Agents who deliberately overvalue in order to gain an instruction will be guilty of a breach of the law, new guidance has underlined.
It also emphasises that manipulating images could land an agent in trouble.
Breaches could mean a criminal record: magistrates have the power to levy fines up to £5,000 and Crown Courts to impose unlimited fines or up to two years’ prison.
The Office of Fair Trading has launched a new consultation on guidance to estate agents which aims to help them comply with the law when selling land and property.
In it, the practice of ‘recommending an asking price in the market appraisal that is unrealistic given current market conditions (in order to gain the instruction)’ is specifically picked out as an example of breaking the law.
The guidance also says that ‘significantly altering images to omit uncomplimentary features’ is also an example of misleading activity.
The new guidance – which is also aimed at developers who market and sell their own developments, auctioneers and online estate agents – focuses on two pieces of law: the Consumer Protection from Unfair Trading Regulations 2008 (CPRs) and the Business Protection from Misleading Marketing Regulations 2008 (BPRs).
Both sets of regulations are aimed at preventing agents from giving misleading information, or omitting information, that lead to consumers making decisions that they would not otherwise have done.
The guidance says misleading information can be given verbally, in writing or visually – the latter, for example, in photographs, video clips, floor plans, artist’s impressions or models of show homes.
Misleading information that could land an agent in trouble could be a false claim that their business has a presence in a particular area, when it does not, or has more offices than it actually has. It is also misleading to claim in flyers that you have buyers lined up for particular types of property when this is not true.
Claiming that a property has been newly decorated or has double glazing, when the description only applies to part, but not all, of the property, is cited as another example of misleading activity, as is providing a seller with invented or exaggerated feedback from viewings.
Failing to mention ‘significant’ non-standard features that the agent is aware of – for example, a public right of way through the garden – would also be a breach.
In some cases, importantly, whether the agent knew they were concealing information would not be relevant, if the existence of the information was foreseeable and the agent failed to take reasonable steps to obtain it.
Aggressive behaviour by agents would also breach the CPRs. ‘Aggressive’ practices include pressurising buyers to act quickly or to take out associated services such as mortgages or conveyancing.
The BPRs guidance deals with misleading advertising. Some of this guidance seems obvious, parts of it less so. For example, agents are told that an advertisement can be deceptive if it contains false information or leaves out important facts, or ‘creates a false impression (even where the information itself is literally true)’.
The advertising guidance also deals with the potential pitfalls of ‘comparative’ advertising – for example, where one agent claims to be better than others.
The guidance on trading practices is also intended for enforcers such as Trading Standards, trade bodies like the NAEA, and the Ombudsmen.
It follows the OFT’s Home Buying and Selling Study which found that many estate agents said the industry needed more guidance on the law. The OFT is also planning half-day workshops during the consultation period.
The consultation closes on December 9.
A copy of the draft guidance can be found at:
https://www.oft.gov.uk/OFTwork/consultations/current/estate-agents
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Comments
@Fun Boy Agent
Are you sure you are not something else too? ;>)
I am the Boss ! I am an oil sheikh ! I am a tycoon ! I am an oligarch ! I am Napoleon ! Oh, no...wait.
Truth is that the only people that are going to even know about this are the 10/11 people that post on EAT
This "Bob" nob'ead who posts the same comments in multiple posts must be a lazy good for nothing job shy benefits claimer??? Spends all of his time reading EAT when he should be be out looking for some friends.
rant: I'm not going to wind you up to a duel over your initial vs. last asking price comment other than to say that for THAT to be the cause, a good percentage of expensive properties must be selling for £1 in order to skew the market by THAT amount.
Here in my patch, according to my Agency contacts, half of the properties marketed sell whilst advertised at the initial asking price. They are achieving in excess of 94% of asking.
Okay - it's a small corner of the globe - far too small you will argue to become a measure - but here IT IS a measure.
Oh - and three of the Agents I spoke to are "How much do you want for it?" merchants...
Fun Boy Agent is the boss, my car is very clean, someone washed it for me.
Doh!
Poor Bob, Bob, Bob. is that a boat you are in?
This Fun Boy Agent bloke who posts all of these comments must be a lazy good for nothing employee??? Spends all of his time reading EAT when he should be leathering off the bosses car.
