Positive news yesterday that the Government are willing to sit up and listen to the industry as to how selling or buying a home can be improved in the UK, particularly through streamlining with technology. Positivity that was greeted with the usual skepticism from some of the industry itself, but who can blame them given repeated rhetoric from successive Governments on this subject?
Russell Quirk and eMoov have already committed themselves as stakeholders in the process with DCLG, submitting their evidence in line with the requests made yesterday.
One aspect of the call for evidence that has so far escaped comment from the industry is the Government’s apparent intent on probing referral fees, the question as to whether estate agents should be able to earn money from introducing conveyancing and mortgage services.
A move by the Government to ban referral fees, would in their eyes, be a positive way of preventing agents from cashing in on the close partnerships they have with their respective third parties.
But this small change could have a catastrophic impact on the sector and those it employs as Russell Quirk explains.
Referral fees are a perfectly legitimate aspect of the property selling process and are already regulated within the Estate Agents Act and via the Property Ombudsman to ensure nothing illegal transpires between agent and broker.
Adding further red tape to this aspect will only be detrimental to the overall process which should not be the aim of this exercise. The buyer or seller has the option to use whoever they please to provide financial and legal facilities during a sale, while this could be made clearer to the consumer, the recommendation itself is certainly not solving a problem that needs to be prioritised.
The implementation of such a ban would result in a monumental decline in revenues within corporate estate agency, as the likes of Countrywide, Connells, LSL and Foxtons base their business model around the commission made via these referrals.
While it may come as a surprise to many that I, of all people, would highlight the potential decline of the corporate industry as a bad thing, you have to look at the bigger picture and the absolute carnage that would come of these industry giants failing rather than flourishing. Not only for sellers and buyers but for those they employ, thousands of whom would find themselves redundant as a result.
Countrywide has already seen a 90 percent drop in profits year on year, with the majority of their income deriving from mortgage and financial services and conveyancing. This further reduction in income will surely sink the ship.
The Government have already begun the process to ban introductory tenancy reference fees in their attack on the lettings industry and so they have a track record of implementing bold moves and pulling the rug from beneath the industry’s feet. But in this particular instance, they would be causing a big problem, not solving one.Russell Quirk