Call for Evidence: Estate Agent Focus
The Government’s ‘Call for Evidence’ has unsurprisingly sparked a variety of opinions being voiced across the industry.
Aimed at both the public and industry professionals, the Department for Communities and Local Government released the consultation last month to gather views and opinions on how the home moving process could be improved.
We recently hosted a webinar focussing on what the Call for Evidence could mean for conveyancers. You can watch it here.
Broken down into a number of sections, the consultation looks at a range of different areas of the process, highlighting the potential issues within each. At the close of each section, it also poses questions to the reader as well as possible suggestions for reform.
The first section of the consultation focusses on estate agents, setting out possible flaws in relation to this initial part of the moving process, as well as potential changes for agents themselves.
Three key issues are highlighted in this section, with the focus being on transparency, the consumer complaints process and strengthening regulation.
- The first point drawn attention to relates to lettings agents themselves. Whilst it states that plans have already been set out requiring agents to register with a certified organisation, it goes on to question whether this measure goes far enough. As estate agents are not under any obligation to undertake professional training, the consultation asks whether there is a need for regulation of estate agents to be strengthened.
- The second issue focusses on consumer protection, with the DCLG mentioning that recent amendments to the regulations positively impacted the quality of service provided. However, it goes on to question the accessibility of the existing complaints process and whether consumers are aware of the appropriate procedure.
- The final point is perhaps the one which spurred the most significant response within the industry – or at least the one which has been most heavily featured in the press. Focussing on the mutual relationship between conveyancers and agents, it questions the transparency of referral fees, as well as whether consumers benefit from them at all.
The National Association of Estate Agents (NAEA) was swift to issue their immediate response to the consultation, which corresponded with the release of their September Housing Report.
Highlighting the findings of the survey, Chief Executive Mark Hayward expressed his approval of the review, stating: “The Government’s announcement last weekend that it will consult to reform the home-buying process couldn’t come soon enough, and we welcome it. Our findings show that estate agents agree, and would welcome changes to ensure the process for buying and selling is brought into the twenty-first century. The current prolonged process means sales are stagnating despite the fact that the supply of housing is up, and there is growing demand. Hopefully we will see activity pick up marginally in the short term, when properties which are being marketed now are taken off the market and pushed through, so buyers can be in before Christmas.”
However, not all responses were quite so positive.
Taking to social media to share his views, house buying agent Henry Pryor stated:
‘If I had a brick for every report, consultation, focus group and enquiry there would be no housing crisis. Stop asking questions and build!”
Within the industry, a number of agent responses to the consultation focussed on gazumping. Highlighted as a key concern for buyers, this is where the owner continues to market the property and accepts a higher offer from a new buyer. As such, the government suggested that parties should build a greater level of commitment, potentially achieved through information sharing.
Consumer group HomeOwners Alliance said that this could be achieved through the use of ‘reservation agreements’, where a payment of £1,000 is paid by the side responsible for a transaction falling through.
However, agency Loveitts stated that this can also go the other way, with a need to protect sellers from ‘gazundering’.
Commenting on this was Chris Priestley, head of residential sales, who highlighted the need to develop a system which works for both parties.
“Just looking at gazumping is not enough. There also has to be protection for sellers from the opposite problem – gazundering – where buyers drop their offer price close to an exchange of contract, leaving the seller in a position where they either have to bite the bullet and accept the lower price, or remarket the property.
“It would be nice to see a system that works for both buyers and sellers, tying both parties into an agreement when an offer is agreed and accepted. Such a system may require that a survey has to be done before a property goes on the market.”
Whilst acknowledging that gazumping and gazundering are both problems for those involved in the process, Jeremy Leaf states that rather than the causes of a broken system, they are the symptoms.
The agent and former RICS residential chairman stated: “The government needs to look at the delays that make the process take so long – conveyancing, contracts and searches. If people are willing to move quickly they should be able to, giving less time for others to change their minds.”
As previously mentioned, the relevance of referral fees garnered debate among agents, with many drawing attention to their significance within the transaction process.
Russell Quirk went so far as to say that an outright ban could result in a monumental decline in estate agency revenues, given the referral model that many agencies are based on.
The founder and CEO of emoov stated:
“Referral fees are a perfectly legitimate aspect of the property selling process and are already regulated within the Estate Agents Act and via the Property Ombudsman to ensure nothing illegal transpires between agent and broker.
“Adding further red tape to this aspect will only be detrimental to the overall process which should not be the aim of this exercise. The buyer or seller has the option to use whoever they please to provide financial and legal facilities during a sale, while this could be made clearer to the consumer, the recommendation itself is certainly not solving a problem that needs to be prioritised.
“The implementation of such a ban would result in a monumental decline in revenues within corporate estate agency, as the likes of Countrywide, Connells, LSL and Foxtons base their business model around the commission made via these referrals.”
He went on to stress the importance of the bigger picture, and the need to look at how a ban would impact the industry as a whole.
“While it may come as a surprise to many that I, of all people, would highlight the potential decline of the corporate industry as a bad thing, you have to look at the bigger picture and the absolute carnage that would come of these industry giants failing rather than flourishing.
“Not only for sellers and buyers but for those they employ, thousands of whom would find themselves redundant as a result. Countrywide has already seen a 90 percent drop in profits year on year, with the majority of their income deriving from mortgage and financial services and conveyancing. This further reduction in income will surely sink the ship.”
Whilst some are apprehensive about certain suggested changes, others suggest that the government need to focus on the housing market as a whole before proposals for reform are made.
Taking this stance was David Blythman. Whilst acknowledging that there are serious issues with the house buying process, the Managing Director of Scottfraser stressed that “an active housing market has a knock-on financial benefit” to a number of other areas and that perhaps taking steps to achieve this should be the government’s priority. In an open letter to Chancellor Philip Hammond, Blythman suggested that stamp duty could a more pressing area of reform for the government to consider.
“..the government, in taking small but positive steps, could help us all by creating a positive environment for house buyers and sellers. Yes, in time the government can do something about the conveyancing process. But right now, Mr Hammond, you could do something to change stamp duty in the upcoming budget on 22nd November.”
Despite some agencies suggesting that reform should take a back seat, others have been motivated by the launch of the consultation, seeing it as an opportunity to get ahead of the game.
For example, PropTech company and online agency ‘Settled’ have rebranded, aiming to improve and streamline the existing service they offer to home movers.
Whilst it’s clear that there are mixed opinions amongst estate agents, the need for reform is a view that seems to be widely shared. The ‘Call for Evidence’ can be accessed here.