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Estate agency probe 'disappoints' Estate agency probe 'disappoints'
(about 2 hours 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.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 (OFT) has given a clean bill of health to estate agents in a year-long report into standards in the industry. The Office of Fair Trading (OFT) has given a largely clean bill of health to estate agents after a year-long study into standards in the industry.
The OFT said sellers should shop around to save money on fees. However, it found a third of sellers were unhappy with their agents' fees.
But an estate agents' body said the report had failed to propose "robust" protection for buyers and sellers. An estate agents' body criticised the report for failing to suggest "robust" protection for buyers and sellers.
The OFT has been studying internet property sites, price competition between agents and consumer protection. Consumer protection
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.
Minimum standards
Despite saying that satisfaction with estate agents had increased, the OFT added that consumers would benefit from a shake-up in the market.
A poodle clipper today can be an estate agent tomorrow Trevor Kent, Former president of the National Association of Estate Agents Will homebuyers embrace the internet?A poodle clipper today can be an estate agent tomorrow Trevor Kent, Former president of the National Association of Estate Agents Will homebuyers embrace the internet?
"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. Market research estimated that the UK estate agency market was worth £6.7bn in 2007 from approximately 1.6 million transactions, although the subsequent house price slump has reduced this figure.
"The government can help this process by updating legislation and making sure regulation only applies where it is essential to protect consumers." The OFT found there was still little competition between traditional agents and the fees they charge to sellers, but stressed its report was not about "bashing traditional estate agents".
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".
It said it had found no evidence that estate agents collude locally to keep up their commission rates.It said it had found no evidence that estate agents collude locally to keep up their commission rates.
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.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."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.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."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.""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."
Shake-up needed
The OFT studied internet property sites, price competition between agents and consumer protection.
While it found greater levels of satisfaction with agents, it added that consumers could benefit from a shake-up in the market.
"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.
"The government can help this process by updating legislation and making sure regulation only applies where it is essential to protect consumers."
Haggling
The OFT study also found that house sellers could save millions of pounds each year by negotiating over estate agents' fees.
It found that only 30% of house sellers shop around among estate agents or negotiate on fees.
Those that did so paid 1.4% of the selling price instead of an average 1.8% to their agent.
In 2007, the sellers who failed to haggle paid, in total, an extra £570m in estate agency fees.
Self-regulationSelf-regulation
The OFT said that existing legislation relating to traditional estate agents was "comprehensive and wide-ranging, and that further regulation was unnecessary".The OFT said that existing legislation relating to traditional estate agents was "comprehensive and wide-ranging, and that further regulation was unnecessary".
The house buying process has come under scrutiny beforeThe house buying process has come under scrutiny before
The study found that in recent years people had become happier with the service that estate agents provided.The study found that in recent years people had become happier with the service that estate agents provided.
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 2007, 88% of buyers and sellers were satisfied with the service they received.
However, research by the OFT found that buyers' and sellers' satisfaction levels with estate agents had improved since 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. A similar study by the OFT into the housing market - but only in England and Wales - in 2004 found that there was widespread dissatisfaction.
The consumers' association Which? has accepted that self-regulation in the industry could be appropriate and work for buyers and sellers.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.
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.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.In a report published in June 2008, the former head of the OFT, Sir Bryan Carsberg, called for more regulation of the industry.
'Shop around' Internet selling
The OFT study also found that house sellers could save millions of pounds each year by negotiating over estate agents' fees. The OFT found that despite the rise of internet retailing, property selling was still dominated by traditional estate agents - both online and in the High Street.
It found that only 30% of house sellers shop around among estate agents or negotiate on fees. It said that a key innovation which might drive down fees for home sellers would be to make it easier for businesses and individuals to sell their homes online.
Those that did so paid 1.4% of the selling price instead of an average 1.8% to their agent. On a £200,000 home, that is a saving of £800.
In 2007, the sellers who failed to haggle paid, in total, an extra £570m in estate agency fees.
The OFT also said that the law on estate agency should be changed to make it easier for new types of home selling businesses to set up.
The report found that despite the rise of internet retailing, property selling is still dominated by traditional estate agents - both online and in the High Street.
It found there was still little competition between traditional agents and the fees they charge to sellers.
The OFT said a key innovation that might drive down prices for home sellers would be to make it easier for businesses and individuals to sell their homes online.
The current laws mean that businesses that might simply introduce private sellers and buyers to each other are classified as estate agents, which imposes unnecessary costs and regulations on them and deters them from setting up.The current laws mean that businesses that might simply introduce private sellers and buyers to each other are classified as estate agents, which imposes unnecessary costs and regulations on them and deters them from setting up.
It pointed to the example of the giant supermarket group Tesco, which had set up and then closed its online Tesco marketplace service because of the cost of checking out the accuracy of the property descriptions posted by individual home sellers. It pointed to the example of the giant supermarket group Tesco, which had set up and then closed its online Tesco Marketplace service because of the cost of checking the accuracy of the property descriptions posted by individual home sellers.
Such matching services would be free from any laws that could see them prosecuted if a property was "misdescribed" in an advert.
The OFT pointed out that in the US, online estate agents currently had 15% of the market, compared with only 2% in the UK.The OFT pointed out that in the US, online estate agents currently had 15% of the market, compared with only 2% in the UK.
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.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.
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