Huge discrepancies in estate agents’ fees and valuations, and routine over-valuations to win instructions, have been uncovered by consumer organisation Which?
Agents are criticised for over-valuing in order to win business in a report published today by the organisation, which launched its anti-estate agent campaign, Move It, seven years ago.
Although Which? concedes that ‘things have improved’, and said that poor behaviour was the exception rather than the rule, it says there are still problems.
The consumer group got 48 estate agents to visit homes around England between November and January.
As a result, it has reported two agents to The Property Ombudsman for making misleading statements, saying Which? was told it “should choose them because they were voluntary members of an ombudsman scheme – when they’re actually legally required to be”.
The report adds: “One of the estate agents we looked at wasn’t signed up to an ombudsman scheme at all – we reported it to trading standards officers.”
The agent, Bridgfords, told Which? it would be investigating.
Two agents also said that they had to quote a fixed price fee because that was what the Property Ombudsman required – which is untrue.
Which? said it found “massive variations in fees”.
The report, published in the April edition of Which? magazine, goes on: “We could have paid between £5,481 (independent) and £13,703 (Connells) for someone to sell the same house. We also discovered that valuations could vary by tens of thousands of pounds for the same property.
“And while valuations are an art, not a science, some of them were too far out, which would inevitably make it harder to sell your home.”
The fees varied from 0.75% from an independent, rising to 2.5% for three Foxtons branches and one Connells branch. According to Which?, both agents said in their visits that the fees are justified by the better job they do.
Which? also found that some fixed fees were high. For example, it said that Bridgfords’ minimum fee of £2,250 meant that for a £60,000 house, the fee would be around 3.5%.
Which? advises consumers to haggle for better deals. It singled out Your Move as being willing to negotiate, but said others would not countenance it.
When it came to valuations, Which? found significant evidence of over-valuing by agents in order to get the instruction.
The organisation sent out 12 surveyors to value the 48 properties that had also been valued by the agents. On 40 occasions, the surveyors valued the properties at a lower price.
On average, there was a 9% difference between the surveyors’ valuations and those of the agent. Around one-third of the agents suggested marketing the property at a higher asking price than they thought it was worth.
Some of the differences in agents’ valuations are quite striking, according to the Which? data. For example, a four-bed house in Surrey was valued at £550,000 by Your Move but at £477,500 by Bairstow Eves.
Another property, in Essex, was valued at £650,000 by Spicer McColl but at £500,000 by Connells.
Kate Faulkner, author of a Which? guide, ‘Buy, Sell and Move House’, said: “We found in some areas, all the agents valued at a similar level, but in others it differed a lot. In these cases, it looked like some of the agents hadn’t done their homework.
“We also found that if there weren’t enough similar properties that had sold nearby, the estate agents came up with very different figures.”
Commenting on today’s report, Property Ombudsman Christopher Hamer said he broadly endorsed the advice to the public: to shop around, and to get agents to justify their valuations.
He said: “All consumers should be aware of the terms and conditions, particularly the fees to be paid, when they engage an estate agent to sell their property.
“I do not make rules about how agents should set their commission fees and they are free to use either a set fee for their service or a stated percentage of the selling price.
“Agents need to make sure the fee method chosen is made plain in their contract terms and that there are no small-print clauses that could give rise to confusion. Where consumers have brought complaints to me about confusing or unexplained terms and conditions which I then agree to be so, I have made an award in consumers’ favour.”
Hamer said there was also an important difference between agents signed up to the Ombudsman scheme as a legal requirement under the terms of the Consumers, Estate Agents, and Redress Act (CEARA) and those who have voluntarily signed up for TPO membership that makes them subject to the terms of the TPO Sales Code of Conduct. This had perhaps given rise to the confusion mentioned in the Which? report.
He said: “The Code of Conduct is a rigorous set of conditions that have been approved by the Office of Fair Trading under its Consumer Codes Approval Scheme and goes far beyond the minimum standards for redress registration brought about by CEARA.
“Full sales members of TPO, for instance, are subject to random monitoring via consumer surveys which flag up potential problems that can then be addressed.
“I also meet regularly with member agents to discuss industry issues and I believe the dialogue, combined with adherence to the Code of Practice, demonstrably leads to higher standards.
“In my recent 2010 annual report, I indicated that the average amount paid to settle complaints had roughly halved for each case in which I made an award since 2007, an indication, I believe, that standards are improving.”
At present, TPO has 8,095 member firms. Of these, only firms operating a total of 330 branches are registered for the minimum requirements of CEARA while 11,073 branches are registered with firms voluntarily subject to the TPO Sales Code of Practice.