Conditional selling skyrocketing as demand soars, say brokers

ended 18. February 2022

In recent weeks, a number of independent mortgage brokers have alerted Newspage to underhand practices at certain corporate estate agencies.

The negotiators at these agencies are apparently intimating to prospective buyers that their offers to purchase a property will not be put forward for consideration to the seller unless they agree to additional in-house services offered, such as mortgage advice or legal services.

Basically, it seems some corporate estate agents are using people's desperation to buy and the sheer strength of demand in the market to sell in-house advice.

What most brokers are keen to stress is that the majority of estate agents, especially small, independent ones, do not use these ‘conditional selling’ tactics and offer a great service to seller and buyer alike.

In the words of broker Rhys Schofield of Peak Mortgages & Protection, who has a client prepared to go on the record about this practice and is building a case to present to the Association of Mortgage Intermediaries:

 

“I won't mince my words: many agents are repeatedly breaking the law and don't give a damn about it because clients are too scared to complain for fear of missing out on properties.”

Another broker, Rob Peters of Simple Fast Mortgage, goes so far as to call ‘conditional selling’ a cancer:

“There is a filthy cancer in the estate agency world, which needs to be addressed.”

A third, Lewis Shaw of Shaw Financial Services, says this: 

I've had numerous cases of estate agents trying to push financial services onto my customers; in the last three instances, they've all been part of the Connells or Countrywide groups, specifically Bairstow Eves, Frank Innes and Burchell Edwards. They're pushing this idiotic line of 'we have to financially qualify them' even though all the customers in question had agreements in principle."

