Six estate agents in and around the constituency of campaigning Labour MP Stella Creasy have signed up to a so-called Fight Against Double Charging' - a name she gives to Sale By Informal Tender contracts.
Creasy, who has spoken out against double charging in the past, says many agents use sale by informal tender contracts, where buyers submit sealed bids to make offers on properties.
She says some agents using these contracts are then charging the successful bidder an introductory fee which can be as much as 2.0 to 2.5 per cent plus VAT.
Sellers are also charged a fee to market their property at the same time, although this is often a relatively small one-off up-front cost.
This practice leaves both sellers and buyers short-changed. Buyers often end up lowering their offers to accommodate the additional cost of paying such a fee- which can be several thousands of pounds, meaning the seller will receive less for their asset and may lose opportunities to sell their property to those who cannot afford such a charge says Creasy.
There is also a conflict of interest for the estate agent to receive money from two parties to the same sale, as it is not clear in whose interests they operate. The only party benefiting in this arrangement is the agent pocketing a substantial fee.
Now Creasy has written to all estate agents operating in Walthamstow, challenging them to oppose these practices.
Six agents have joined our call to end this practice and confirmed that they will not use these types of agreements she says.
These agents are Outlook Residential Property Agents, Spencers Property, 21st Century Land, Central Estate Agents, Strettons and the Stow Brothers, who have confirmed to me that they do not support these agreements or use these types of contracts says the MP, who is Labour's consumer affairs spokeswoman.
Creasy's website sets out the agents' views on the practice:
[We] are completely against double charging' and agree that the sale method blurs the lines between client and customer. We believe the practise only benefits the agent. - Stow Brothers
We wholly support your efforts to outlaw the practice of agents charging both buyers and sellers - Strettons
In regards to sale by tender' we are strongly against such practice. - Central Estate Agents
An unsavoury practice - 21st Century Land
We do not chose to sell property by this method - Spencers Property
We appreciate it's a different option for a seller however it merely ensures the buyer pays more and due to current supply and demand the agent earns a higher fee down to the desperation of the buyer! - Outlook Estate Agents
Now Creasy, who has campaigned on this issue under the banner of Home Sweet Home', is urging buyers and sellers in her constituency to ask the remaining estate agents who have not yet responded to these concerns if they use such contracts.
And if they do use them, how they justify ripping off consumers in this way she adds.
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Comments
The HMRC will look at the total cost of the transaction as to the stamp duty. I would not advise anyone to try and get around a threshold by using this tactic as it unlikely to be looked at favourably. Also to od something to evade tax is a serious charge, with heavy consequences. If the contact to pay the fee lies with the buyer, however odious it is by the agent concerned' it is possible the HMRC will not be on such strong ground, but really is anyone interested in taking on the Government to save some stamp duty, possibly get convicted of what is a criminal offence, so that the agent concerned can earn an OTT fee Ironically just bought in an area where one agent does this, voted with my feet!
Mike, disagree with you, this is purely down to unethical and immoral Estate Agents who do not care about their clients or buyers, it is purely for monetary gain. Whichever way you try to disguise it, it is against Estate Agent Law.
The reason this is often done in my experience as a lawyer is to get round the SDLT levels if you sell by tender at 250K the agents fee is not liable for SDLT (or so I am told) and so assuming no double charge the seller does gain. Of course if we had progressive SDLT that would assist with the issue that this is allegedly dealing with.
Paul i could not agree any more end of the day its just down to your personal conscious, business ethics and morals. very well said
There is nothing wrong with informal tenders - with the proviso that ALL original offers should be shown (not just told or collated) to the Client Vendor BEFORE any decision is made.
The prospective purchasers should NEVER be charged.
Zack, it is nothing to do with supply and demand, it is only a question of business and human morals and principles.
every situation is different, from Stella point of view it does makes sense but we agents should not get blame for it entirely. Its the matter of supply and demand instead of identifying the problem perhaps government should step in and regulate the whole industry starting with rentals. what more does she need or is it a publicity stunt. Though i admire her passion and concerns but its merely the tip of the iceberg.
P.S. We have never practiced this rogue technique and we condemn the informal tender practice.
Philip, you too raise a very valid point, my answer to that is maybe Nat Daniels does not know Estate Agent Law and clearly Stella Creasy appears ignorant of that point as well.
It is clear that only the rife agents seem to use this tactic to boost instructions and offer lower fees to vendors, who are, inherently greedy about their most treasured asset. "you can market it for 99 you say Where do I sign" Typical of an uneducated, greedy vendor, but sadly that does mean a majority of the population. Who WOULDN'T want to get more money for their home. It however falls to the good agents, like us, to educate Joe Public about the potential pitfalls of such an arrangement. Most people not having 2.5%+VAT in hand greatly diminishes the target audience, and thus also the price achieved. Who is the winner The agent. The vendor THINKS they are a winner, just like by using one of these rubbish DIY Online "agents" because they have "saved money in fees." They, once again, don't think long term and consider what else will play a role in the figure they NET in their pocket. The "normal agent" with a "normal" structure will undoubtedly present a better platform on which to market the property to find the right buyer at the right price.
What a dispicable Practice. What nobody has mentioned is the fact that this is against Estate Agent Law, so those Agents charging both buyer and seller should be struck off and banned for life from ever practising Estate Agency again. I guess until the Government Licence Estate Agents this is going to keep happening.