When you receive your first offer on your property, it's likely that your estate agent will point you in the direction of a conveyancing service.
While it might be tempting to just use the solicitor recommended by your estate agent, there are a few things worth considering before you decide.
In this article, we'll look at estate agent referral fees, the service you should expect, and the best ways to figure out if your estate agent's recommended solicitor is any good.
Once you've accepted an offer on your home, a solicitor or conveyancer will help navigate you through the legal process of transferring ownership from you to the buyer. You'll usually work with the same conveyancing solicitor if you're buying a property at the same time too.
Having a good legal representative is key to ensuring the success of your sale. They'll be managing lots of vital, and difficult legal parts of the home sale. For example, all of the checks - including for fraud and financial security - on the buyer. Given the importance and time pressure on property transactions, it's vital to have the best team on your side.
There are a few reasons why an estate agent might be recommending a particular solicitor to you. These include:
They have worked with them before and believe their service to be good
They take a holistic view of the sales process, and believe directing home sellers in the right direction is part of helping to sell their home
The solicitor they recommend will provide them useful information about the conveyancing process that they wouldn't otherwise have access to. In these cases you'll usually have to waive your 'right to privacy' as part of your agreement with the conveyancing firm
They get paid a referral fee by the conveyancer
A combination of two or more of the above
Without further investigation, it's pretty hard to tell whether an estate agent is recommending a particular service because they have your best interests in mind, or simply for financial gain.
Yes, it is legal for a lawyer to pay an estate agent a referral fee.
The most common type of referral fee is called an 'introduction fee'. This is a fee that's paid once you've agreed to work with the recommended conveyancer. It can be a percentage of the amount you pay to the legal firm, or a fixed fee.
Some referral fees are what's called 'pay per lead', or a 'marketing fee'. These are a fixed fee paid in exchange for information on potential clients (also known as leads). For example, an estate agent might get paid for passing on your name and contact information to a firm, so that they can be in touch with you directly.
Both types of fee are legal, and used commonly in the property industry - within the limits of GDPR and any conflict of interest.
Referral fees are standard practice in the property industry and are used commonly.
The Property Ombudsman - the property redress service - undertook a survey of 675 of its member agencies in 2020. Of these, only 16% said they made no referrals to other services.
Of the estate agents that did make referrals to other services (including solicitors, mortgage brokers, and insurance providers), 81.3% said that they received a referral fee for doing so.
It's therefore incredibly likely that when your estate agent recommends a service, they are getting paid to do so.
In February 2019, National Trading Standards (NTS) released new guidance on referral fees received by estate agents in the UK. This guidance says that any referral fees have to be disclosed by agents to both sellers and buyers.
Similarly, according to the Solicitors Regulation Authority (SRA), solicitors are required to set out the full details of their fees, and any expenses associated with your transaction, including how much they paid for a referral. The Council of Licensed Conveyancers (CLC) has a similar rule for their members too.
So, in theory it should be fairly easy to see which agents are getting paid to recommend a particular service.
In practice, that's not always that simple.
In The Property Ombudsman's survey, agent's were asked whether they would let sellers and buyers know that they would receive a referral fee from their recommended provider. While, 80% said they would let the seller and buyer and know, 14% said they would not disclose that they would get a referral fee for a recommendation.
Of those that would disclose a fee, only 12% said they would let you know in person. The most common method of disclosure was 'in writing' - which can mean anything from an email, to in the small print of your original contract. 18% claimed details of any referral fees they get were on their website.
An investigation by NTS found that in reality, that the number of agents who actually provide information about referral fees on their website was more lower than those that claimed to on the TPO survey.
If you'd like to know how much a law firm is paying for your business (and whether it'll be added to your conveyancing fees), ask your estate agent in person. You're within your rights to know both that a fee has been paid, and how much it is, and they should let you know if you ask. If your agent is reluctant, or refuses to discuss their referral fees, take this as a warning sign.
The short answer is, it depends.
In some cases estate agents will refer a conveyancing solicitor simply for the financial reward, while others will recommend a preferred solicitor based on their experience working with them.
It can be useful to ask for a quote, which includes a full breakdown of costs, from the conveyancer - even if the estate agent has given you an idea of the fee already. This will show you exactly what you're paying, and if there are any hidden extras. At this stage you can also ask whether they are receiving a referral fee and how much it is. Solicitors and conveyancers are obliged to tell you. You may also wish to ask if this cost will be added to your bill.
If you're happy with the quote, take a look at reviews from other customers - both buyers and sellers. This will give you a sense of whether the service they provide is good value for money.
Remember that price does not directly correlate to the performance or expertise of a solicitor. The cheapest solicitors are unlikely to be the best - but that doesn't mean that the most expensive is automatically going to be the right fit for your sale.
Some estate agents will try and sell their recommendation by saying it will result in better service. Many people feel pressured into using a particular conveyancing solicitor through promises of: a smoother process, quicker completion times, and easier communication. But how far is this true?
Research by National Trading Standards found that there was about a 50:50 split between those estate agents that put in the work if a customer uses their recommended solicitor, and those who do nothing for the referral fee. While some agents will act as a formal go-between, others were found to do no extra work once the referral had been made.
Although not failsafe, the best thing to do is to look at reviews, compare the information and quotes with other conveyancers, and talk to your estate agent about what differences in service going with their preferred law firm will offer you. You may find that the agent's recommendation is the best fit - but at least you'll be 100% sure.
It can also be useful to think about your estate agent's position in the transaction too. Have you paid a fee upfront? Or do they only get paid on completion?
Those agents that only get paid when your home sale is successful have more of an incentive to recommend a conveyancer that will work hard to keep your sale on track. If your home sale is slow, or falls through, they'll have to wait much longer to get paid.
On the other hand, upfront fee agents (usually online agents) have already been paid. They have very little at stake during the conveyancing part of your transaction. If you're being pushed to use a particular solicitor by an online or upfront fee agent be particularly cautious. We've seen evidence that some of the most popular online agents push their clients to use lawyers with consistent reviews of poor service. You can read our full investigation here.
Remember: Referral fees are incredibly common in the property industry, and many very good conveyancers pay them too. Research your options carefully before you decide.
Ultimately the choice is yours. You may learn about the referral fee, or read poor reviews, and decide the conveyancer your estate agent wants you to use isn't the right fit. Or, you may find that the service is exactly what you're looking for.
The most important thing is that it's your free choice. Your estate agent should not pressure you into working with a particular firm, either with aggressive selling, or withholding things - such as offers, or sales progression services - from you. If they do this, be incredibly wary, both of their suggested firm, and of the estate agent themselves. If you're concerned seek advice from the SRA, CLC, or The Property Ombudsman.
As with every part of the home sale process, we'd recommend shopping around before you decide. Remember the firm you pick will be the legal representative for one of your largest financial assets; don't settle for a firm that's not the right fit.
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