Estate agent f***ery - is this even legal?

[raratigera]

I'm house-hunting and very keen to move. I've seen several in the last few weeks and will be putting an offer on one of them. Then I noticed the small print the estate agent has written at the bottom of one of the house brochures.

Basically they want a reservation fee, "refundable on exchange", of £500/£1,000/£1,500 depending on the cost of the house to mark it as Sold Subject To Contract. The fee will be reimbursed upon exchange of contracts or retained by them if I back out of the sale unless there are structural issues or other issues that come up after a survey.

So they want me to pay £1,000 to have an offer accepted? That they may or may not reimburse? And who decides if an issue is serious enough to make me withdraw an offer? And what if I don't agree with their decision?

I've bought and sold many houses and have never come across this. I'm a serious buyer ready to move, but I think I'm going to give this house a miss. And also the house removal company, building society and solicitors they recommend, when I do buy and move in the near future. The fee is to cover the work they do to move the sale forward but that's part of their job.

Is this how it is now?

This would be the obvious procedure imo. Isn't it a bit like that in Scotland, where the vendor pays for the homebuyers report?

Only issue I can see is surveyors will make less money not doing surveys that cannot be used due to people pulling out.

It may deter people from making offers, but is it acceptable the agent should be the one to profit?

How would this work though? The vendor has to sell through the agent but to buy, the buyer has to pay the fee. I can't see how the buyer can avoid paying it?

Our seller asked for a £1000 deposit to be refunded upon completion within a fixed time frame.

She was buying a house at auction and needed to have completed before the auction date and the £1000 was meant to make sure we got everything done before her deadline.

We agreed in theory, on the condition that it was arranged through solicitors and held by an independent 3rd party at her expense. We never discussed the deposit again and everything went through in time (just!)

Tbh it is such a small amount (in terms of house prices -I definitely don't have £1000 to throw away!!) That it wouldn't compensate for the sale not going through and you pay more than that in solicitors, searches and surveys (our solicitor said she expected it to add more than £1000 to her bill just to arrange it!)

So I wouldn't necessarily run a mile from it, but I wouldn't agree to pay it without some discussion.

I think the main issue here is that the fee is going to the agent. There is no benefit to the buyer at all. There's no guarantee the vendor won't pull out, nor will it hurry the process up. They'll just lose even more money should the survey bring up issues they didn't expect but the agent doesn't seem them important enough to refund their money.

Hey OP. I am in the SE and this has just started happening to me too. We kicked off and they have waived it. I threatened to go to the vendors and explain the situation - as the EA threatened me they would tell the vendor we aren't serious - they caved.

In cases where buyers are flaky and non-committal I can see some sort of incentive like this being a good idea, but as a buyer I would be put off too.

What if you suddenly got made redundant out of the blue, midway through the process, and you wanted to back out just in case you didn't find another job? That money could end up being desperately needed.

As PP have said, with no regulation over the criteria for what is considered to be a valid reason, it sounds really, really risky to me.

To me it sounds like with sales plummeting, the estate agents are struggling, so charging buyers gives them a bit of a cashflow boost in a difficult time.

What happens if they went bust?! Bet it's not being held in a protected client account.

I'm not arguing there shouldn't be a better procedure to protect sellers and buyers in the UK. But this isn't it. If a buyer were to back out of the sale at any point for valid or other reasons the seller doesn't benefit in any way. This is to cover the estate agents costs, which are minimal after solicitors are involved. Who decides what a valid reason is anyway? I won't be dealing with an EA that does this, so will be offering on another house with the intention to complete the sale. The owner of the house has just lost out.

Good for you op. It’s not like Agents don’t make enough with their 1% commission.

Seems there are better systems in France, Sweden and Australia at least then.

They did try to introduce the whole idea of surveys and homebuyer reports been the responsibility of the vendor here in England a number of years ago but it never really took off.
I realise it is difficult in that people can think of exceptional circumstances and situations where it didn't work, but it has to be better to have some kind of commitment from both sides from the point at which the offer is accepted.

