The Property Ombudsman has released guidelines on how agents should handle the controversial Sale By Tender process, which has received criticism within the industry and from MPs and the media.
Sale By Tender is defined by TPO as the process where the buyer meets the liability for an agent's fee when purchasing a property. TPO Christopher Hamer says he has no regulatory power to dictate whether this practice should be used or not, but he does see the need to produce best practice guidance to ensure consistency.
The guidance places the emphasis firmly on transparency and disclosure to assist both buyers and sellers to fully understand the process and any fees or associated risks says Hamer.
The full guidance runs to three tightly-packed pages of A4 and covers four main elements - transparency, disclosure, conflicts of interest and duty of care/fairness. There is also guidance over the tender pack's contents, which must include - according to TPO - the sales particulars, agreement to submit by tender/pay agents commission, the bid form, FAQs, and a key features' document.
The full link to the guidance on the TPO website is https://www.tpos.co.uk/downloads/TPOE49%20Guidance%20for%20Agents%20-%20Sale%20by%20Tender.pdf
Key sentences include:
It must be clear to all parties through and from the outset of the transaction that the instruction to the agent to market the property is given by the seller and that the agent's primary duty of care is therefore to that individual. Agents must ensure that any conflict of interest which might compromise that relationship is avoided.
The buyer must be advised that by paying the agent's fee, that amount may be considered as part of the chargeable consideration for the property and be included in the calculation for stamp duty liability.
The level of fee charged to the buyer must be representative of the agent's normal fee for residential property sales and should not be exploitative.
To ensure agents meet their obligations under the Code of Practice .... agents will need to use a script for dealing with the seller and a script for dealing with the buyers. Agents are allowed their own wording but the script needs to include certain principles notably:
- who will have the liability for the fee
- the options for marketing (ie, sales by tender or traditional sales approach to selling the property) should be explained
- the risks, advantages and disadvantages about each approach
- the precise costs for both buyer and seller.
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Comments
Agree with Richard C - The article is wrong. BUT - BUT - BUT - by law offers HAVE to be put forward. So if an agent pushes for a buyers fee then place the offer and send a copy to the local Trading Standards officer.
Refusal to put offers forward would land the agent in hot water (unless the agent has alternative written insttructions from their client) and would be seen as manipulating a situation away from consumer best interest. It also gives the offerer the right to give the agent a two finger salute as they walk past the agent.
Have a look here: http://www.cimaglobal.com/Documents/ImportedDocuments/The_estate_agency_guide_jan06.pdf
CPR's as governed by Trading Standards are currently under review
It would really help if a responsible, online paper such as Estate Agent Today got important facts correct.
Sale by Tender is NOT the process where the buyer meets the liability for an agent's fee when purchasing a property. Sale by Tender is where prospective purchasers are invited to submit offers for the purchase of a property in a "sealed bids" manner by an appropriate time. Sales by tender can be formal or informal. Formal tender is little used for general residential sales, but its advantage is that the tender is accompanied by a 10% deposit and is legally binding immediately if the vendor accepts it effecting exchange of contracts It is sometimes preferable to auction where the vendor owns adjoining property and wants to choose whom he sells to but still wants the certainty of an auction. Informal tender is the one that has caused all the problems and only because some agents have been using it unscrupulously. It can be a very advantageous sales method when used correctly. Please lets get the facts right. It's hardly surprising the public are confused!
When buying at auction,whether small items costing a few 's,or major works costing millions both parties are charged fees,sometimes each paying 20% or more,plus VAT.Do solicitors declare the amount for conveyancing/stamp duty.
It is now common,for Auctioneers to charge a comparatively small amount to the buyer,as Buyer Premium,or at least a nominal amount for Admin.
There are other areas where it is not the seller,or landlord pays all the fees,such as residential lettings where effectively split.Again there is misunderstanding,and if such charges were barred,rents would rise,as tenants would be paying less,and landlords paying more.It is acceptable to take holding deposits for rentals,and indeed I wonder why not nominal deposit for sales,when an uncommitted buyer,can drop about costing seller money.
Perhaps this would equate to the Scottish System,where properties are only taken off market,when committed offer made,effectively letter of intent/exchange of contracts.
This does leave buyers with abortive costs however,which is not commonly realised.
The TPO has forgotten or is perhaps not aware of Compulsory Purchase Proceedures.The Acquiring Authority pays all fees including Solicitors and Surveyors when dealing with Compulsory Purchase,and has done from the outset.
Now many Councils,Statutory Undertakers,Water Boards,Government Bodies etc.,ask for a "contribution" to costswhen selling,especially by auction and tender,indeed even charge for tender documents.
When taking a lease,despite the Cost Of Leases Act,most transactions have been done on basis of ingoing tenant paying both parties legal costs.
Really perhaps TPO should have consulted lawyers,and The Royal Institution Of Chartered Surveyors,as it is an obligation to get the best price for your client,who is the person who instructs you.
A Client basically in any event deducts the legal and agents fees to estimate the net proceeds.
There are other areas where fees are charged and concealed,especially by Solicitors acting on Personnal Injury Claims,which I think should be revealed,as the client can end up with very little while Solicitor gets disproportionate amount.
I do not wish to criticise,as I think in part the TPO are right to clarify,but obviously even an agent charging fees for selling a site,can receive instructions from buyer to handle development,to the detriment of the fee paying client,or staff are often asked for information about amount of other offers.This is certainly common,and accepted,as most readers will be aware.
My Firm has grown by tactfully pointing out in such event we would have to tell all bidders,and while they might have friendly agents who give such information,they should use us to sell as they can be confident that we will get best price.