Another law would need to be created in tandem which would prevent buyers making offers at less than the asking price, because the asking price will be correct. Or am I being silly?
This may be the thing that gets rid of the Zoopla valuation calculator. Or, maybe we all have to value at Zooplas suggested price.
Will they target used car salesmen?
If you offer on something and your offer is less than the asking price but still accepted, did the advertiser break the law?
Would this idea work in North African contries notorious for the 'haggle' concept?
Stick it up yer casbah!
Some views from vendors on a RM blog re-overvaluing:
http://www.rightmove.co.uk/sell-my-house-fast/
It's rarely mentioned that the RM index measures INITIAL asking prices and not any subsequent reductions. This explains why the difference between RM and the Haliwide indices can be as high as 41%.
According to other sources (home.co.uk I think), then vendors are on average getting 92.5% of the asking price that actually attracts an offer, not their initial asking price.
Intriguing idea but however much I think the industry is plagued by fantasy valuations (and for all the damage they are currently doing to sales volumes), I don't think criminalising stupidity is a good thing.
PeeBee, he's fine, he's used to me have virtual friends *ahem*
x
Never bothers me, we value correctly and generally we get the instructions second time round, when the muppet who over valued couldn't sell it.
wardy: people will talk about us, bud...! ;ox
You should know by now, I only have eyes for Country Lass!
Even her hubby doesn't mind ...allegedly...!!
Thanks for the backup anyway ;o)
"So one hand we have RM and the Land registry whom collect data on hundreds of thousands of properties, and whom are considered major industry authorities. And on the other hand we have PeeBee, a BTL landlord and '..expert..'."
Well, Frog - meet PeeBee. 32 years in the property industry - but NOT an Estate Agent.
BTL landlord - nope, sorry. Owner of ONE property. Never wanted to be a property magnate. Never will be.
'Expert'? In my own little way, yes. Like you are in your own little way, no doubt.
Did I query the reliability of Land Reg statistics? I don't think I did. Or Rightmove's for that matter. I simply stated that the two do not bear relevance to each other.
You can 'believe' whoever you want. I don't give a shizzle - just don't make out that you 'know'.
If you 'know' so much, why are you not quoting the ONS statistics - that the average completed house sale is currently running at £207,690 - only TEN POINT TWO FIVE percent below the RM marketing price index?
Could it be because that doesn't make your argument worth Jack?
I would normally say "Delighted to meet you."
But frankly, I'd rather french kiss a rattlesnake than shake hands with THIS particular reptile...
@PeeBee
The Frog is wrong.
Nationwide and Halifax don't measure the average house price, they measure the average price of a typical 3 bed house. That's the 165K-ish figure.
DCLG and Acadametrics measure house prices differently, and their figure is 200K plus.
Rightmove don't release their methodology, but odds are it's simply not measuring the same thing at all as Haliwide.
If you want to know the real gap between asking and selling, it's somewhere around 8% on average.
@The Frog
Am I? I have my opinion and you have yours.
You obviously do not understand human nature or the nature of valustions each of which is unique (really they are appraisals) Just one of your 'quotes' , 41% where did that come from? they cannot be assessed in any way to that accuracy. Please read my post again and digest properly before being so rude.
Bit concered about the "ommitting" information! I would never put on my details "Only 1mile from Travellers Encampment". Rediculous. What ever happened to caveat emptor?
One thing that does need addressing is auctioneers providng "gudei prices" at BELOW the reserve. What's the point of trekking halfway around the country, thinking a property is going to sell for "£200,000 - £220,000" and then bidding stops at £230,000, and the reserve is set at £240,000?
T.Osser
The frog,
....and shall we take notice of PeeBee, been in the industry for years, seen markets rise AND fall and knows what he is talking about or you, someone who wants the market to crash for his own gains and has an obvious axe to grind against estate agents?
Mate, your posts are barely visible.
Sorry typo's!
Hi Rant - I agree not many would look at it this way! but there are far too many ways to look at fact ie, 92k is better than 90k so the "optomistic price" did work! fact! but not for me that method I would rather the asking price closer to reality (so with you on I wouldnt do it that way)
Richard Rawlings says if one is not selling at £280k even though the last one sold for £300k we should list at £270k easy words, but too easy to get that method wrong! and potential cost a client money!
