Agents that charge both buyers and sellers can carry on doing so, after an amendment in the Commons was defeated yesterday evening.
The result gives the green light to the highly controversial so-called For Sale by Tender arrangements.
MPs made clear their concerns but settled for a report into the practice by ombudsman Christopher Hamer.
In the earlier part of the debate on the Consumer Rights Bill, MPs declared war on agents generally.
In particular, letting agents that list their charges secretively in “the loo” were castigated by MPs.
Labour’s Stella Creasy said that some agents complied by making their charges visible to consumers by putting them in their toilets.
In an earlier defeated amendment, Creasy had wanted to outlaw agents’ fees to tenants.
Yesterday, she tried – but lost – an earlier amendment which would have asked the Government to file a report.
Creasy also quoted the Shelter report which claimed that the lettings industry in Scotland has not suffered after a ban on letting agent fees to tenants.
Minister Jenny Willott appeared to be quoting directly from Eye when she said that there had been widespread non-compliance and that 25% of agents took no notice of bans on fees.
Further on in the debate, Creasy also tried to get “double charging” by estate agents banned, citing For Sale by Tender arrangements.
She said that one agent, charging a 2% “introduction” charge to a purchaser, had claimed a 102% success rate in terms of selling price.
“Who would have thunk it?” she said.
Answering the proposed amendment, Willot said that the Property Ombudsman would be looking into the issue “with urgency”.
The House agreed.
The Bill will now be debated in the Lords.
I have used sale by tender many times, but rarely have I asked the buyer to pay our fee unless there was a good reason to do so. I have used this method on properties with development potential, those requiring modernisation or substantial works or simply when a property was so unique, I hadn't got a clue as to the value. To attempt to outlaw a well established process is naive and misinformed and not in the interests of vendors of properties which fall into this category. I even sold a £70k house for £156k as the BMW garage next door wanted to build a new show room.
That said, the process has been hijacked by agents looking to generate market share by effectively undercutting all competition and then applying a higher fee than they would otherwise achieve.
I am sure TPOS will come up with a sensible solution to the actual issue and its a pity a viable sales method has been tainted by the minority as it was with Tenants Fees. I really wish these 'campaigners' would engage with the professional elements of the industry so we could work together towards a proper solution, regulatory framework and effective policing.
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I am with Eric Walker here and dislike the reporting of this approach by agents as For Sale by Tender which is a perfectly legitimate method of sale whether by formal or informal process and does not, in itself, mean that a buyer pays fees.
If agents wish to operate in this fashion then an alternate description for the sale methodology should be used so as not to confuse or potentially damage the understanding of a legitimate sales method where fees are paid by the client (seller).
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One problem with Sales by Tender as I see it is the many variations that are possible. If the tender closes with a contract being created fine but so many invitations for 'Best and Final' Offers (BAFO) confuse prospective buyers who think they have secured the property which is rarely the case. Agents are duty-bound to submit all offers to their client right up to exchange of contracts unless they have been given authority by their client, in writing, that offers of a certain type – usually, but not necessarily, a certain price – need not be submitted. The obvious alternative to a higher price is someone without an associated sale and therefore (in theory) able to proceed more quickly. But the seller may set any criteria they wish that is lawful. Unlawful would be discriminations of any type.
The problem is at its worst when the sale instructions come from a mortagee in possession which has foreclosed in a case of unacceptable repayment arrears. These institutions will ask agents to invite BAFO and then another advertisement stating the highest offer received asking for any higher offer within, usually, a further seven days. Prospective buyers see this as underhand, etc.
When I was advising one large financial institution during the 1990s when the market was falling and many possession properties were being offer (many by auctions as well as BAFO arrangements) we devised a Clear Code which every agent was required to follow which explained precisely what was to happen and why. Some agents thought we were being too prescriptive but most saw the point. In the event it saved a lot of hassle and served its purpose.
TO BE CONTINUED>
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Sorry about that – just had an outdoor supper overlooking Tintagel in North Cornwall – nice bit of barbequed rib-eye!
I seriously suggest that any estate agency using sales by tender or BAFO sales sets out the details of their procedure in clearly worded notes which should then be given to every seller-client and every prospective buyer where a tender of BAFO is being used. This ought to reduce confusion. And from experience I know that confusion is inevitable.
Take on example, a closing date was set at 5.00 p.m. on a Friday. The sales was on instructions from a bank acting as trustees in possession having foreclosed under a mortgage deed. Fair enough, save the agents had expected a fourth offer which had not arrived. The winner had rung in to ask the result and, yes, his was the top offer. Naturally he though it was his.
Next morning's post brought the missing bid which was now the highest by a significant amount. On the Monday, the agents, still in a quandary, rang the bank and were told to accept this final offer although it had arrived late.
In my opinion that was the right thing to do, since as Trustees, the bank had no option and, as agents, every offer had to be passed on to the client.
The under-bidder went ballistic and accused the agents of deceitful underhand behaviour. Clearly, this fourth bidder was their preferred buyer and they had wrung him to tell him what was the top bid he had to beat and that resulted in the letter next day. No doubt including a kickback as well.
In due course this case landed on my desk and I took great care in my deliberations as the under-bidders were still steaming and unless I agreed with their complaint were going to drag me through the courts along with the agency and everyone else in this conspiracy.
In my final assessment I concluded that the agents had played it absolutely straight and that there was no disciplinary charge for them to answer. Their solicitor wrote a ridiculous letter to the agents to which I replied sending them a copy of my adjudication, which must have helped as matters then calmed down.
So back to that earlier suggestion – set out in writing what your tender process involves and what happens when it does not run to plan!
Finally, many years ago the Director General of Fair Trading remarked that if every estate agent understood the laws of agency there'd be no need for any estate agency Orders or Regulations. Presently, I cannot see the present administration addressing the problem. The best hope that the Property Ombudsman recommends additional obligations for the Estate Agency Code of Practice and these are eventually made mandatory.
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