The OFT has announced today that it has opened formal investigations into three quick house sale firms for alleged unfair practices.
Some consumers may have lost tens of thousands of pounds thanks to the practices by three unnamed firms.
As well as the three firms in question 120 providers have been written to by the OFT advising them to check that their business practices and contractual terms comply with their legal obligations.
Discussions are also underway with businesses in the sector on developing self-regulation.
Quick house sale firms offer consumers a faster sale than might be achieved on the open market, with the seller usually agreeing to receive a below market value price for their home in return. This value is usually about 10 to 25% lower than the market value of their property.
The OFT has published a report on the sector which found that, whilst some businesses deal with customers in an open and fair manner, others employ trading practices that may prevent customers from making informed choices when selling their home, or exploit their difficult financial circumstances.
Practices of concern include:
– Reducing the price offered at the last minute after the seller is financially committed to the transaction.
– Making misleading claims about the value of the property or level of discount to be applied.
– Stressing the fastest possible times to completion (for example ‘seven days’), rather than the more typical times (three to four weeks) on websites and marketing materials.
– Inducing sellers to sign long-term exclusivity agreements that prevent them selling to other buyers, with severe penalties for breach of contract.
The OFT revealed that 70% of complaints about quick house sales came from vulnerable consumers such as older people who may wish to sell their property quickly due to declining health, or homeowners in financial difficulty may look for a quick sale to help reduce their debts.
Gaucho Rasmussen, OFT Director, said: “Responsible quick house sale firms offer a valuable service to consumers who want a fast sale. However we have also seen potentially illegal behaviour and as a result the OFT has opened investigations into three companies.
“When sellers get a bad deal, they could lose a lot of money. We want to ensure that consumers can have confidence in this sector and put an end to these shoddy practices.”
The Property Ombudsman Christopher Hamer responded to the OFT’s market study by calling for legislation in the sector. He said: “As with the residential lettings sector there is a minority, albeit sizable, number of ‘quick house sale’ firms that do not appear to follow established standards or acceptable trading practices.
“The result is an unsafe environment for consumers at a time when they are making important decisions concerning the sale of their home perhaps when under severe financial or health pressures.
“Consumers using ‘quick house sale’ firms have no access to independent redress and the risks associated with this are significant. Whilst I note that the OFT is pursuing a self-regulatory approach, the only way of realistically ensuring all such firms provide consistent service is through legislation.”
What do you think of quick house sale firms? Do you think conveyancers should be concerned about which firms they are dealing with?