It’s a pretty common view that estate agents are untrustworthy - ready to play any tricks to maximise the profit they make on a sale.
In this article we take a look at one of the worries buyers have when they’re dealing with an estate agent - whether estate agents lie about competing offers.
An estate agent is unlikely to go to prison if they make up offers on a house, but it does go against the codes of conduct that most legitimate agents choose to follow.
All respectable agents are registered with the Property Ombudsman - a redress scheme for estate and letting agents. They provide a place for you to escalate complaints that cannot be resolved with an agent directly. They provide advice, mediation, and compensation. And they also help you escalate your complaint to court, if it's serious enough.
As part of membership with the Property Ombudsman, agents have to agree to a Code of Practice. If an agent is found to be breaking the rules laid out in this document, they will be penalised, and expelled from the scheme.
One of the rules that estate agents must follow includes not making up, or inventing details, about any other offer.
The exact clause in the Code of Practice is: ‘By law you must not misrepresent or invent the existence, or any details, of any other offer made or the status of any other person who has made an offer.’
Read the full Code of Practice on the Property Ombudsman's website.
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These rules mean it is very unlikely that an estate agent will try and make up an offer in order to get you to increase your bid. Being expelled from the Property Ombudsman is incredibly damaging for an estate agency business. Being a member is a sign of trustworthiness, and many people will not work with an agent that is not a part of the scheme.
But, the legal implications aren't the only consideration. Estate agents are unlikely to lie about offers, because the risk of a buyer withdrawing from a sale is not worth the small amount of money they will gain if you increase your offer.
It is true that many estate agents earn commission on the final sale price of a house. But, at the standard 1.5%, increases of a few thousand pounds, amounts to a tiny increase in their final payout. For example 1.5% of £5,000 adds just £75 to their final fee.
On the other hand, losing the sale (and potentially the respectability of their business) can mean losing several thousands of pounds.
However, if you do suspect an estate agent of making up offers, the Property Ombudsman Code of Practice should give you the confidence to challenge them. If your challenge is not satisfactorily resolved by the agent - who should provide you with written proof of the offer - you have the power to escalate, and request mediation.
Find further information, and reviews, of a particular estate agent in your area, here.
There’s no law, or Code of Practice term, that stops an estate agent from disclosing how much someone else has offered on a property. But, it’s not really standard practice in the UK. If an agent is cagey about giving you the exact amount of your competitors offer, it’s not necessarily an indicator that the other offer is fake.
Giving you a guide rather than an exact figure for other offers is one of an estate agent’s tools of negotiation. Estate agents work for the seller, not the buyer. They are unlikely to tell you the exact amount another buyer has offered if they think a guide amount will encourage you to offer more.
For example, if your competitors offer is £265,000, the seller’s estate agent might tell you that they’ve received an offer in the range of £260,000 - £270,000. This has the psychological effect of encouraging you to offer above £270,000. In contrast, if they had told you the offer was £265,000, you might only offer a very small amount more.
It can feel like there’s a lot of smoke and mirrors when it comes to this part of the home buying process. If an estate agent won’t tell you exactly how much the other offer is, how are you supposed to know if the offer is real?
The best way to find out whether a third party offer is real is to ask for written proof. This is a fairly standard request, and the seller’s estate agent should be fine with providing you with the evidence you need. Usually, they will share a signed letter from the seller’s solicitor, acknowledging receipt of a legitimate offer.
If an estate agent is unwilling to provide this written proof, this is a warning sign that the other offer is fake.
Yes, an estate agent is legally required to present all offers to the seller up to the point that the contracts are signed. In practice, this means that even if your offer has been accepted, another buyer can put forward their bid at any time before you’ve signed a contractual agreement - which can take a few weeks.
There are some ways you can protect yourself from being caught out by last minute competitors. However, these aren't 100% effective, and come with some negatives too.
A lockout agreement involves a buyer paying a holding deposit to the seller’s solicitor on the condition that the seller takes their property off the market for a set period of time. This allows you to get the contract signed, and removes some of the risk of a competitor putting in a bid at the last minute. It also shows the seller that you are serious about the purchase, and are keen to proceed quickly.
On the other hand, it requires more upfront expenditure. And, a lockout agreement can restrict your negotiating ability later, because you’re already financially tied in to the sale.
A good will agreement is slightly different. In this case both the buyer and the seller pay a deposit when the offer is agreed. Then, if either party pulls out, the other side gets to keep the deposit money.
Similarly to the lockout agreement, you’ll have to have the extra cash on hand to pay the deposit upfront. And, if problems arise and you need to withdraw from the sale, you will lose your deposit (for example, if there are issues with the house survey, or your mortgage funding).
If you're unsure what option is best for you, talk to your conveyancer. They should be able to provide some objective advice, based on your personal situation.
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