Opinion  

Time to regulate the estate agents?

Kevin White

The forthcoming implementation of the mortgage market review is set to bolster regulation in the advisory sector, and according to the FCA, will “deliver a mortgage market that works better for consumers and is sustainable for all participants”.

The proposals will tighten lending criteria, ensure borrowers can afford their home loans, and promises to end the phenomenon of “mortgage prisoners”.

But while intermediaries and lenders are dragged towards reform and greater accountability, it appears that another crucial component of the home-buying process - the estate agent sector - can get away with increasingly sharp tactics as they capitalise on a resurgent housing market.

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In this week’s Financial Adviser we heard of a number of mortgage brokers who claimed that estate agents were holding potential homeowners hostage by demanding proof of their deposits and account data before passing on their offers to vendors.

Despite breaching data protection rules and the Estate Agents Act 1979 - which states an agent must not discriminate against potential buyers - a spokesman for estate agent group Countrywide sounded unrepentant, citing the firm’s duty to the vendor, and the need to ensure that potential buyers have the necessary funds.

Elsewhere, agents are refusing to pass on an offer unless a purchaser uses their own in-house mortgage adviser, “dirty tactics” which Essex-based mortgage broker Brian Brotheron claimed were not treating customers fairly.

Office of Fair Trading rules are in place warning that estate agents must not “discriminate against a potential buyer who does not want to take up other services an agent provides”, but this practice is becoming increasingly prevalent.

Indeed Countrywide has said that it prefers that purchasers use its own consultants as “they give better choice and convenience over high street banks”, something which I have personally experienced with another well known estate agency.

My question is convenience for who? Certainly not for the clients who put an offer in through an external broker. Coercing a customer to use an in-house adviser under the pretence that they can get you a better deal is not good for the wider broker market, and I would venture that it’s not great for consumer choice either.

In fact, if the tactic remains unchecked, it could squeeze independent advisers out of the equation altogether.

The advisory community has had to contend with a significant ramp-up of regulation over the past few years, which in turn has driven up standards.

As we fall back in love with that British obsession of buying houses, perhaps its time that the regulatory microscope is trained on the estate agents.