Exactly. The agents make enough as it is and they’re also the ones who keep pushing up asking prices … and every time prices go up the value of their commission does too!

if anything it should be a commitment on both sides to repay the costs incurred by the other. The estate agents gets paid anyway.

also - surveys are notoriously subjective… with most houses you could pretty easily find a reason on a survey not to proceed if you wanted to

Are you sure it goes to the agent if you pull out? I’d expect it to go to the seller, but be held in an escrow account by the agent before that. I can understand sellers wanting to avoid people pulling out for spurious reasons that seems to happen fairly frequently in England & Wales.
If it goes to the agent that’s crazy - they’ve reduced their incentive to get a workable sale through by doing that.

I have not come across this and wouldn't be prepared to pay it in the UK. In another country where the seller has spent money on surveys upfront and perhaps pays some sort bond too that would be different.
Can't you just tell the agent that you like the house but will not be making an offer unless the waive the fee. If not, there will be no offer. Honestly, in this sort of market where demand has plummeted they would be foolish not to agree (unless your area is bucking the trend).

I’d just say to the agent that you want to show their t&c’s around this to your solicitor before making an offer and then get them to check it over.

I can see you feel very uppity about the mere suggestion but it’s not personal. The system in this country is broken and I don’t think there’s anything wrong with trying to get people to put their money where their mouths are.

Sadly it’s not the case that “most prospective buyers are serious”. My experience is that most buyers are somewhere on the spectrum between lying charlatans and just plain flakey. People are especially unreliable on a fluctuating market.

It’s perfectly legal.
When we sold a property in London last year, we were made an offer by a person that had previously offended us by making a silly low offer. I said to the estate agent I was minded not to accept the offer as I doubted she was genuine. He then proposed that she paid a 10k deposit ( on a 1.2million flat) to show she was genuine. It was only refundable if the survey threw up any serious issues. I was quite surprised but she agreed to it & a contract was drawn up between her solicitor & mine.

Just don't buy it.

This is also standard in the US (I think - possibly it varies from state to state) and Canada. The agent holds the deposit but doesn't pocket it - in the event the buyer pulls out it goes to the vendor, and if the sale goes through it is applied against the purchase price. There's also no issue with gazumping or pissing about with reducing offers because the minute an offer is accepted, both parties have to sign a contract agreeing the sale in principle at that price subject to inspection.

Honestly, with all the horror stores I read on MN about buying and selling property in England you'd think people there would be happy to have more regulation in the market to protect everyone's interests.

something needs to be done to stop offers from non committed buyers wasting time and sellers money. This is not the right thing but maybe the French system where you put your deposit down initially. This deposited us refunded if you stipulate conditions on the purchase.
i.e. subject to mortgage, subject to house sale or job etc. anything.
then if you don’t complete the sale it till refunded if you had to pull out due to a condition you set. Great system.

If I were a seller I'd actively support that. My buyers offered - I accepted - low price for cash sale - delayed for a year as always some problem - then pulled out. Next set of buyers - offered asking and then gave spurious reasons for knocking off £10k.

If the agents have done viewings, set up files, answered questions - and the buyer pulls out - they get zero.

This isn't what this is. It's a fee that the agent calls an admin fee, and goes directly to them.

Slippery buggers that they are, I suspect a survey to have to show the house is virtually falling down before they'd ever return it.

Also if you OP are a serious buyer and the house is worth several hundred thousand £500 - £1000 is nothing - especially if you are NOT going to pull out so won't pay it anyway. And if you might pull out - neither the agent nor the vendor wants your business.

I don't think prospective buyers are any more 'lying charlatans' or 'plain flakey' than potential sellers and in many cases people are both buying and selling together so are the same group of people. There have been just as many threads on here about sellers changing their mind at the last minute and disappointing potential buyers who have spent £££ or accepting a higher offer after the offer was agreed as there have been sellers whose buyers have pulled out.
If a system was devised where both parties committed financially (by the seller paying for a survey, certification, etc) and the buyer paying a deposit and them both signing a legally binding document, that would be reasonable but not a situation where just the buyer commits and the seller can pull out on a whim.

I wouldn't even consider making an offer under those conditions. But I would tell the house owner why I hadn't made the offer I'd been thinking of.

I agree that if the fee is for the agents then that is quite different. Is OP sure that they pocket the fee themselves? Or do they just "keep" it, ie to give to the vendor? I'd be curious to see the actual wording.

I think every purchase should have it!

As a buyer I was happy to pay the £1000 refundable deposit for our house purchase because we were serious buyers, we exchange on Monday and the agents have already refunded it.

Anything that filters out time wasters is a great idea!