Estate agencies with in-house brokers who advise on non-commercial residential mortgages must surely fall under Financial Conduct Authority (FCA) regulation and be subject to Consumer Duty rules.
Across financial services, consumers are supposed to have more power than ever. Consumer Duty means giving clients all the options that suit their needs, while offering advice that is transparent and always in their best interests.
So how come conditional selling is getting worse, not better?
At Access FS and across industry media and forums, we are seeing an upsurge in reports of conditional selling – where an estate agent pressures a potential buyer into using their inhouse mortgage broker or financial adviser.
Often, agents are telling potential buyers that the process will be a lot faster if they do, and that they could lose the sale if they don’t. In some instances, they may not even forward the offer to the client.
Most worrying is growing evidence that this practice could be institutionalised.
CONTRARY TO CONSUMERS’ BEST INTERESTS
Agents will prioritise in-house advisers because they secure a referral fee or it adds to their top line (not always a referral fee). While this works out well for the agent, it may not be the best option for the mortgage client.
While it is legal for estate agents to endorse the use of their inhouse mortgage adviser, they cannot insist that a client uses them. Or, in worst cases, resort to a blackmail style of selling with comments like, we cannot put your offer forward until you have spoken to our adviser.
Not only does this practice breach Consumer Duty rules, but it also violates The Property Ombudsman’s Code of Practice, which disallows residential estate agents to enforce a conditional sale by mandating their own services.
Further, the Estate Agents Act 1979 states that every offer must be put forward to the vendor regardless of whether the buyer has obtained their mortgage from the mortgage adviser recommended by the estate agent.
Unfortunately, none of these rules appear to be having any effect on eradicating conditional selling, leaving many consumers in distress and brokers feeling helpless.
WHAT IS THE SOLUTION TO CONDITIONAL SELLING?
Until the government or the FCA enforces compliance with existing laws and regulations, brokers will have to help themselves. Where law enforcement has failed to support brokers, we continue to support them with advice and a free letter template which is available on our website to all brokers nationwide.
For brokers whose clients find themselves early victims of conditional selling, brokers can use our template to write to the estate agent, highlighting where the Code demonstrates that conditional selling is against the law. They can also send the estate agents their client’s financial qualifications such as a Decision in Principle (DIP) certificate and proof of deposit funds.
If the agent either doesn’t respond or continues to pressurise the client, the broker should escalate the issue to the property ombudsman.
In the meantime, we need to educate clients about conditional selling so they understand they are under no obligation to meet with the estate agent’s preferred broker.
As an industry we cannot in good conscience turn a blind eye to conditional selling while saying we support Consumer Duty.
