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?

A valid reason would be a structural issue, surely? Therefore refundable. I don't see any issue at all, and it definitely didn't put me off!

Of course the deposit isn’t for the estate agent to keep 🙄

i am NOT a fan of estate agents... cheating bastards... fuck you Richard!

There absolutely are estate agents that charge a reservation fee and will keep it if you don't keep to their terms.

So it's wrong to pull out if your spouse dies or something, but fine if the survey says the loft insulation might need updating in a year?

Agree with OP. Equating time-wasting or not with "something coming up on the survey" isn't a practical way of ensuring the sale goes through.

Surely the way to gain good faith on both sides is to get the ball rolling with solicitors, mortgages, surveys etc in good time? Once you've done that you're a bit more invested than just putting an offer in and sitting back. Sadly getting accurate info and action from conveyancers can be kind pulling teeth....

You can make an offer without paying the agent. The payment is for them to mark the house as "sold subject to contract" and to stop showing people round. Crucially though, the agents will still be legally obliged to pass your offer on to the seller.

If the seller accepts it I would just say: "great, we'll proceed once the house is off the market. But we're not paying any upfront fees." It's then up to the seller and the agent to argue between themselves. With an offer in the bag the seller (in this market) will want to go full throttle. If you stand your ground I predict the agent will cave in and take the house off the market for free. Otherwise you carry on looking but leave your offer on the table subject to that condition for proceeding.

Yes like I said - the system is broken.

Also, like I said, I was speaking from my own personal experience. I hadn’t carried out a stats check on how often buyers cause problems vs sellers. Can you tell the personal experience of which I speak has left me a little bitter? 🤣

I asked the EA about personal circumstances such as bereavement or job loss, and he said of course it would still be refunded - it is purely down to filtering out time wasters, it's such a good idea!

I think if a buyer is not repared to simply put a £1000 deposit down then how serious are they? They want to be able to change their mind. That's part of the problem.

Everyone wants a better system and this definitely helps.

I asked the EA about personal circumstances such as bereavement or job loss, and he said of course it would still be refunded

I'll bet he did 🙄 I've looked at a few of the terms on these contracts. None stipulate those reasons. I mean, you might have found an honest estate agent who would refund as a goodwill gesture in these circumstances, but they wouldn't be obliged to.

I also saw another agent that uses a different approach. So if buyer pulls out unless due to structual issues on the survey, or an issue with the searches, vendor gets the money, and buyer must also complete within a certain time frame. If vendor pulls out buyer gets the money back. If the sale goes through, agent keeps the cash. On top off their commission.

Never heard of this in my life and I’ve moved house a lot in different parts of the country. Maybe you could provide a link to an estate agents that asks for a deposit & keeps the deposit for a normal house ( not a new build development where people pay a deposit to reserve a slot).

Shelton & Lines are the ones I've mentioned above.

There are lots of agents that charge a buyers fee, but not all have the same terms.

There's even an agent that charges the buyer rather than the seller!

I think the current system is failing as so many house sales now fall through before exchange for various reasons - I believe it is currently over 30% that fail before exchange. In many countries it is normal to pay a small deposit on making an offer to show commitment.

I have had two house sales fall through recently due to buyers pulling out because they have changed their minds - nothing to do with surveys or mortgage offers. It is not fair on the seller as it costs money in extra legal fees. I can understand why the EAs may be doing this.

Where on the Shelton & Lines does it say the estate agent asks for a deposit for someone offering on a normal house and keeps it? To save me searching the whole website.

It's under Buyer's Information.

I think it’s a reasonable way of screening potential buyers if you have a few interested. Gets rid of the flakey ones for a start. If only one potential offer then probably less useful and it’s better to not do this. I think it just depends on the market and how many offers there are.
The 10% deposit at time of offer wouldn’t work here as it could be thousands of pounds and people up the chain use their house equity for it ( which they don’t have access to at time of offer) so literally no one would be able to ever move which is also bad for first time buyers.
As a vendor I wouldn’t object to this in principle as it saves wasting my time and as a buyer I also wouldn’t mind that much if I really wanted the property as it reduces the competition with other potential buyers if some don’t want to pay it.

In a former lifetime I used to be an estate agent and we never asked for a refundable deposit. We did however ask for proof of mortgage offer or other means of financing. Sadly there are loads of complete and utter timewasters who talk a good game but repeatedly pull out of sales.

Thank you @CellophaneFlower

It does say that the Buyer's Fee of £480 will be paid to the Vendor in full if the buyer pulls out of the purchase (not the agent).

However, you're right, it does also say the estate agent gets the £480 upon successful sale of a property. I'm really surprised as never come across this. It's not necessarily a bad idea but highly unusual as it's basically an additional £480 for the buyers to pay. Wouldn't be too happy with that if I was a buyer, as would expect any deposit to be repaid upon Exchange or Completion.

Yes, I don't like the way they list all that the fee covers, when it's just what they get paid for through commission!

A PP has stated they refused to pay and they still managed to proceed, so I wonder how common this is? That's even worse imo, as clearly they're just trying it on!

It's quite sneaky isn't it? I wonder where they would stand legally if a potential buyer made a good offer on a property but refused to pay the £480 unless they were guarenteed to get it back if the sale reached Completion or broke down through no fault of theirs. Because I thought estate agents were legally obliged to pass on all offers to the Vendor and the Vendor would want to accept.

I would avoid this particular agent if I was buying or selling.

I live in a country where if you pull out of a house sale or the exchange (bar financial difficulties that you need to prove) you pay 10% of the accepted offer for dicking them around. No ifs or buts. If you're not sure you're going to buy the house then don't fuck people around by making an offer. Consequently, nobody ever pulls out of a sale, so it works. There's also no fucking up the exchange, the keys are handed over at a notary office so the seller can't go back to the old house.

'Can you tell the personal experience of which I speak has left me a little bitter? 🤣'
I did pick up on that!

So the EA hasn't even explicitly set out which circumstances would get you your money back or not.... it's down to an individual's interpretation of what is reasonable?

And this is supposed to make things more straightforward? It introduces a whole new layer of ambiguity and interpretation to a situation already potentially fraught with second-guessing!

Everyone wants to be able to change their mind if they feel the situation necessitates it. Death, survey issues, health issues, divorce, neighbour issues, the seller becoming increasingly unreliable or unresponsive...

Good point- I gather it is a legal requirement for them to pass on any offers, so presumably they can't refuse to do it if you refuse to pay them a fee.
The agent is acting for the seller, not for the buyer, so the buyer ought not to be be paying them so much as a penny. If a buyer does pay them, surely that puts the agent in the position of having a conflict of interest? If I was a seller, I wouldn't tolerate this sort of shenanigans on the part of my agents.