They are doubling down on the practice to ensure their incomes, it's claimed
The practice of estate agents pressuring buyers to use their own inhouse brokers is worsening, suggests Matthew Roberts (pictured left), director of brokerage YesCanDo Money.
Mortgage Introducer yesterday reported concerns that first-time buyers, in particular, are being coerced into using estate agency advisers, for fear of losing properties if they don’t agree. Roberts confirmed that, from his experience, it is a growing problem, driven by agents striving to maintain their earning level.
“From what I can see it's still a big issue and in some places it's actually getting worse,” he said. “When the market gets tougher some estate agents double down on pushing their inhouse brokers because they’re trying to protect income wherever they can. The problem is it can lead to buyers being told, either directly or just heavily implied, that they have to speak to the inhouse broker if they want their offer considered - that’s not right.”
Roberts is concerned about how the culture is affecting homebuyers. “The impact on borrowers can be pretty awful,” he noted. “It takes away their choice and often they don’t realise they’re being pushed down a particular path until it’s too late. It adds unnecessary stress to what’s already a pretty full-on process.”
Brokers arguably feel under as much pressure as the clients they are trying to persuade to sign up with an agency adviser, suggests Roberts. “This is something that comes up a lot for us,” he shared. “We've taken on quite a few advisers from estate agency broker firms over the years and nearly all of them say the same thing - the pressure they were under to hit referral and conversion targets was intense. It often felt like the customer’s best interests came second to hitting the numbers.”
Roberts would like to see more action taken to prevent the practice. “The FCA technically already has rules that should prevent this kind of thing, but in reality it feels like it flies under the radar,” he observed. “Borrowers deserve transparency and proper advice, not a sales tactic.”
READ MORE: How brokers can improve the homebuying process for people with disabilities
A profitable practice
As a former in-house adviser with an estate agency, Bob Singh (pictured right), director of Chess Mortgages, has seen both sides of the fence. “Estate agents have historically had a financial services connection as it can add to the bottom line significantly and quite often it's the only profitable component in a sales agency,” Singh said. “From an agent’s perspective, they have a job to do which is to sell their vendor client’s house for the best price to a suitable, committed and proceedable buyer. In order to do this they must comply with the Estate Agents Act and confirm the buyer’s position as well as their financial position - they have to make these enquiries. This, however, doesn’t mean the agent has to do those enquiries. Any broker can do it for the agent and generate a decision in principle, and we all know it’s a near worthless document, as it’s non-binding and takes ten minutes.”
The purpose of asking for a decision in principle is to catch unwary buyers - typically first-timers - who are led to believe they must have an agreement in place to see a property, Singh suggests. “Who better to arrange this than the friendly inhouse broker who just happens to be free for a chat?” he said. “The negotiators are paid to walk people over or book appointments for the in-house broker. A sign up gets a bigger fee. If the adviser is good they will probably keep the client, wherever they end up buying. In fact they probably sign up more people who do not buy through the agency. It’s internal policies that decide these practices, not law. They have the buyer over a barrel and through some carefully chosen words that imply, ‘you won’t get this house unless we do the mortgage’. They will cite keeping control of the sale and the vendor will be happier if we do the mortgage, but it’s all flannel. It’s the pounds and pence that are the reason.”
Singh added: “Too often we hear of our clients being forced to use the in-house broker, and new build developers are as bad - who not only deny broker or lender choice but lawyer choice, so there are no upsets or surprises that could scupper a deal. These practices are ingrained in law and won’t change anytime soon unless Regulation of Property Agents (RoPA) is brought in. Estate agents are the only party in a house buying transaction that are not regulated. This has to change soon.”
