In last week’s issue of Mortgage Introducer, a broker who chose to remain anonymous revealed how his clients had been pressured into seeing the estate agent’s advisers to discuss mortgage options, despite having already agreeing to a mortgage deal with the broker.
This reportedly happened to two of his clients that he had met with in the past month, with whom the estate agent had claimed that they could get the buyer ‘a better rate’ than what the broker had arranged, despite not knowing what the agreed rate was.
Competition is rife within the estate agent network, and with so many independent agents on the high streets across the UK, there is a need to ensure that customers are given a complete service, to the best of the agents’ ability. But is this attitude of a complete service representative across the board? Or is it just limited to the experiences of this particular broker?
A harsh experience
The experiences of the broker’s clients do seem to be particularly harsh with reports of the buyer being called four times at home and them eventually seeing the adviser to ‘get them off their back’. The buyer was also concerned that if they didn’t see the in-house adviser they would get a second rate service, or could possibly lose out on the sale altogether to another buyer who had seen the adviser.
The broker said: “It is this sort of activity that gives this industry a bad name. As soon as these people are regulated the better.” Although he understood that there is a level of service that needs to be provided by the estate agent, and that ultimately they are a commercial company with a profit to be made and commission to earn, the methods of going about the earning was irresponsible.
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When the broker spoke to the estate agent to ask why they had acted in such a reportedly unprofessional manner, the response was that the agent told buyers to see the adviser to look after the vendor and ensure the buyer can afford the mortgage.
So where does this put estate agents in regard to regulation? The debate will carry on, and although there is no illegal act going on with the invitation to see an adviser, they act according to the Estate Agents Act 1979 which ‘regulates the conduct of estate agents in the course of estate agency work’ and ‘lays down the duties that agents owe to clients’.
Deeper understanding
To get a better understanding of this situation, Peter Bolton King, chief executive at the National Association of Estate Agents (NAEA) commented on the situation. He explained: “Estate agents should be involved in the mortgage process. The NAEA Code of Practice in fact states that agents ‘must take reasonable steps to find out from the prospective purchaser his source and availability of the funds for buying the property’. This avoids unnecessarily wasting a client’s time.”
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With estate agents involved in the mortgage sales process, is it right to offer buyers a ‘one-stop shop’ or should they leave it to the specialists? King claimed that a ‘one-stop shop’ should not be a problem, as long as the customer is getting good advice.
To look at this from the perspective of the estate agent, are they ensuring that the customer is being vetted properly and that they are able to afford the property they are being shown? King agreed that ‘it is perfectly reasonable for an estate agent to check that a prospective purchaser has access to sufficient funds’. However he did not approve of the strong-arm tactics being used to coerce buyers into seeing in-house mortgage advisers.
Estate agent regulation
On the issue of the regulation of estate agents, King said: “We agree that estate agents should meet minimum competency standards, and this should include best practice on how to handle this type of situation.
“The NAEA has been calling for the government to introduce better regulation of estate agency for some time now. I would stress, however, that we are calling for regulation with a little ‘r’. We believe there is no need for the government to implement complicated and costly new legislation that will only serve to increase the burden of red tape. Regulation need not be difficult to deal with – in fact the structure is already in place within the industry.
“The UK estate agency has for a long time been plagued by the actions of a rogue minority, with both consumers and other estate agents suffering as a result. By insisting that estate agents must be a member of an approved professional body before they are allowed to practice, the government could successfully go a long way towards tackling this issue.”
A widespread issue?
Kim Barrett, proprietor of KS Barrett & Associates admitted he had experienced this situation to varying degrees. He said: “My advice to the buyer would be to tell the estate agent to call their mortgage intermediary to sort the situation out. The estate agent will always put buyers under pressure and it is up to them and and their intermediary to manage the situation. If they reported this to me I would not hesitate in reporting them to the compliance officer.
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“Estate agents are targeted for selling to the adviser, as they get paid on the basis of how many people they turn over to them. This sort of practise should be outlawed as I certainly don’t want to feel that I have to coerce anyone to do business with me.”
The point of competition is not the one that is being being debated here, but the prospect of bullying tactics from agents is disapproved by mortgage intermediaries, consumers and reputable estate agents alike. Although there is no clear end to the debate, if the majority of the industry can act in a respectful and professional manner then the minority should be forced to act accordingly.
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