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House Buyers Beware, As Estate Agents Try To Double-Charge

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http://www.theguardian.com/money/2014/feb/10/house-buyers-beware-estate-agents-double-charge

It is an estate agent's job to work for the seller of a property, lining up lots of prospective buyers and getting the best price for the property, whether it's an immaculate family home in a most-wanted catchment area or a fixer-upper in need of some serious DIY. As such, the agent's fees are met by the seller.

But a new trend is emerging where buyers are also being asked to stump up some cash – and when they've already had to go through a process of outbidding rivals. With the property market warming up in London and the south-east, an increasing number of sales have been going to "sealed bids" and "best and final offers". Typically the estate agent will hold an open day or a series of viewings in quick succession, and ask would-be purchasers to put their offers on paper. In some parts of the capital buyers are being advised that an offer of less than 10% above asking price won't stand a chance.

Now some agents are taking the process a step further with "sale by informal tender" contracts for buyers who make sealed bids – the contracts commit the successful buyer to paying an introductory or finder's fee to the agent, usually around 2-2.5% of the cost of the property. At the same time, the agent collects a fee from the seller.

..One agent in the south-east that uses this sales method is Douglas Allen. In a letter to Creasy, the agent said the process was fair and that fees were made clear from the start. "If buyers are at all concerned or deterred by the introduction fee, they remain at liberty to take this into account when making their bid. If a seller is not satisfied with the highest bid on the closing date, they remain at liberty to decline to sell ..." the letter said. The agent told the Guardian sellers were currently paying a reduced fee to use the process – £150 plus VAT – so the overall charge was not larger than on a sale made through the traditional process.

Mark Hayward, managing director of the National Association of Estate Agents, said: "Common practice for estate agency fees is for the fee to fall to the seller in return for the agent's role in marketing the property, securing the sale and negotiating the transition with the buyer and others who may be part of the chain. However, given the current pressures on supply in the market, some agents may well consider changing their fee structures to encourage more sellers to the market by reducing fees for those selling a property and instead introducing a finder's fee to help buyers find the right property.

..

You can tell volumes are down and they are getting desperate!

EA don't you just love them!

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Well, they double charge renters and rentiers now don't they?

If this ever takes off it'll happen in London first.

I've never paid any changes when renting as I have always deal with the landlord directly. I also know my landlord as he is a friend of my parents.

I think if I had to pay all those stupid fees the EA's try to charge for finding a place to rent, I would be forced to buy! :angry:

Back on topic. I can't see these fee taking off long term. What seller is going to go to an EA who charges a fee which puts potential buyers off!

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This is a very interesting development!

I'm not convinced the London property market is booming. Sure, prices have gone crazy. But there is a dwindling number of properties being chased by a dwindling number of buyers. It will look like a boom right up until the last buyer leaves the market. EAs have created the situation. To get the instruction they have to overvalue and under charge. So with low volumes and low barriers to entry I'm not convinced the EA profession is that lucrative outside Prime London.

If the only way to increase revenues is to charge buyers then it changes the fundamental relationship between buyer, seller and agent. As a buyer, the ball will have moved a bit more into my court. I'll register with the EA with the lowest fees or I can use the EA to noble the seller. Why not? The agent is working for me now.

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I think if I had to pay all those stupid fees the EA's try to charge for finding a place to rent, I would be forced to buy! :angry:

Anyone know when charging tenants for the privilege started? It didn't seem surprising in London when I was there, but seems to have spread to the rest of the country.

If that can happen, I don't see why this couldn't happen too.

Can't wait until Estate Agents are wiped from the face of the Earth by the internet. Still waiting for a reply from one I emailed back on Friday.

Every one I have dealt with has been incompetent. It's like I'm putting them out and they don't want my business.

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Hopefully Stella Creasy will be as successful with this campaign as she has been with payday lenders.

Douglas Allen have two offices in her constituency - and are one of the leading estate agents in the north east London/Essex borders (Walthamstow, Leytonstone, Woodford, Buckhurst Hill, Wanstead Leyton, Chingford etc). Coincidentally this is an area where asking prices appear to have boomed by up to 30% in the last 6-12 months. No doubt driven by estate agents raising the asking prices.

