Industry share their view on referral fees survey launch

Earlier this week, the National Trading Standards Estate Agency Team (NTSEAT) launched a survey aiming to assess the use of referral fees by estate agents.

Supported by the Property Ombudsman and Property Redress Scheme, the survey forms part of the government’s exploration into how it can improve the buying and selling process for consumers, following the Call for Evidence of the same title which was released last year.

Improving the level of clarity around referral fees was highlighted as a particular area for change, with mooted proposals including transparency of the commercial arrangement between agent and conveyancer to be made clear from the offset.

Whilst reform may be on the horizon, it is as yet uncertain whether a total ban will be implemented.

Commenting on behalf of the HomeOwners Alliance was Chief Executive, Paula Higgins. She said:

“We are delighted to see the NSEAT taking a pro-active approach and collecting evidence on referral fees.  More transparency is needed as a minimum. We don’t oppose referral fees outright but they should not be hidden and they should be reasonable. There are great estate agents out there who do not get any financial reward for referrals.

“What we do have a difficulty with is estate agents who are profiteering from both the buyer and seller in the same transaction. We all know that the estate agent acts on behalf of the seller and this becomes less clear when they are also making money from the buyer – through provision of mortgages and other financial products. This causes a real conflict of interest.  We would like to see a ban on estate agents selling services to parties on both sides of the same transaction.”

Also sharing his thoughts on the current consumer view of estate agent referrals was Simon Bath. The CEO of When You Move said: “When You Move recently conducted new research specifically into how home buyers feel about the relationship between estate agents and conveyancers.

“The results showed that over a third – a staggering 38% – said that they don’t trust legal service referrals from estate agents’ due to biased referrals (as a result of commission gains, geography and preferred relationships that aren’t necessarily the best for their property transaction), with 36% adding that they then found the legal processing of their property transaction the most dissatisfying part of buying and selling a home.

“With previous When You Move research revealing that the home buying/selling process takes, on average, seven weeks longer than the projected completion date it is clear that consumers will no longer accept a lack of transparency from agents or conveyancers.

“While it is good to see the Government moving to take action on this topic, since launch When You Move has offered a solution that benefits all parties – homebuyer, agent and conveyancer – by offering a transparent and easily-navigated service.”

Reflecting on his own experience of referral fees and their impact on conveyancing was Rob Hailstone. The founder and CEO of Bold Legal Group also considered the possible impact of a ban, stating: “Back in the early 1980s I knew of a solicitor who used to lunch with two local estate agents every month. He had an arrangement with them that he would pay them a certain amount of cash every time a transaction, they had introduced, completed. He would take a bundle of cash in an envelope and quietly hand it over. He liked the arrangement as did the agents. For obvious reasons!

“The $64,000,00.00 question is if referral fees were banned, would they continue in one form or another? The answer surely has to be, in some cases, yes.

“I have never paid a referral fee in my life and have lost work as a result. The agents concerned sent the work elsewhere when I refused to pay them. However, when they wanted conveyancing work done for them, their family or friends, they would come back to me. They felt my service was superior to the service provided by the firm they now recommended to their sellers. Read into that what you will.

“Let’s be honest, in an ideal world there would be no referral fees. However, agents are usually the first foot through the door and the resulting power is immense. In many cases, they can dictate where the conveyancing work goes. Especially in a slow market.

“In my opinion, referral fees are here to stay and in plain sight would be best. Transparency at the outset (via estate agents) is vital.

“However, I believe there should be a cap on how much referral fee should be paid. The maximum should only be a certain percentage of the overall fee being charged by the conveyancer. There must be some firms who take on work at a fee that is not profitable, and that cannot be good for them or their clients.”

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