Home sellers are being blindsided by real estate agents looking for additional financial kickbacks, experts warn.
Some brokers reportedly only make offers from buyers who have been “financially qualified” by their recommended mortgage broker.
Sometimes this can be in the form of your own mortgage advisors or a separate real estate agency with which the broker works.
This practice, known as conditional selling, allows brokers to take advantage of referral fees, which are paid to them by mortgage brokers, but sometimes also by attorneys.
Sharp Practice: Some brokers choose which offer to offer based on whether the buyer will give them a financial kickback
Given their role as an intermediary in the sales process, this means that sellers may not be notified of offers from buyers who choose to use a mortgage service separate from the broker.
Paula Higgins, CEO of HomeOwners Alliance, said: ‘We have always believed that 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 it is an illegal practice, there is no enforcement, so brokers get away with it.
“Sellers are being fooled into agreeing that buyers are ‘financially qualified,’ but what they don’t realize is that they are limiting the number of buyers, which is not in their best interest.”
This real estate agent tactic also means that buyers who refuse to be “qualified by an agent’s mortgage advisors” may unfairly miss out on the homes they are listing on.
“Conditional sales have been around for years and we are regularly contacted by buyers who are pressured to use in-house services or even find that they are not allowed to view a property or make an offer,” Higgins adds.
‘In one case the seller ended up losing £5,000 because the ‘preferred’ buyer backed out and ended up having to sell the property for less.’
Estate agents who fail to pass on offers to sellers for these reasons are in breach of their professional duties and could face sanctions, said James Munro, senior manager of the National Trading Standards Estate and Letting Agency Team.
He said: ‘We consider this practice to be unacceptable and are aware that it is a significant problem that could cause significant financial loss and emotional distress for buyers.
‘This practice often goes unnoticed and unreported because offers on homes can be rejected for a variety of reasons and most potential buyers rightly assume that, if an agent tells them their offer has been rejected, the process has been fair .’
Talk to our mortgage broker: Buyers feel pressured to use a mortgage broker recommended by brokers
How do cops get away with it?
Brokers write clauses into their contracts with sellers that justify blocking bids, according to the National Trading Standards.
James Munro told the Telegraph: ‘Anecdotally we have found that agents can manipulate the bidding process. An exception (to conditional sale) is if the seller states in writing that he does not want certain offers.
“Agents are getting creative, shall we say, with the contracts they ask sellers to sign (before putting their properties on the market). We’ve seen rules like “reject buyers who are not financially qualified by us.”
This way, brokers can claim that they haven’t done anything that is technically illegal.
However, Munro believes a judge will ultimately side with the seller if such a legal claim is made.
He added: ‘If you went to a tribunal, the judge would probably decide that explicit consent was necessary – and that an implied consent period in a contract doesn’t count.’
Jeremy Leaf, North London estate agent and former chairman of Rics, says buyers and sellers need to be sensible about these estate agent tactics.
‘We do hear about these agreements, which are clearly not necessarily in the interests of the buyer or seller.
‘As with any contract or agreement, it is up to the parties to read the fine print. The most obvious disadvantage is that the seller will not get a better offer from a buyer who has made separate arrangements with a real estate agent, while a buyer can waste time, money and effort on a property that he has little chance of acquiring. ‘
Just sign on the dotted line: some agents include clauses in their contracts that could technically justify them blocking bids
What can sellers and buyers do if they become victims?
It is important that people report any misconduct or manipulation of the bidding process, according to the National Trading Standards.
James Munro added: ‘We would encourage anyone who believes their offer on a house has been rejected purely because they chose not to use the agent’s recommended services to report this via Citizens Advice Consumer Service ( England and Wales), advice.scot (Scotland) or Consumerline (Northern Ireland).
‘These organizations will provide advice and refer the complaint to the local authority’s Trading Standards team, allowing them to gain a comprehensive understanding of the issue and initiate investigations.
‘If the agent is registered with the Property Ombudsman or the Property Redress Scheme, consumers should also report the agent to them as these bodies can investigate the complaint and award compensation.’
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