How do they get away with it?! (Estate Agents)

[Power Mortgages Ltd]

I have spoken with a couple of clients recently who are buying property and it seems that the current unscrupulous tactics Estate Agents are using is to demand money from the people offering to buy the property in order to secure it!

An Estate Agent is meant to act on behalf of the vendor and obtain the best possible deal for them but I have a client who is interested in a property which already has an offer on it (higher than the amount my client wishes to buy the property for may I add). The Estate Agent knew of my client's interest from before as my client originally offered on the property but was outbid by the current buyer. The Estate Agent has called up my client to see if he is still interested in the property as it has been a whole 2 weeks (shock horror!) since the current buyer's offer was accepted and he thinks that is too long as a valuation hasn't yet been booked in! Now whilst I would like to think in most instances a valuation would be booked in by this stage it largely depends upon when the application was submitted and there are a number of genuine reasons that the valuation may not have been booked in so far, it doesn't automatically mean the buyer is not interested as the Agent seems to think (he is obviously keen to be paid as quickly as possible by any means).

The Agent has asked what the highest amount my client would be prepared to buy the property for to which my client gave his figure. The Agent came back with a counter proposal that he would persuade the vendor to take my clients offer but for £4k less than my client is prepared to spend on the agreement that my client pays him (the Agent) the £4k personally!

Surely that is a massive conflict of interests?! The Agent is already being paid by the vendor to sell the property from the commission upon sale and is now no longer acting on behalf of the vendor! The best offer for the vendor is actually the full amount my client wishes to buy the property for, not that figure minus £4k which he will stuff into his greedy pockets!

I'm not sure on the legal side of things but surely that is a breach of the contract the vendor has with the Agent and would enable the vendor to tear the contract up and continue with the sale of the property (either to the current buyer or my client) without the involvement of the Agent thus saving the commission they would have to pay to the Agent for selling the property? Anyone versed in the legalities of this?

The problem is there is little/no regulation in Estate Agents and in recent years it really has bred the worst of the worst as you may have seen on that Estate Agents uncovered documentary.

[Clare@InTouch]

That's terrible. I've had estate agents trying to convince me to gazzump someone else, but never actually taking money for it. Surely that's illegal in some way??

I'm buying a new property at the moment and have to say my experience of a couple of the estate agents I've spoken to hasn't been good either. One of them tried to convince me a property had no lease and an absent freeholder (which surely makes the current "owner" a squatter?!) but that it wasn't a problem and I could sort it out after buying it. Two weeks and lots of questions down the line, finally found out the property had just 70 years left on the lease. Another sale had fallen through before so I don't believe he didn't know about it, but presumably he thought he could string things along and I'd just go with it!

[mudskipper]

If I was your client, I would contact the vendor and tell him/her what's happened.

[doodab]

Estate agents, recruitment agents and double agents. All equally trustworthy.

[barrydidit]

If I was your client, I would contact the vendor and tell him/her what's happened.

^^this

[Bronco Billy]

If I was your client, I would contact the vendor and tell him/her what's happened.

The pimp will just deny it. Get your client to purchase one of those mini voice recorders, and try and record the conversation..... And then play it for anyone who's interested (press / vendor / estate agency directors)....

[Scruff]

This sounds like a material breach of the Agency Agreement to me and would probably allow the vendor to cancel the agreement.

This might work in favour of your client, since if this double-agent is confronted by both parties, and agrees to cancel, based on his actions, then the vendor would be able to deal direct with your client?

IANAL

[Power Mortgages Ltd]

If I was your client, I would contact the vendor and tell him/her what's happened.

Completely agree. The difficulty is I cannot advise on any matter non-mortgage related like whether to buy the property or to take the risk in proceeding with this Estate Agent's offer because that doesn't fall under the remit of mortgage advice. I have pointed out the pitfalls from my professional opinion though to enable him to make his own mind up.

Personally like you, I'd knock on the vendor's door, explain what has happened, advise them to review the contract they have signed with the Agent and possibly seek legal advice with the view to tearing the contract up and selling the property privately anyway. Thing is, if that did happen I guess the onus would be on the vendor proving that this happened so unless my client recorded the Estate Agent doing it, it would be very difficult to prove and therefore the vendor would likely fail in any bid to oust the Agent from the process and would still have to pay them.

It really is unbelievable they are not regulated though!

[Power Mortgages Ltd]

This sounds like a material breach of the Agency Agreement to me and would probably allow the vendor to cancel the agreement.

This might work in favour of your client, since if this double-agent is confronted by both parties, and agrees to cancel, based on his actions, then the vendor would be able to deal direct with your client?

IANAL

My thoughts entirely but I guess it just comes down to proof. I'd assume in order to enforce the £4k he would ask my client to sign something to ensure my client doesn't just walk away without paying him the £4k once completed and by doing so, he would then be providing all the evidence he needs for my client to take the document to the vendor to prove there has been a breach.

Worrying thing is, this is the second time I have heard this in a week from two different clients so I'd imagine it is becoming a practice more and more Agents are trying to get away with!

[TheCyclingProgrammer]

I have no idea on the legalities of this either; I have seen some estate agents in London do "sale by tender" and charge the buyer a "finders fee" instead of the seller paying commission.

I've been doing research on this myself as I'm planning to buy later this year, but isn't there a risk that the £4k "inducement" paid to the estate agent could be treated as part of the overall consideration for the property for the purposes of stamp duty?

I believe any offer to settle a seller's debts by the buyer (e.g. paying the seller's estate agent fees or anything else) in order to get a lower sale price doesn't work to avoid extra stamp duty as it's treated as part of the consideration (although I bet lots of estate agents try and convince buyers to do this on properties near stamp duty thresholds). I wonder if this could be too (I also wonder how HMRC look at buyer "finder fees" too - probably depends heavily on the wording of the contract).

I wonder what would happen if your client was to approach the vendor, let them know what the sneaky estate agent has been up to, offer to meet them in the middle (so their offer + half of what the estate agent wanted from them) and use a different agent!