The housing minister has stressed the importance of estate agents disclosing their referral fee arrangements upfront.
Heather Wheeler said buyers needed to make informed decisions.
She was speaking following findings that most buyers who follow an estate agent’s recommendation of a conveyancer do not know if the firm has been paid for that ‘back hander’.
A YouGov survey of almost 500 consumers in England and Wales who have bought a property in the last ten years, reported that recommendation by an estate agent was the most popular primary factor behind their choice of a conveyance.
Some 26% followed the agent’s recommendation, compared with 21% who went on price, 20% on previous use of that lawyer, 18% on recommendation from family/friends, and 15% on the firm’s general reputation.
However, 59% of those who took a recommendation did not know whether or not the estate agent was paid a referral fee for this.
Some 29% were aware a fee had been paid, while 12% knew a referral fee had not been paid.
The survey was done for regulator the Council for Licensed Conveyancers ahead of rule changes.
When they confirm their instructions from their client for the first time, CLC-regulated lawyers already have to set out when they have paid a referral fee.
From this December, firms will be expected to provide this information earlier in the process, when consumers are shopping around for a lawyer.
The move anticipates likely similar disclosure by agents.
The Ministry of Housing, Communities and Local Government is planning to make it mandatory that estate agents reveal their referral fees.
Sheila Kumar, chief executive of the CLC, said: “We are not saying that it is wrong for conveyancers to pay referral fees, but transparency is key and that is why CLC lawyers have always had to inform clients about them.
“However, it is important that the client is aware of the payment of referral fees before deciding who to appoint.
“So, we welcome the Government’s proposals that estate agents should be required to be transparent about referral fees they will receive if their client follows their recommendation.
“It is in the interests of both the public and those we regulate that consumers have easy access to useful and easily comparable information to guide them in their choice of lawyer.
“That is what all of the front-line regulators of legal services are introducing new rules with the aim of empowering consumers to make better informed choices.”
Housing minister Wheeler said: “The findings from this valuable survey demonstrate why it is so important that estate agents are transparent about referral fees.
“That’s why we are working with the industry to ensure estate agent referral fees are clear, so consumers can make an informed decision before they decide to purchase.”
See also Peter Ambrose’s very topical column – EYE’s down!
No problem with this we disclose this fact already. Hopefully this will be applied across the board though and then monitored by the authorities.
Also, who the hell is this Wheeler lady, do we have yet another housing minister and no one told us?
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Heather Wheeler was appointed as a Parliamentary Under Secretary of State at the Ministry of Housing, Communities and Local Government on 9 January 2018.
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So basically this will stop “back handers”?
I don’t see the problem in this, makes perfect sense to me.
I get recommendations from estate agents because I do a decent job for a reasonable price, I will not pay someone to “refer” me despite having been asked on numerous occasions by some less reputable agents.
As I see it, an agent can still recommend those who do a good job, have the relevant experience and local knowledge in the hope this will keep a sale progressing smoothly, you just can’t make money from your recommendation. In my experience its the “out of town” surveyors with a limited workload who pay referrals as its cheaper than advertising.
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Milking the cow twice – putting the £££’s before the interest of the client?????
Interesting times for agents who overcharge tenants and also take back handlers from Conveyancing referrals!!!!!
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Brokenshire, Malthouse & Wheeler – who does what?
It isn’t helpful if the press refer to them all as “Housing Minister”
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Looks like PB share price will drop as a result of this….surely!? A large % of their income, per sale, relies on solicitors inflating their charges by hundreds of pounds to give them their kick back!! Pass the popcorn….
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PB boasted in their latest accounts that ancillary income per listing had increased from 30% (£ 311) to 43% (£ 502).
How much of that is referral fees?
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Large companies will end up finding the loophole in this and rather than a referral fee, the “back hander” as it is being referred to will just be replaced by some sort of case by case or monthly “retainer”.
