A couple of weeks ago The Property Ombudsman published a case report about an estate agent who failed to inform the seller of an offer made by a prospective buyer. The Ombudsman found in favour of the complainants (in this case both the seller and the buyer) awarding £4,300 compensation to the seller and £1,000 to the buyer. This case not only illustrates the impartiality of the Ombudsman (many members of the public believe the Ombdusman works for estate agents) but more importantly that some estate agents are still not reporting ALL offers to sellers and some are not looking after the best interest of their client, favouring their own commercial interests.
This case centred around a promotional offer the agent had made to secure the listing. If the agent secured a sale within 5% of the £295,000 asking price the agent would secure a fee of £5,427 including VAT. If the final sale price was under 95% i.e. less than £280,250 of the asking price they would reduce their fee to a flat rate £500 inclusive of VAT!
After some period of inactivity the agent finally received an offer of £280,000. They failed to communicate this offer to seller, simply telling the buyer the offer wasn’t acceptable. The buyer revised their offer to £281,000. This was put forward and with some reluctance to reduce the price to this level a sale was agreed.
It was only after the sale had completed and the seller and buyer were handing keys over that the seller became aware of the buyers initial £280,000 offer. Had the seller accepted this, they would have paid £500 including VAT to the agent. As it was, they sold at £281,000 and paid £5,472 – a difference of £3,972. The seller would of course have accepted the £280,000 had they known the offer existed. More to the point the buyer would have saved £1,000 on the purchase price.
The Ombudsman quite rightly highlighted that it was an agent’s duty to achieve the best price they can for a client, this didn’t override the agent’s duty to ‘step into the client’s shoes’ and act with integrity. The agent should have asked themselves “What would the seller do in the circumstance?” That was clearly to accept £280,000 rather than £281,000, despite the financial penalty to the agent. The agent offered the promotional deal. It did not give them any right to disregard their fiduciary duty to the client.
Estate agency relationships start with an initial contract/agreement, but this only sets out the agent’s entitlement to their fee. The marketing and negotiating offers requires the seller to trust the agent to look after their best interest. Every few weeks I come across people who tell me they’ve had a poor experience with an agent, both High Street based and online; offers that were not put forward, a refusal to book a viewing because the buyer hasn’t already sold their existing property or where the viewer refuses an invitation to meet with the agent’s financial/mortgage advisor, where offers have been put forward omitting any reference to fixtures and fittings the buyer expected as part of the deal, etc. I could go on. Buyers have no choice about the agent they buy through, if that agent has the property they want. Sellers do have a choice. Care should be taken when choosing the agency they want to work for them. Sellers should ensure that the agency staff are either very experienced or professional trained (preferably qualified via the NFoPP), or at the very least managed by experienced senior staff with a track record of not only finding buyers and tenants in the area in which they operate but have a record of providing an honest and reliable service (word-of-mouth recommendations, online testimonials, Google Reviews, etc. all help with this today).
I think this Ombudsman case highlights the need for sellers to carry out due diligence checks when choosing an agent, not just being attracted to the highest valuation, the lowest fee or a combination of the two.