My neighbour sells for £300k I am on at £280k same house, but no intention of selling refusing viewings, had offers of £275k and said no as just going through the motions to satisfy my wifes deviorce lawyer! so the house next door but one comes on lower not knowing mine could sell but it is a vendor blocking the ease of sale!
I dont think valuing can ever be discussed on a site like this as everyone will throw an example in to rubbish the next, fact is the OFT will never be able to police this, I wish they could that said! but just too messy.
So one hand we have RM and the Land registry whom collect data on hundreds of thousands of properties, and whom are considered major industry authorities. And on the other hand we have PeeBee, a BTL landlord and '..expert..'.
Hmmmmm, which one do I trust??
Overvaluing - another of those "...but not in Scotland" scenarios.
Every house marketed in Scotland has to have a Home Report with an RICS valuation therein.
If an EA says £200,000, and the Home Report £150,000, the EA ends up looking stupid, and will have to market at or around £150,000, because the buyer's lending is based on the HR valuation.
If E&W had kept HIPs and adopted the modus operandi of including the surveyor's valuation in the HIP, overvaluing would automatically have become a thing of the past.
'The Frog: "...as I pointed out below, property is being overvalued by 41%."
No - YOU didn't point it out - Rightmove did; Henry Pryor did - and NEITHER of these two sources can put meat on the bone. One figure applies to the average value of LISTINGS ADDED TO A WEBSITE in one month; the other to the average COMPLETION price of properties where sales were agreed roughly 3-6 months earlier.
Basically, THEY ARE WRONG!
Unless YOU can provide PROOF of this alleged 41% gulf in figures, I suggest you leave embarrassing oneself to the "experts"!
The bad agents use overvaluing as a tool. It’s all they know.
The good agents don’t need to, and would welcome the end of overvaluing.
It is very obvious reading these comments who is who.
If people get 3 quotes, two agree and one is too high then someone is in trouble, if a realistic vendor reports them.
How many vendors think like that though Ric? Aren't they more likey to think 'we lost £23K on the asking price - should've gone with a different agent'...
So under the new rules or indeed the existing ones highlighted by Peebee, who and what action can be taken against an overvaluing EA.?
In my opinion ....Overvaluing is one of the primary tools of poor EA's but nothing will stop it because it is so engrained in the culture. Good agents will sugget the right price at the right time to ensure the best possible outcome for the EA and the vendor.
Ps did anybody see the Dragons Den and the Realtor solution for the property market in the UK. Anyone think it was good idea?
Too many agents (and surveyors) use the so-called "evidence" of what has sold as a guide to asking price. As I frequently emphasise in my training, it is more important to consider what is currently failing to sell that is most relevant to a buyer and should be used to guide sellers accordingly. Ie if a house sold for £300k and a similar one is failing to sell for £280k then this would suggest that a third comparable property should be marketed for around £270k.
@Rant, fair points although
same properties both 2 bed terr properties same road:
Agent one asking price £100,000 sold for £90,000!
Agents two asking price £115,000 sold for £92,000!
Buyer via agent two thought wow getting 20% off, vendor though my agent got £2k more than the agent who did not give it a go!
Which actaully did better in real terms?
Regulators are desperate to be seen...........regulating ? The concept is laudatory but when 3 agents an value homes that are not standard at widely varying values,all in good faith, this opens up a can of worms to keep regulators and lawyers in jobs.
A slight problem: It would be very hard to actaully prove whether the property was intentionally overvalued, or whether it was due to lack of knowledge/severe optimism. And I do believe it's true that a property is worth as much as someone is willing to pay for it. But intentionally overvaluing is a waste of everyones' time. You may get the instruction but will you get a let? Or even a viewing? We always give Landlords and Vendors an accurate valuation and never overvalue a property as it will stop people from coming through the door if similar, cheaper properties are available. A waste of advertising costs etc. really. Yet another nationwide well-known Agent round the corner from us, constantly overvalues properties by as much as £100p/w! Often we have already valued the property but the Landlord decided at the time to go with the Agent who gave the higher valuation. Inevitably the Landlord will come back to us after a few weeks with little interest and few viewings and ask us to market the property at the price we gave them based on local comparables - perhaps £10p/w higher to leave room for negotiation - and then we will let it within a day or so. Many of our Landlords have been with us for years now and continue to use as as the rent lost when a property is vacant due to being overpriced hits their budgets too.
