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Estate agents could face shake-up Estate agency probe 'disappoints'
(about 5 hours later)
The UK estate agent sector is likely to get a clean bill of health when a key report into people's experiences of buying a home is published later. Satisfaction with estate agents has improved, a study has found, but a trade body says an opportunity to regulate the sector has been missed.
The Office of Fair Trading has been studying internet property sites, price competition between agents and consumer protection for the last 12 months. The Office of Fair Trading (OFT) has given a clean bill of health to estate agents in a year-long report into standards in the industry.
A recent survey suggested satisfaction with estate agents had improved. The OFT said customers could shop around to save money on fees.
But there have been calls for more regulation, as anyone can set up in business as an estate agent. But an estate agents' body said the report had failed to propose "robust" protection for buyers and sellers.
The OFT has been studying internet property sites, price competition between agents and consumer protection for the past 12 months.
Market research estimated that the UK estate agency market was worth £6.7bn in 2007 from approximately 1.8 million transactions, although the subsequent house price slump has probably reduced this figure.Market research estimated that the UK estate agency market was worth £6.7bn in 2007 from approximately 1.8 million transactions, although the subsequent house price slump has probably reduced this figure.
Satisfaction 'Shop around'
House sellers could save millions of pounds each year by negotiating over estate agents' fees, the year-long study by the OFT found.
A poodle clipper today can be an estate agent tomorrow Trevor Kent, Former president of the National Association of Estate Agents
The review said that people who haggle over agents fees pay significantly less than those who do not.
The OFT also says that the law on estate agency should be changed to make it easier for new types of home selling businesses to set up.
The study found that in recent years people had become happier with the service that estate agents provide.
In 2004, a similar study by the OFT into the housing market - but only in England and Wales - found that there was widespread dissatisfaction with estate agents.In 2004, a similar study by the OFT into the housing market - but only in England and Wales - found that there was widespread dissatisfaction with estate agents.
KEY AREAS OF REVIEW Are customers overcharged because of agents' links with associated services, such as surveyors?Are internet-based estate agents able to get a foothold in the market?Is the level of industry regulation sufficient?Can more be done to increase confidence in the market? However, subsequent research by the OFT found that buyers' and sellers' satisfaction levels with estate agents had improved from 2004. It found 72% of buyers and 74% of sellers were happy with the service in 2004, but this had risen to 88% by 2009.
Buyers argued that some agents' descriptions of properties were misleading and that some failed to pass on offers to sellers. 'Bashing'
It prompted new legislation, including a requirement that all estate agents must be a member of a free ombudsman service that deals with any customer complaints and can order compensation. However, the OFT said consumers would benefit from a shake-up in the market.
More controversial has been the introduction of Home Information Packs in England and Wales, or Home Reports in Scotland.
The latest market study - due to be published at midday - is considering whether competition has improved since 2004, and whether consumers are adequately covered by the new rules.
It will draw on research, published by the OFT in November, which found that 24% of estate agents visited by trading standards officers failed to comply with regulations in the industry.
However, research published at the same time found that buyers' and sellers' satisfaction levels with estate agents had improved from 2004. It found 72% of buyers and 74% of sellers were happy with the service in 2004, but this had risen to 88% by 2009.
The Property Ombudsman has found that sales complaints have dropped away in 2009 owing to the state of the market.
The bigger gripe for these people was with the individual buyer or seller on the other side of the transaction, or their solicitor.
Changing picture
The housing market has seen major changes since 2004, not least with house prices.
The house buying process has come under scrutiny beforeThe house buying process has come under scrutiny before
Prices rose sharply until the credit crunch led property values to plunge throughout 2008 before recovering to some extent at the end of 2009. "Encouraging new business models, online estate agents and private seller platforms could put useful competitive pressure on traditional models and lead to better value for buyers and sellers," said John Fingleton, chief executive of the OFT.
Estate agents were hit hard by the downturn, at a time when the methods of buying and selling homes were changing. "The government can help this process by updating legislation and making sure regulation only applies where it is essential to protect consumers."
An increasing number of people have considered selling privately, selling at an auction, and - most significantly - using an online estate agent. The OFT said that improvements could be made to price competition and innovation and it stressed its report was not about "bashing traditional estate agents".
The latest year-long review has looked at how easy it has been for new internet-based agents to gain a foothold in the market. It said it had found no evidence that estate agents collude locally to keep up their commission rates.
Regulation However, Trevor Kent - a former president of the National Association of Estate Agents (NAEA) - said that the OFT should have introduced minimum standards of competence for those running an estate agency business.
"A poodle clipper today can be an estate agent tomorrow," he said.
The current chief executive of the NAEA, Peter Bolton King, also criticised the lack of regulation.
"Once again the OFT has categorically failed to see that better regulation of the home buying and selling market is required," he said.
"Buying a home is often the largest single transaction of a person's life and it is disappointing that the OFT has not thought it appropriate to acknowledge that a robust and appropriate level of consumer protection is needed."
The OFT responded that there was more than enough regulation available but it could be enforced more effectively.
And the consumers' association Which? has accepted that self-regulation in the industry could be appropriate and work for buyers and sellers.
At the moment anyone can open up an estate agency without any qualifications or permission from any official body.At the moment anyone can open up an estate agency without any qualifications or permission from any official body.
They can, though, be banned by the OFT if they subsequently break the laws about describing a property incorrectly, handling a client's money, not declaring an interest in a property, or engage in some other form of dishonesty. However, they can be banned by the OFT if they subsequently break the laws about describing a property incorrectly, handling a client's money, not declaring an interest in a property, or engage in some other form of dishonesty.
In a report published in June 2008, the former head of the OFT, Sir Bryan Carsberg, called for more regulation of the industry, and for Home Information Packs to become voluntary. In a report published in June 2008, the former head of the OFT, Sir Bryan Carsberg, called for more regulation of the industry.
However, the cost of greater regulation in an industry under pressure from a moribund market could be fought against by agents. A specific change that the OFT is calling for the government to alter is the definition of an estate agency in the 1979 Estate Agency Act, so businesses that do not pose a risk to consumers are free from the burden and cost of the regulations.
The OFT report will offer various recommendations that might require new legislation if they are not automatically adopted by the industry.
The study has also looked at the question of fees for services provided to buyers such as referrals for mortgages, surveys, legal advice and other services.
It has considered whether agents are open about these fees to customers, whether people are at risk of being overcharged, and whether these customers shop around or negotiate on charges for these services.
Mark Mclaren, of the consumers' association Which?, said: "We have long thought that the industry works more in the interest of property professionals and the consumer is forgotten about."
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