Watch out for sneaky mortgage tactic estate agents are using to ‘rip you off’
HOMEBUYERS pressurised into using estate agents’ mortgage services face being “ripped off”, warn experts as cases of conditional selling rise.
Conditional selling, banned under industry regulations, happens when estate agents try to strong-arm or incentivise buyers to use their mortgage broker.
Buyers who refuse are told it could affect their chances of securing the property.
It’s an underhanded practice that has been around for a long time say brokers. But recently it has become more widespread.
If persuaded, buyers could wind up paying too much for their mortgage, for the property and for extra services such as insurance and legal work.
Sun Money explains how to spot signs of pressure selling and what you can do to avoid it.
Rise in pressure selling
In a quieter housing market, like the one we’re in now, more estate agents are likely to try to coerce customers into using more of their services such as mortgage broking, say independent advisers.
Rowan Frayling, managing director of J Finance, said: “This year, almost all my team of nine brokers have experienced this issue.
“I personally have had four cases. Our customers are being told by the agent that they cannot put their offer to the seller until they’ve met with their own broker to be verified.”
A recent survey by brokerage Access Financial Services which has 150 advisers revealed that 63% said they’d experienced conditional selling and in all these cases the borrowers suffered stress, hassle or confusion.
Other sneaky house sales tactics
Look out for these sales tricks to hook you in:
Tactic: You’re offer cannot be forwarded to the seller unless you use the agent’s in-house broker.
Truth: Under the Estate Agents Act 1979 all offers must be passed on to the seller.
Tactic: You’re offer will be looked upon more favourably if you use the agent’s broker and conveyancer.
Truth: Agents are not allowed to discriminate against a buyer by misrepresenting their offer to the seller or passing it on less quickly than others.
Tactic: Before you can view a property we need to verify your income to avoid disappointment.
Truth: The agent is entitled to confirm to the seller you can afford to make an offer but your own broker can provide a certificate as proof.
Tactic: Only our agency has access to the cheapest rates on the market.
Truth: This isn’t likely. Agencies often work with a limited number of lenders. Ask for a list.
Risk of being “ripped off”
Buyers who bow to the pressure of using the agent’s broker face the possibility of paying over the odds for their mortgage and insurances.
“Consumers risk being ripped off,” said Nicholas Mendes, mortgage technical manager for broker John Charcol.
Some large estate agencies tempt buyers with the promise of the cheapest rates on the market stating they have exclusive tie-ups with mortgage lenders.
This may be true, but so do mortgage brokers.
The estate agent’s broker is often only allowed to offer mortgages from a few lenders, called a panel.
Your own broker typically has the pick of the whole market, but check that is the case.
Mr Mendes added: “Buyers who have had past credit problems, for example, could find they are offered an uncompetitive rate if the in-house broker works with a limited number of lenders.”
Brokers are obliged under financial regulations to provide a list of the lenders they work with if it is a restricted number. Always ask for this upfront.
Chief executive of consumer group HomeOwners Alliance said: “Buyers risk spending thousands of pounds more in interest by not getting the best mortgage rate.
Many of the in-house brokers do not offer deals from every lender in the market and they receive hefty commissions.”
Using in-house brokers also makes it difficult for buyers to haggle over the asking price.
The agent knows exactly how much you can afford to pay for the property once you’ve handed over details of your salary and outgoings.
By keeping your cards close to your chest, you’ll have more bargaining power.
Flouting the rules
Estate agents who engage in conditional selling are breaking the rules of the Estate Agents Act 1979.
Under section 3 of the act, the regulations state that every offer made by a buyer must be passed to the seller within two working days of being received.
The rules state that agents must not discriminate against a buyer by misrepresenting their offer to the seller or passing it on less quickly than others.
Agents are allowed to check you can afford to back up any offer you make.
You can satisfy this check by producing your Agreement in Principle (AIP), the certificate from your own broker that confirms you’re mortgage ready.
You do not have to pass another financial assessment.
James Munro, senior manager of the National Trading Standards Estate and Letting Agency Team, said: “We view conditional selling as unacceptable and are aware that it is a significant problem that can cause considerable financial loss and emotional turmoil to buyers.
“It is crucial for us that people report any misconduct or manipulation of the offer process.”
What can buyers do?
There’s lots you can do to protect yourself from pressure selling.
Do your research – get an idea of the mortgage rates you’re eligible for and understand what could affect your rate such as the size of your deposit, being self- employed or having past credit problems.
Be prepared – ask your own broker to check you’re eligible for a mortgage and get an AIP to prove you can afford the maximum you are prepared to pay.
When you make an offer by email, attach your AIP and your solicitor’s details.
Quote the regulations – you are less likely to be pressured if you’re clued up on the rules.
Complain to Citizens Advice Consumer Service and either The Property Ombudsman or the Property Redress Scheme, whichever body your agent is a member of.
You must also notify the agent of your actions.
Nathan Emerson, chief executive of Propertymark, the estate agent trade body, said: “Buyers should never be denied progression within the home buying or selling process due to not choosing an agency’s specific mortgage adviser.
“We encourage anyone who has or is experiencing this behaviour from an agent to follow correct procedures and make the appropriate industry acting bodies aware of the situation.”
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