‘Sellers are having the wool pulled over their eyes’ by property brokers

Home sellers are having the ‘wool pulled over their eyes’ by estate agents looking for additional financial kickbacks, experts are warning. 

Some estate agents are reportedly only putting forward offers from buyers who have been ‘financially qualified’ by their recommended mortgage broker.

These can sometimes be in the form of in-house mortgage advisors or a separate brokerage firm that the estate agent is in partnership with. 

The practice, known as conditional selling, enables estate agents to profit from referral fees – paid to them by mortgage brokers, but also sometimes by solicitors.

Sharp practice: Some estate agents are picking and choosing which offer thet put forward based on whether the buyer will provide them with financial kickbacks 

Given their role as the middlemen or women in the sales process, it means sellers may not be alerted about offers from buyers who choose to use a mortgage service unconnected to the agent.

Paula Higgins, chief executive of HomeOwners Alliance said: ‘We have always believed that estate agents should not be able to make money from both the buyer and the seller in the same transaction. There is a real conflict of interest.

‘Although an illegal practice, enforcement is non-existent so estate agents get away with this.

‘Sellers are having the wool pulled over their eyes as they agree to buyers being ‘financially qualified’ but what they don’t realise is that they are limiting the number of buyers which is not in their interest.’

This estate agent tactic also means buyers who refuse to be ‘qualified by an agent’s mortgage advisors’, could be losing out unfairly on homes they offer on.

‘Conditional selling has been around for years and we get regularly contacted by buyers who find themselves pressured to use in-house services or even find themselves not being allowed to view a property or make an offer,’ adds Higgins.

‘In one case, the seller ended up losing £5,000 because the ‘preferred’ buyer pulled out and ended up having to remarket the property for less.’

Estate agents who don’t pass offers to sellers for these reasons are in breach of their professional duties and can face sanctions, according to James Munro, senior manager of the National Trading Standards Estate and Letting Agency Team

He said: ‘We view this practice as unacceptable and are aware that it is a significant problem that can cause considerable financial loss and emotional turmoil to buyers.

‘The practice often goes unnoticed and unreported, as offers on homes may be turned down for lots of reasons and most prospective buyers quite rightly assume that, if an agent tells them their offer has been rejected, the process has been honest.’

Speak to our mortgage broker: Buyers are finding themselves pressured to use some estate agents recommended mortgage advisor

How are agents getting away with it?

Estate agents are writing clauses into their contracts with sellers that justify them blocking bids, according to National Trading Standards.

James Munro told the Telegraph: ‘Anecdotally, we’ve found agents can manipulate the offer process. One exception (to conditional selling) is if the seller says in writing that they don’t want certain offers.

‘Agents get creative, shall we say, with the contracts they ask sellers to sign (before they list their properties). We’ve seen them include lines such as ‘refuse buyers which have not been financially qualified by us.’

It is this way that estate agents are able to claim they have not done anything that is technically illegal.

However, Munro thinks a judge would ultimately side with the seller if such a legal claim was made. 

He added: ‘If you went to a tribunal, it is likely the judge would decide that explicit consent was needed – and that an implied term of consent in a contract doesn’t count.’

Jeremy Leaf, north London estate agent and a former Rics residential chairman, says buyers and sellers need to be wise to these agent tactics.

‘We do hear of these arrangements, which clearly may not necessarily be in the interests of the buyer or seller.

‘As in any contract or agreement it is up to the parties to read the small print. The most obvious disadvantage is that the seller won’t receive a better offer from a buyer who has made separate arrangements with a broker whereas a buyer may waste time, money and effort on a property which they have little chance of acquiring.’

Just sign on the dotted line: Some agents are including clauses in their contracts that can technically justify them blocking bids

What can sellers and buyers do if they fall victim?

It is important that people report any misconduct or manipulation of the offer process, according to National Trading Standards.

James Munro adds: ‘We encourage anyone who believes their offer on a home was rejected purely because they chose not to use services recommended by the agent, to report it via Citizens Advice Consumer Service (England and Wales), advice.scot (Scotland) or Consumerline (Northern Ireland).

‘These organisations will provide advice and refer the complaint through to the local authority Trading Standards team, helping to gain a comprehensive understanding of the issue and initiate investigations.

‘If the agent is registered with either The Property Ombudsman or the Property Redress Scheme then consumers should also report the agent to them, as these bodies can investigate the complaint and award compensation.’