will ‘put them in better stead with the vendor’ Of course offer a second opinion, but insisting? No way!”
