Mortgage brokers have warned that some estate agents are pressuring buyers into using their in-house financial advice services – sometimes as a condition of submitting their offer.
A group of independent brokers has said that certain agents, including some nationwide chains, are taking advantage of the ultra-competitive market as a way to sell in-house mortgage and financial advice.
They have said that buyers, desperate to secure a home, are being ‘misled’ into using services they do not want or need.
Brokers have accused some estate agents of pressuring buyers into using their in-house financial advisers, but trade body Propertymark confirmed that they don’t have to do so
They claim that some agents are implying that a buyers’ offer will not be put forward to the seller unless they agree to use these services, or that they will be viewed less favourably.
Buyers may pay a fee for in-house mortgage or financial advice, which can be up to £700 in some cases, and agents usually receive a commission if they do.
Having to go through lengthy conversations with advisers may also waste buyers’ time, especially if they have already spoken to an independent mortgage broker and secured an agreement in principle (see case study below).
The practice also affects sellers, as agents refusing to put certain offers forward could reduce the price they ultimately sell their home for.
Rhys Schofield, managing director at mortgage broker Peak Mortgages and Protection, told This is Money the practice had been increasing in the past eighteen months due to the current housing market boom.
He said: ‘I won’t mince my words: many agents are repeatedly breaking the law and don’t give a damn about it because clients are too scared to complain for fear of missing out on properties.’
Schofield, along with other brokers, is currently assembling evidence to take to trade body the Association of Mortgage Intermediaries.
Home buyers can provide documents from their own personal mortgage broker or financial adviser, instead of using the one recommended by an estate agent, to prove viability
Rob Peters, principal at broker Simple Fast Mortgage, said agents employing these tactics were doing so under the guise of having to prove to the seller that the buyer could afford the property – even if the buyer had already obtained such evidence elsewhere.
‘Clearly, by the time a buyer gets to the estate agent, they’ve usually already checked they can get a mortgage and for how much,’ he said.
‘High volumes of feedback from both customers and brokers indicate some estate agents are refusing to accept confirmation or documents provided which evidence the buyer is “fit” to proceed, instead insisting they speak with their preferred in-house mortgage adviser.
A large corporate applied the pressure tactics, and ended up offering a client a mortgage that would have cost them an extra £12,000 in payments over a few years
Imran Hussain, independent financial adviser
‘The unfortunate result is that buyers are being misled into using services they would not have otherwise wanted or needed, with potential additional cost, in order to have their purchase offer put forward.’
There are also concerns that buyers using in-house mortgage brokerage services may not be offered the best deals available.
This is because they often use a selected ‘panel’ of lenders, rather than showing clients mortgages from across the whole market.
Lewis Shaw, founder and mortgage expert at Shaw Financial Services, said: ‘Often these in-house mortgage services have limited panels, are never whole-of-market or independent.
‘They also often push heavily-loaded life insurance premiums, often from only one insurer – you guessed it – the one that will pay them the highest commission rates and that rinses the consumer.
‘It’s time this practice was banned, and a proper punishment was put in place.’
One independent adviser said he had seen a client offered a mortgage that would cost them thousands more over the fixed term than comparable deals on the market.
UK house prices rose 11.2% last month, the strongest January rise since 2005. The competitive housing market is said to be making buyers more susceptible to agents’ up-selling tactics
Imran Hussain, director at Harmony Financial Services, said: ‘I think most advisers at some point have come across agents applying pressure tactics on clients looking to purchase a home to use their in-house services, which they get huge kickbacks on.
‘Usually it comes from the large corporate agents who have silly targets in place for the advisers they employ.
‘I have personally had someone approach me after a large corporate applied the pressure tactics, and ended up offering a client a mortgage that would have cost them an extra £12,000 in payments over a few years.’
This is Money asked Propertymark, the membership body for estate agents, to clarify the rules when it comes to agents recommending their in-house financial advisers to buyers.
Its chief executive, Nathan Emerson, was clear that ‘an agent cannot say they will not pass on an offer unless someone is taking their services.’
It is a legal requirement that an agent puts forward all offers on a property, unless the person selling the home has requested otherwise, in writing.
It is not illegal to ask a potential buyer to verify their information, however, and agents must perform anti-money laundering checks and confirm the buyers’ identity.
If the agent has in-house financial experts, Emerson said it often ‘makes sense’ for them to carry out this vetting.
However, he said that this should not be forced upon buyers, and that they are free to solicit their own advice elsewhere.
‘These checks can [also] be done by a provision of mortgage agreements in principle, evidence of proceeds of sales and conversations with brokers and independent financial advisers,’ he said.
Emerson also said that, if an agent receives a referral commission, they must advise the seller of the home in writing.
In 2015, we answered a reader question on the same topic – could I lose out on our dream property if the estate agent snubs me because I haven’t used their financial services?
‘I was on the phone for TWO HOURS going through checks I didn’t need’
Home buyer Sadie Brown was told she needed to go through lengthy checks with an estate agent’s financial adviser, or she could not offer on a property
Home buyer Sadie Brown, 24, from Belper in Derbyshire found herself pressured into taking financial advice she didn’t need by an estate agent.
Sadie works at a mortgage brokerage, and had spoken with an advisor colleague to get a mortgage decision in principle – but was still forced to spend hours going through financial ‘checks’ which she was told were a condition of offering on the property.
This was with a local estate agent which operates under its own name, but is owned by a much larger national chain. She has since purchased another home elsewhere.
Sadie said: I booked a viewing on a shared ownership new-build, and told the agent I had a decision in principle in place from the broker where I work.
The lady on the phone said I still needed to speak to a ‘new homes advisor’ to discuss the requirements and application procedure, as well as mortgage options. She said this would allow me to make offers on properties with that agent.
I reiterated that I had discussed these options already, that I had a decision in principle and wouldn’t be proceeding with another advisor. She said I still needed the checks and the call would only be 30 minutes.
On the call, the advisor talked me through every single thing that I’d already done with my existing broker.
She also did an insurance review within the appointment, even though I told her I didn’t want to waste her time and was using my own broker
She also incorporated a protection insurance review within the appointment, even though I told her I didn’t want to waste her time with this section as I would be going through my own broker.
All together I was on the phone with her for nearly two hours.
When I finally went to view the property, the agent told me it had already sold, and tried to get me to view another home on the same street.
I called the estate agent and found out that the offer was accepted the day before I called to book the viewing, and got told I had to do all of the checks.
The house I wanted had sold, and I wasted my time with the mortgage advisor and with the viewing.
A couple of weeks later, I wanted to view a property listed with another branch of the same estate agent, and was told I would have to speak yet another advisor – even though I explained I had done the checks before.
I let her book the appointment and when the time came, I watched my phone ring and wasted their time like they did mine. I avoided using them for any other houses.
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