Has anyone tried to report anything to the OFT, what a joke. They make up the rules but do not have anyone to enforce them. Its feels like they pick a topic 52 times in the year and use the one week on that topic to make headlines so they can justify the tax monies spent on there existence.
Would be nice if they applied the same rules to journalist, then we wouldn't have to read incompetent and incomplete reporting by EA Today every time.
Does any one remember Rowan & Martin's Laugh-in? Interesting, very interesting, but dumb! I agree that the OFT seem to have joined the 'say anything to get noticed' style of WHICH? always believed to be particularly PR-effective when their ire is seen to be directed at estate agents.
Here's an idea they can cogitate on to restrain their imagined over-valuation for instructions 'scam' - legislate
that no vendor may grant a sole agency when marketing a home and that two or more agents MUST offer each property for sale on competitive terms, and no instruction term can last longer than four weeks. Won't work of course, but might if the vendor is also obliged by law to write a letter of instruction to the agents confirming why the marketing price has been chosen by the vendor at the level agreed..
Big T for DG, OFT
Erm... isn't 'overvaluing' already covered under TPOS Code of Practice, Section 2?
Looks like a re-write of the PMA with some bells & whistles added.
"In it, the practice of ‘recommending an asking price in the market appraisal that is unrealistic given current market conditions (in order to gain the instruction)’ is specifically picked out as an example of breaking the law."
Unfortunately, no-one at OFT seems to understand that the housing market is never 'normal'. There are ALWAYS "current market conditions". What about when the market is rising (and yes, HPCers - it WILL happen again one day... ;o) )?
As EW suggests, whatever the 'Law' states, Agents will simply reword their Appraisal letters to stay within the guidelines.
And until a property is put on the market, no-one can prove their figures or otherwise.
Who do the OFT think they are 'protecting' here?
Industry observer...It's not an inappropriate subject for many agents that do try to do things correctly.
I think the better agents would much prefer a system that would encourange vendors to give the instruction to an agent based on their aptitude, knowledge and experience rather than their ability to over value!
So not every agent has a vested interest to overvalue.
@The Frog
EA's will rightly be far more worried about the army of 20 million homeowners willing to report them for undervaluing, than the "army" of a few hundred disgruntled hpc-ers obsessively making nuisance complaints about overvaluing.
It’s funny watching the EAs on this site desperately reaching around for examples of why providing an decent valuation is impossible, while at the same time assuring themselves what artful masters at valuation they are.
The truth is the vast majority of houses sold by an agent are basically commodities in terms of location and size and various grades of repair.
Time for 75% of agents to go bust or get locked up for market abuses, and the other 25% who can actually do the job can thrive. Good to the minority that actually earn the money.
Hopefully this will also apply to property auctions, who are notorious for putting a "guIde price" in place that is often half the achieved value of the property.
And it specifically mentions undervaluing, and listing a wide "guide range" where the lower price is below what the owner is willing to accept.
Not to mention the inaccurate descriptions and shameless photoshopping of images that we've all seen done by the more "creative" types..
Good stuff overall.
A great idea but proably unenforcable, as if valued for £300k who is to stop the vendor going to market for a higher price?!
There are agents that blatantly over value Foxtons fro example historically go over by some 15% to 20%, this can be easily spotted and clamped down on but how about the agents who skim it by 5% to 10%, this will behard to police!
RM's price comparison feature offers some guide here. The latest two entries in my postcode search were both 'last sold' in 2007. One is currently priced 10% over that price, the other is 10% under. Both are described as being in good condition etc. When I checked which EA was marketing the 10% plus property, I wasn't surprised...
I'd find some value in knowing what % of initial asking prices EAs are actually selling properties for. EA One manages an average of 80%, while EA Two manages an average of 90%. Fairly obvious who is overvaluing there.