7 responses from the Newspage community

Star Quote
"I won't mince my words: many agents are repeatedly breaking the law and don't give a damn about it because clients are too scared to complain for fear of missing out on properties. Connells in particular crop up time and time again on the broker forums. In fact, I have been collecting evidence for a contact to take to the Association of Mortgage Intermediaries meeting next month and have an inbox of unethical and in some case illegal examples from other brokers as well from our own clients. The most shocking story I have been sent is: "I suspect it’s the same old story but I have a client that found a house they loved. They put an offer in through Connells but didn’t hear anything. They called to chase to be told that the vendor had gone with someone else. Strange as they are first-time buyers living with parents and they offered full asking price. A few things didn’t add up so I encouraged them to put a note through the front door of the house. The vendor called them and said that they had only had one offer from a buyer that was using Connells to do their mortgage and they said noone else had made an offer. He thought this was strange as my clients had spoken to him on the day about how much they loved his house and he was waiting for their offer. The vendor withdrew the property from sale with Connells and is selling to my clients and now I’m the go-between for the vendor and the client who are are going to the property ombudsman. They totally lied about putting my clients' offer forward and they also, prior to this, told them that they would be on the ‘A List’ if they used their in-house mortgage broker and the ‘B List’ if they didn’t and therefore would never get first dibs on a property even if someone came in after them. So wrong. This client is willing to go on record as well as others."
Star Quote
"There is a filthy cancer in the estate agency world, which needs to be addressed. I speak not only as a mortgage adviser but also as a regulatory compliance expert, which means I'm passionate about protecting consumers, and often brought into firms to assist them with getting the right outcomes for their customers. The key issue is that some estate agents appear to be misleading potential buyers, and at the potential financial detriment of those selling a property. Buyers are being told their offer to purchase the property will not be put forward for consideration to the seller unless they agree to additional in-house services offered, such as mortgage advice or legal services. Clearly, by the time a buyer gets to the estate agent, they've usually already checked they can get a mortgage and for how much. There's often an existing relationship with a mortgage adviser, supported with paperwork to evidence this, known as a Decision in Principle. High volumes of feedback from both customers and brokers indicates some estate agents are refusing to accept confirmation or documents provided which evidence the buyer is 'fit' to proceed, instead insisting they speak with their preferred in-house mortgage adviser. This is often followed by the unlikely justification that 'the seller has requested this' specific method. The unfortunate result is that buyers are being misled into using services they would not have otherwise wanted or needed, with potential additional cost, in order to have their purchase offer put forward. Sellers, meanwhile, are not benefiting from higher sales offers they might otherwise have received, resulting in a lower price achieved. At best, these practices are unethical and irresponsible, at worst, illegal. "As someone who has spent many years ensuring customers get the right outcome (and enforcing a correction when they don't), it's very disappointing to learn this type of thing is still going on. It's reminiscent of archaic sales tactics best left in the past; tactics that resulted in widespread customer reviews and billions of pounds in financial compensation being paid. This behaviour needs to be stamped out as it it penalises buyers and sellers alike and gives the majority of what is a professional industry a bad name. "Estate agents are bound by the rules such as the Code of Practice for Residential Estate Agents and The Property Ombudsman. Both of these are very clear that making a service, such as mortgage advice, conditional on presenting a property purchase offer is not allowed. It's not a new issue, but one that seems to have become worse. If the industry can't work together to resolve it, a closer look at regulation needs to be taken to ensure consumers are protected and bring the industry forward and away from practices that belong in the dark ages. "It's equally important to understand that this does not apply to all estate agents, most do an excellent job for their clients but, as ever, it is the minority that is tarnishing the reputation of the many. However, there do appear to be big company names that are repeatedly mentioned as culprits."
Star Quote
"I've had numerous cases of estate agents trying to push financial services onto my customers; in the last three instances, they've all been part of the Connells or Countrywide groups, specifically Bairstow Eves, Frank Innes and Burchell Edwards. They're pushing this idiotic line of 'we have to financially qualify them' even though all the customers in question had agreements in principle. I spoke to the estate agents and said you don't need to do anything of the sort, and their reply was 'It's company policy'. I'm waiting for the 'no we didn't say that' so I can download the recorded phone call and it can be used as evidence for all to hear. It's illegal, unethical and a violation of consumer rights. These corporate estate agencies aren't good enough to win business by providing a great proposition and service, so they use blackmail and coercion instead. Often these in-house mortgage services have limited panels, are never whole of market or independent and push heavily loaded life insurance premiums, often from only one insurer - you guessed it - the one that will pay them the highest commission rates and that rinses the consumer. It's time this practice was banned, and a proper punishment was put in place."
"This has been a problem for as long as I have been advising. It is not legal to insist that a buyer uses a specific mortgage broker, solicitor or surveyor, but it can be strongly suggested that such a route would be "beneficial". The buyer has the option to make a fuss, but that will most probably mean their interest will not be pursued and they will lose out on the potential purchase. My view is that we are here to help the buyer and if that means we have to bow out gracefully now so be it, we will keep in touch and win the customer's long term loyalty and the next transaction. My experience is that estate agents are, in the vast majority of instances, professional and work hard for their clients to achieve the best result."
"It is disappointing to hear reports such as these, as it gives the impression that estate agents (and by association mortgage brokers) are a bunch of cowboys and do not have the customer's interests at heart, which on the whole is untrue. The market is full of honest, hard working and professional agents and brokers. Many will argue, quite correctly, that it is important that a seller knows if a buyer's offer is genuine, namely can they actually afford the property? There is, however, a massive difference between asking a buyer to have a quick affordability check, compared to telling them their offer won't be put forward unless they use the agent's in-house adviser. The vast majority of agents are signatories to The Property Ombudsman and their Code of Practice for Residential Estate Agents does talk about how they should deal with mortgages and other associated services: 9d) By law you cannot make it a condition of passing on offers to the seller that the buyer must use services offered by you or another party. You must not discriminate, or threaten to discriminate, against a buyer because that person declines to accept that you will (directly or indirectly) provide related services to them. Discrimination includes but is not limited to the following: - Failing to tell the seller of an offer to buy the property. - Telling the seller of an offer less quickly than other offers you have received. - Misrepresenting the nature of the offer or that of rival offers. - Giving details of properties for sale first to buyers who have indicated they are prepared to let you provide services to them. 10b) You must put all offers to your seller client even if the buyer has not been financially qualified at that stage. In addition, section 18a headed "Aggressive behavior" lists some examples of what the Code defines as poor practice and this includes pressuring a potential buyer to use associated services, for example to take out a mortgage through the in-house mortgage adviser or to use a particular firm of solicitors or licensed conveyancers. "Given the various parts of the Code that would seem to ban the types of behavior that are being reported, it would seem that these firms have little regard for the rules they have agreed to follow. "Anecdotal tales from ex-estate agents would suggest that staff are given stiff targets to refer customers to in-house advisers, with disproportionately large penalties for failure to achieve these targets. As we saw with branch staff in banks mis-selling PPI, if you apply huge pressure you are likely to have staff resort to some pretty shady tactics to meet the expected targets. Are we seeing the same here?"
"I think most advisers at some point have come across agents applying pressure tactics on clients looking to purchase a home to use their in-house services, which they get huge kickbacks on, and usually it comes from the large corporate agents who have silly targets in place for the advisers they employ. Not all agents are bad as from my own experience and that of clients the small, family run independents tend to be much more understanding and never as pushy. I have personally had someone approach me after a large corporate applied the pressure tactics and ended up offering a client a mortgage that would have cost the client an extra £12,000 in payments over a few years. This is down to them only having a limited panel of lenders, usually of around 12-30 lenders and only one provider to protect a client and their family, which is disgraceful. The management within these organisations must know this is happening as most have been exposed previously but it continues to happen in 2022. Surely they must look to provide their teams with a solution to prevent this from happening or are they actually part of the problem with the unrealistic targets being set?"
"Yes, this is now worse than at any point since I started. I have a recorded call with an agent for a national chain where they admit to conditional selling as they are instructed by their bosses to do it. Prospective buyers are told at the outset that they must see the in-house broker to be qualified for a mortgage, and that it speeds the whole buying process up if the use their preferred conveyancer and surveyor. When I ask my clients to get this in writing from the agent, they do not do it, I wonder why? It is because the vendor has requested it, is the usual response. Or is it so they can see how much the client can afford to borrow, so they can up the asking price on the property? I mean, who would do that. Certain agents also advise that it is best to use the in-house conveyancer as that speeds things up (it never does and in my opinion is a conflict of interest and should never happen). I now give all my clients a copy of the estate agents' guide and prepare them for the inevitable "conditional sell". However, this is not all agents, as some are still very good, honest and not pushy. The same way that not all mortgage brokers are great as well. We have guidelines to follow and they get checked, I do not hear of many agents that get checked for this. If I, as an FCA registered broker, who has to prove all the work I have undertaken for that client to have a mortgage that is affordable, then why can the estate agencies not take my decision in principle as proof of funds. There must be other reasons surely! All it does it give a bad experience for the client and wastes time and potentially could cause more issues with a mortgage application with multiple brokers looking at the client at once."