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It’s not just conveyancing solicitors, surveyors, cleaners, inventory clerks, contractors ZZZZZZ
A recommendation should be just that, do disclose the fact you may get a case of plonk at Xmas though
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A referral fee and a back-hander are completely different things. One being the fee one business legitimately earns from the other for their loyalty and recommendation, the other being an undisclosed amount which passes secretly between two parties without anyone’s knowledge, except the two in the bar, or on the golf course.
This legislation simply initiates more bar and golf days between directors!
Anyone fancy a round? 😉
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That works well, if it is disclosed.
As in “I recommend XYZ as they do a great job oh and by the way, they give me a commission for a referral”
That is transparent, in more ways than one!!!
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Lets put some pressure on to Heather Wheeler and see how transparent she is with the copious amounts of back handers she will have received in her life
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There is nothing wrong with a ‘case management fee’. Do you want more regular updates from a law firm that I work closely with? One that I know will answer the phone to me and respond to my emails in a timely manner? Do you want more regular updates than I can get you if you choose a solicitor who I don’t work with, who may actually be no good at what they do? When you position it correctly, the majority or sellers & buyers are happy to pay £150 more for that.
It is when agents start taking £250, £300, £400 that it is hard to justify. Also when the agent doesn’t actually chase cases properly but they still take a referral fee.
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All for greater transparency but if we are all honest some will comply some wont and there will be absolutely no consequence for those that dont.
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What I find a little distasteful with all of this is the Government are acting like the kids in the playground, you know, the ones that when a bully singles out someone to pick on, they go “yeah, lets get em”.
I bought a car a few years ago and the garage wanted to sell me finance, alloy wheel insurance, minor scratch insurance, they did that why? because of customer support or because they earn commission from it?!
My friend has a sister who works in the NHS, even they make referrals and I would argue some might find theirs a little more distasteful. They often refer bereaved relatives to funeral directors. “Ash cash” I believe they call it.
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Whilst this may still be a minority view, if as an industry we wish to improve our reputation, surely acting for, or referring to those who pay us a fee is an obvious example of a conflict of interest where we cannot, with a clear conscience, say we have acted in our clients’ BEST interest at all times ? The corporates may continue to bamboozle their clients with promises of a one-stop shop, all under one roof, where terrified negotiators struggle to reach their monthly mortgage referral targets, but unsurprisingly I am not that concerned bearing in mind the damage they have done to traditional agemcy. .
Announcing the fact that they do take referral fees is hardly likely to reassure the savvy client, and what does that do for our reputation as an industry ? “Sorry, Mr Client, we need to try and sell something to you as well as an agency service and by giving me your instruction I shall try to sell you legal services, financial services, removals companies etc etc for both your sale and onward purchase, and do the same to your buyer and anyone else who might show interest in your home”.
I am sorry (well, hardly) for those guys who now rely upon such ancillary income streams, but if “traditional” agency is to have a hope of combatting the race to the bottom in fees, we need to make it a level playing field. Our clients will quickly understand how for some of our corporate competitors, and of course the online monkeys, the sale of their properties is seen as a means of cross-selling other products, rather than acting in their best interest. Why else have some of them discounted their fees so heavily ?
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See where your coming from, but I don’t go to B&Q for a paintbrush and expect to have to drive to the other end of town for the paint!
Services should be offered as one stop shop in our fast paced world where we all have so little time. Obviously this is optional and if people do have the time to shop around then they should.
We prefer to work with certain conveyancers, not because of referral fees which are small, but because it is better to deal with someone you can get hold of, have trust in, and don’t drag their heels causing clients to become frustrated, who then vent on the agent.
The process is slow and laborious at the best of times, throw in a lazy solicitor or online conveyancer based in a town far far away with no urgency to keep local agents or their customers happy and the agents job of keeping the chain moving becomes even more difficult.
Transparency seems to be the buzz word since the MP’S expenses where called into question, but do we see their back-handers?
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