Of course, if transactions are down, then surely the logical conclusion is that overvaluers will be some of the first to go under anyway?
Developing just as I thought it would - which is depressing.
@ Ray Evans
Not like you to quote a poor example but of course in the two scenarios you quote there will be different valuations etc because they are not identical properties.
The example I am surprised no-one has yet quoted is of two identical properties both in excellent order but where the pressures on the two vendors are totally different. One has to sell quickly and the other does not.
Johnny got close to it but then went off into realms of fantasy. If it's the Law then it's the Law. If vendor then says " well Bloggins and Co never mentioned it" or "yes Bloggins & Co said that but said they'd market at £425K" then report Bloggins and Co to the OFT.
As I have said repeatedly on many subjects the solution to most problems is pretty obvious - its the will to implement that allows unsatisfactory situations not to carry on unchecked .
At the risk of encouraging criticism this is also of course another inappropriate subject for estate agents themselves to comment on - because they have a vested interest in encouraging instructions with optimistic valuations and then if by some miracle they sell at a higher figure than they expected they get the bonus of commission on a higher figure.
Jonnie, again top marks for trying to be funny, but an F for reading. The suggestion is not to mandate what a vendor wants to try the market at. Quite simply to try and get the agent to provide decent advice on the initial valuation.
Only an EA could find that so difficult.
‘What, no ramping.......me .. no .. understand”
Slight problem here....totally agree over valuing on purpose NO PLACE in the market! BUT.....
Market slipping, if at the rate of knots HPC clan will want or beleive any snap shot value today or 2,3 or 6 months ago is indeed over priced after 30 days, are we now to reduce prices every 30 days if not sold or risk someone complaining the price was wrong! in the first place!
I know many arguments on this and the words "on purpose" must be shouted out loud, but over valuing is such a thin line and if you have one or even two comps to substantiate your marketing price and nearly "every" agent will have at least one example; this is a law becomes open to far too much debate.
Interesting angle also for the vendors who say can we try at £xxxxxx our reply is now "no, unless you sign this waiver to agree it was your price not mine, because they are the vendors who blame agent before their own ambitions!"
Do not confuse this with me saying its okay to over value or put a property on at a vendor price, I just think it will be virtually impossible to prove an "on purpose over value" if there is even one property to compare to....it is an opinion after all and a snap shot in time, so for me this will only ever stand up in court if your complained about on day one of marketing.....agents defence....1 day really!!!
“This is ridiculous”
No Ray, it is you that is ridiculous.
“most of it is already covered by the Misdescriptions Act”
Ray, as I pointed out below, property is being overvalued by 41%. Clearly EAs do not understand the current rules. They need it explaining to them again more clearly.
“and the part about 'values' is being suggested by those who know very little about the art of is an 'opinion' as to 'value' and an agents job.”
Nonsense. Things that cannot be accurately valued will go to auction and find their own level there. However, number 127 A Street, Anytown, can be valued very easily by seeing what it last sold for coupled with a selection of nearby similar properties and by applying an adjustment based on how the market has behaved since those sales dates. Its not really a demanding skill set, all surveyors can do it, most FTB’ers can now as well. Even some EA’s understand the process.
“If implemented it could become a lawyers paradise!”
Why is this, are so many EA’s truly incapable of NOT ramping until they get banged up for it? Well there is an army of HPC’ers out there who will be delighted, positively delighted to refer very many examples of breaches of the rules to the OFT. I suggest you acquire some actual sales skills pronto, as your last weapon of overvaluing is being removed.
I would love the OFT to get involved with misleading agent claims when it comes to flyers and the like. Up until now the limp wristed ASA have done nothing other than issue the odd warning. I would also like to see a carpet ban of 'contact me urgently' slips and that stupid fly board inducing 'sold board survey'.
While we are at it lets have the OFT take a look at private seller scraper websites and the out of date information they make live.
To all those who talk about 'overvaluing'.
Just where is the 'line' between over & under? Is there be a percentage leeway? As I say this would be unenforceable, unless blatently obvious or unacceptable draconian measures were employed.