PS You have until midnight to submit your sale by tender for this 'superb' 2 bed flat in Walthamstow - the nation's new most popular place to buy houses - a snip at £325,000 (plus DAs commission!)

http://www.rightmove.co.uk/property-for-sale/property-29114745.html

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Here is an example of their sale by tender instructions.

http://www.douglasallen.co.uk/_assets/pdfs/53113641_tender_pack.PDF

"An introduction fee of 2% + VAT of the contracted sale price or £2,000.00 + VAT (whichever is greater) will be

payable if the tender bid is accepted and a sale results at any time. This fee becomes due for payment on exchange of

contracts. The total fee will be confirmed in our memorandum of sale and must be lodged with the purchaser’s legal

representative prior to exchange of contracts and settled by the purchaser’s legal representative within 10 days of

completion of the sale. Interest may be charged at 3% per annum above Barclays Bank base rate if the account

remains unpaid after this time. "

So in the case of this flat they potentially make £6,400 (excl VAT) for doing very little bar putting an ad on rightmove and booking some viewings. Nice work if you can get it!

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This could become amusing. Effectively the agent is the contracted by both parties in the sale.

Therefore when the property has a problem found after completion and the buyer wants someone to sue it wouldn't surprise me if the agent is a viable target. Given the buyer has paid them a fee they should be able to expect the agent to have verified the property

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This could become amusing. Effectively the agent is the contracted by both parties in the sale.

Therefore when the property has a problem found after completion and the buyer wants someone to sue it wouldn't surprise me if the agent is a viable target. Given the buyer has paid them a fee they should be able to expect the agent to have verified the property

Well I am sure the agent will have a good lawyer. Look at these extracts from the tender documentation!

"All bids must be stated in pounds sterling only" - no Malaysian Ringitt/Singapore Dollar or yuan bids permitted!

"7. The sale will be subject to any conditions, restrictions and/or timeframes as may be agreed by negotiation through

our staff and these will be stated in the memorandum of sale, which should be checked by both parties before

proceeding to ensure accuracy."

"2. Bids will not be accepted if:

• Any inducement payments are offered or given to any member of our staff."" :D

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In other news estate agents offering sale by tender seem confused as to why the offers they are receiving appear to be 2.5% (+vat) less that anticipated.

There is only so much money in the pot, like stamp duty, these fees will simply take up a proportion of the available funds. I would maybe be able to pay more, but that involves stopping being reamed by energy companies and food sellers amongst others.

Edited by hirop

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Here is an example of their sale by tender instructions.

http://www.douglasallen.co.uk/_assets/pdfs/53113641_tender_pack.PDF

"An introduction fee of 2% + VAT of the contracted sale price or £2,000.00 + VAT (whichever is greater) will be

payable if the tender bid is accepted and a sale results at any time. This fee becomes due for payment on exchange of

contracts. The total fee will be confirmed in our memorandum of sale and must be lodged with the purchaser’s legal

representative prior to exchange of contracts and settled by the purchaser’s legal representative within 10 days of

completion of the sale. Interest may be charged at 3% per annum above Barclays Bank base rate if the account

remains unpaid after this time. "

So in the case of this flat they potentially make £6,400 (excl VAT) for doing very little bar putting an ad on rightmove and booking some viewings. Nice work if you can get it!

Quick read and I spotted a mistake...

the famous eastend street market (in fact the largest in Europe)

It is not the largest in Europe but the longest.

http://en.wikipedia.org/wiki/Walthamstow_Market

Walthamstow Market in the London Borough of Waltham Forest, is the longest (though not the largest) daily outdoor market in Europe.

Not that these mistakes, (or lies) from EA surprise me. Most don't have the IQ to do a little basic research! :P

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Anyone know when charging tenants for the privilege started? It didn't seem surprising in London when I was there, but seems to have spread to the rest of the country.

If that can happen, I don't see why this couldn't happen too.

