I write to you as chief executive of eMoov.co.uk, a low-cost online estate agent. I understand that Powys Council now runs the National Trading Standards Estate Agents Team, I have some suggestions for making the sector more transparent.
We know that estate agents deploy tactics such as sole agency contracts to lock sellers in and hide fees. The market’s very structure does not encourage honesty and straightforwardness. Nor does it help raise the standard of services which are hugely variable in quality and generally massively overpriced.
Yet, the enforcement picture is woeful. Information released under the Freedom of Information Act found that just twelve prohibition or warning orders for breaches of the Estate Agents Act were issued last year, and just nine the year before. In fact, since April 2005, just one hundred orders have been issued by the Office of Fair Trading and its agencies. This is a dismal reflection of previous authorities’ appetite to hold estate agents to account.
Local authorities have good track records enforcing real change in specific sectors such as trading standards and money laundering. I hope that now might be the time to grasp the nettle in this sector and encourage openess.
My aim is simply to propose a few simple changes to help bring transparency into an industry which has resisted it for so long.
The key problems:
- There is huge variation over fees charged by estate agents. Few estate agents disclose their fees and terms and conditions, sometimes the seller is hit with ‘hidden’ additional costs such as fees for ‘for sale’ boards or photos, or withdrawal fees if the seller changes his/her mind.
- A seller’s legal position is often unclear as there is no standard contract and estate agents rely on the fact that the public are poorly informed about what they should expect. This can leave a seller open to paying extra charges further down the line, such as if they decide to instruct a second agent after deciding on a sole agent agreement first.
- In addition, in order to subsidise the offices, cars, and entertainment costs often associated with the high street model, estate agents are encouraged to bend the rules to gain their extra commission.
- The whole selling process can often take a long time. If a sale takes three months then a seller loses an average of £11,750 (calculated using the average national house price increase of 9.4 per cent last year)
- Sole agency use. Agents often encourage sellers to sign a sole agency contract which gives the agency unique rights to sell that property for a certain time. It restricts the seller, unfairly locking them in to one agent, and provides an opportunity for the agent to convince the seller to lower their asking price to ensure that agent sells the property before the contract expires.
- Sellers often believe the fees they pay for an estate agent are justified because they will get the best price, rather than the price being determined by the market. It is in the public interest for vendors to know if this is true.
The solution: Each estate agent should be obliged to publish data about various parts of its business to increase openness and transparency. This is the direction many public sector organisations are moving in (for example NHS Trusts).
- Fee structures should be published on all estate agents websites as a legal requirement. As is legally required when a deal is done, all costs should be specified in writing, however this should be published on the agent’s website to inform sellers who have not yet decided which estate agent to choose.
- Introduce new consumer protection measures that relinquish sole agency use and allow sellers to get the best price possible for their property.
In addition, all estate agents should release an annual table, published prominently on their websites, detailing:
- The time taken from date of an offer made to completion of the deal as an average for all transactions across the year
- The number of deals which are abandoned each year (defined as offer made and accepted but the deal not being closed)
- An average of the difference between the asking price and sale price.
- Annual turnover. Under the Companies Act 2006, any ‘medium sized company’ which has a turnover of at least £25.9m and over 250 employees is required to disclose turnover. But all estate agents should, in the spirit of openness, disclose this data, as too often a company claims that it is the ‘largest in the area’, which cannot be properly substantiated otherwise
Background to eMoov.co.uk: Having run a traditional estate agent for many years, I decided to found an online agency in 2010. My aim was and is to disrupt the traditional high street model, where agents take up to 2.5 per cent of the sale price.
We are an online-only outfit, the associated reduction in overheads meaning we can charge flat fees which are ten times less than the average. We offer a standard package of £400, while still providing all traditional services except viewings, which are carried out by the seller.
I hope you will consider my proposal. I am more than happy to work with the council in any way that is helpful.