Using comparables are only any good if one has ALSO personally seen the interior condition, standard and type of equipment provided etc. etc. Just an example, simplistic I know, would be of two similar looking properties on an estate, one could have been a trashed ex-rental and the other a well cared-for home - two entirely different values.
The most worrying aspect is that it appears the OFT have nothing better to do than in the words of John Cleese "state the bl...ding obvious". Sad commentary on what were once respected institutions.
Silly headline grabbing by the mandarins at the OFT. This all comes under misdescriptions other than the valuing. As there is no absolutley accurate way of giving a scientific value on a property, this is totally unenforcable. If this comes into law, the corporates will just have a get out clause built into their contract saying that the valuation is not a valuation, merely a market appraisal, the seller can choose to market at whatever value they want. Totally unenforceable.
Excellent!
I agree with all the stuff above but the pricing bit will be good to see in reality so the conversation will go like this;
EA: ‘Madam, I think we should set an initial asking price of £400,000 based on the factors we have discussed and the comparables available’
VENDOR: ‘Well thanks for your view but we have only just started looking and have a few months until my husbands company completes the relocation [Add one of the billion reasons why vendors do this here] so whilst I agree with you id like to try it at £425,000 to begin with’
EA: ‘Erm……..I cant, it’s against the law madam’
VENDOR: ‘Sorry? Against the law – are you winding me up?
EA: ‘No im afraid not but there is a bloke called Realising Reality that got such a massive perk on when the law came out he exploded’
…………..so, (apart from RR) who thinks it might work, and I mean really work with people being taken to task and fined for topping stuff?
Oh, and while we are at it who has been into something recently and been the lowest / one of the lowest prices and still been instructed, cause its happening here and there is no way my lot are alone
Jonnie
Alternatively Ray, you could just not over value.
Just a thought.
Parkdisc, if EA’s valuations where only out 10% I doubt many would have any cause for complaint. But that’s not the case is it. The average selling price of property is £164,000 yet agent’s initial asking price is that, plus 41%!! Taking it to £231,240.
This story is of course excellent news. Too many weak agents are unable to deploy any other talent for winning business, OTHER, than over valuing. I only hope these new rules and vigorously enforced.
This is ridiculous - most of it is already covered by the Misdescriptions Act and the part about 'values' is being suggested by those who know very little about the art of is an 'opinion' as to 'value' and an agents job.
If implemented it could become a lawyers paradise!
So lets take a look. Agent 1 'overvalues' so what research did he do?
Agent 2 gives his opinion and it is vastly less than agent 1.
So who is to say who is right?
I just did some research on a small parcel of land and found the difference varies from £60k to £350k.
Pick the bones out of that and tell me who would be blamed.
I ageree with EWB - silly.
What about undervaluing to sell to a mate will this fall into the bull**it police arena?
Silly policy. It will just mean agents will be more careful about the wording of their letters. I can see it now - "Our view is that the property should achieve no less than £400k, but we are willing to test the market at £450K"
Would this be worked as a value or a percentage? Who will judge? Surveyors who seek comps from agents?
Fact is - many vendors would rather try a higher figure and frankly their motivation for selling is a key issue when assessing asking price. Ok - some agents overvalue to get an instruction - but vendors are not stupid. They usually know an approximate value of their home before you arrive.
Better the OFT ban lengthy lock in's on sole agencies so that if a vendor discovers an agent has overvalued to gain instruction as the sole reason for the overvaluation, they can walk away and return to the agent who gave honest advice.
As for the rest - recycled misdescription Act
Does this apply to rightmove as well with the overpricing of their membership?
Sadly very tricky to police I think! Remember even formal bank valuations can be up to 10% out without liability!
@ Agent 1 - it probably means no more instructions for about 75%+ of all agents!!
Boy I'll bet this generates some indignant posts from estate agents who think they never do any wrong and that the world is out to get them.
Can't wait to see what develops in this thread when the proposals are aimed at giving the public what they want i.e. no pictures that omit the nuclear power station half a mile away etc.
How will it be policed - by good agents who snitch on the naughty presumably.
"In it, the practice of ‘recommending an asking price in the market appraisal that is unrealistic given current market conditions (in order to gain the instruction)’ is specifically picked out as an example of breaking the law."
Great this will mean no more instructions for the corporartes in our area