Can't wait until Estate Agents are wiped from the face of the Earth by the internet. Still waiting for a reply from one I emailed back on Friday.

Every one I have dealt with has been incompetent. It's like I'm putting them out and they don't want my business.

Seriously thinking of setting up an online letting agents in my town, (well start off with my postcode) dealing direct with landlords, and if the tenant doesn't pay the fee's its common for the letting agency agreement to charge them to the landlords account.

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The agent is there working for the seller and aiming to achieve the highest possible price.

The charge on buyers excludes potential buyers who are not prepared to pay the charge. It also reduces the amount buyers can afford by £2000 or whatever, by definition. Therefore the estate agent is not seeking the highest possible price for the seller.

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Seriously thinking of setting up an online letting agents in my town, (well start off with my postcode) dealing direct with landlords, and if the tenant doesn't pay the fee's its common for the letting agency agreement to charge them to the landlords account.

Dooooooooooooooo it!

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We put in a bid on a house via that agency, the fees including VAT were going to come to over £20k so our max offer was reduced by that amount. Not sure what the seller thinks they will gain by this approach as I am sure all the bidders did too. Despite it supposedly being best and final offers they came back and asked us to increase our bid as another was very close. I told them I wasn't playing those games!!

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We put in a bid on a house via that agency, the fees including VAT were going to come to over £20k so our max offer was reduced by that amount. Not sure what the seller thinks they will gain by this approach as I am sure all the bidders did too. Despite it supposedly being best and final offers they came back and asked us to increase our bid as another was very close. I told them I wasn't playing those games!!

Almost every property that agent is listing now in north east London - from expensive houses to cheap flats/maisonettes - is a s sale by tender. I expect the buyers simply listed with them - and hey presto their sale is now by tender with a nice fat 2% fee for the agent.

I don't think any of the other local agents are using this approach at all - so its just them at present. If the business model works of course - then I expect the others will follow.

If buyers have any sense they will boycott any property listed by Douglas Allen - in protest. But such is the hysteria now in that area.

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This could become amusing. Effectively the agent is the contracted by both parties in the sale.

Therefore when the property has a problem found after completion and the buyer wants someone to sue it wouldn't surprise me if the agent is a viable target. Given the buyer has paid them a fee they should be able to expect the agent to have verified the property

There is a clear conflict of interest, and this sounds illegal, like both parties in a divorce using the same lawyer. :o:blink:

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I've asked a few questions of agents I know in London. In a nutshell, the EA business model is falling apart.

Low barriers to entry meaning lots of new kids on the block. Low volumes meaning not a lot of fees going round, despite high prices. New kids over-value to win business. No loyalty or repeat business, so old firms going head to head with new kids. Vendors want highest valuations and lowest fees. Only way left to win business is to value high and pass fees on to the buyer.

If it works, then coming to an EA near you soon.

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I've asked a few questions of agents I know in London. In a nutshell, the EA business model is falling apart.

Low barriers to entry meaning lots of new kids on the block. Low volumes meaning not a lot of fees going round, despite high prices. New kids over-value to win business. No loyalty or repeat business, so old firms going head to head with new kids. Vendors want highest valuations and lowest fees. Only way left to win business is to value high and pass fees on to the buyer.

If it works, then coming to an EA near you soon.

thanks for the summary

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..bypass the Estate Agent and offer direct ... :rolleyes:

Making estate agents redundant? :)

The Ombudsman calls this an 'emerging commercial practice' meaning it may be starting in London but without quick action it could spread across the country. Does that mean that the Ombudsman has no issue with this then?

from 1 April 2014 the OFT will be abolished on and its consumer law enforcement functions transferred to other bodies. At present the Government is refusing to set out its proposals to put into force the European Directive on dispute resolution which will require every consumer to have access to a mediation process to resolve problems. Without this protection the moves to transfer the OFT's powers and lack of clarity about the role of Ombudsmen could leave an enforcement gap In which sharp practice by estate agents and letting agents could flourish.

:blink:

http://www.workingfo...k-urges-labour/

Edited by neontetra

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