It can be tricky for those of us who work in the industry. We know that all parties in a chain and all professionals involved in the chain have to work together to achieve the clients’ dream of moving house.
But it can be difficult when we know what is going on behind the scenes and that decisions are being made that are perhaps not for the benefit of the house buying/selling public but are being made out of self interest from those involved in securing the deal.
And there is one sector in our industry which is not regulated and, in my view, needs to be regulated – and would it surprise you if I told you it is the estate agents.
So, bearing in mind what the coal face conveyancers know, I was not surprised to see an article in the national press this week regarding “illegal” practices by estate agents. It would appear that some agents put forward a lower offer to a seller if it means that the agents receive a commission from a referral fee paid by the buyers’ conveyancer.
Now we all know what happens – a potential client calls up as he/she has been recommended to me by a friend. The friend had a good experience so the client would like to know the charges.
I explain everything and send over the figures, tailor made for that client from the information I have gleaned from the conversation. The client calls back and says that he/she has received a quote from the firm recommended by the agents.
That quote is half my costs. Not only that but the agent has told the client that the transaction will go far smoother if he/she goes with the recommended firm. That firm may be in a different part of the country; that firm may be a factory style firm; but what the client wants is to buy his or her new home with the minimum of stress and probably for the cheapest price possible.
When I get those calls, I am very frank with the potential client and ask them to ask the agent what referral fee the agent will receive for that recommendation. Many clients are staggered that this happens – why would the agent do this? Surely, the agent makes more money than any of the other people involved?
Well, yes , perhaps the agent is the most highly paid but the conveyancing process is an irritant as it stops them being paid. So if they are going to be waited to be paid, I guess that they believe that they may as well make more money out of the process and this is where they make the money – out of up-selling other services.
Fast forward – when that agent moves house, do they instruct the firm which pays the referral fee? No they instruct the likes of you and I – those firms which do not pay referral fees but get the job done for the benefit of the client, making sure that the client gets the best service and not keeping an eye open as to from where the next instruction will come.
I do not accuse every firm which pays a referral fee of providing a poor service – but when you hear that agents are not putting forward all offers unless a potential buyer uses the agent’s preferred conveyancer or mortgage broker, then perhaps it is the agent who needs to think about their integrity. Or perhaps they need to be regulated…..but at least be transparent – that is what is fair for the client.
2 Responses
This is so true. This has happened for many many many Years and is likely to continue to happen until none payment of “referral fees” is wholly stamped out. More recently I have had a good client tell me the agent told them that the “SELLER would not accept the offer made, unless the buyer used the agents mortgage adviser, as only ‘their’ advisers offered the safest guaranteed mortgage to
ensure the transaction would proceed”. Disgusting greedy behaviour
Indeed this happens.
The lack of transparency is mind boggling.
Perhaps one solution would be for it to be an offence for estate agents to recommend anything to the buyer at all? The client of an estate agent is the Seller.
But then again the large home builders offer inducements to buyers to use their preferred conveyancer too and we know what an absolute mess awaits the buyer when they come to sell. It is corrupt.