The latest BBC Panorama documentary has underscored the malpractice of conditional selling in the property market, a malpractice whereby estate agents pressure prospective buyers to use their in-house services as a prerequisite for making a valid offer. This has been widely deplored as a way to leverage lopsided deals through deceit and manipulation in favour of the estate agent, with the 1979 Estate Agents Act classifying conditional selling as an ‘undesirable practice’.
Panorama Documentary
The investigative journalist Lucy Vallance uncovered a myriad of issues in relation to conditional selling. One such issue was the ways in which estate agencies would encourage staff to sell add-on services and were financially rewarded for knocking down a seller’s original asking price for their property.
This was a theme underpinning the practices of Purplebricks, where an agent said to the whistleblower cooperating with Vallance that the company is ‘overvaluing properties massively just to gain instructions’. ‘Once a customer was signed up,’ a former sales negotiator told the BBC, ‘staff then tried to convince them to cut the asking price of their home, earning commission if successful’.
Another target of this investigation was the estate agency Connells, which operates 80 chains comprising over 1,200 branches. Julie Gallagher, a former customer of Connells, said that her property was sold for far less than its market value due to Connells favouring a prospective customer taking out an in-house mortgage that would make the company more money.
As it was reported, the mortgage was worth approximately £2,000 to Connells, yet the company was set to make over £10,000 by getting the customer to use their in-house services and selling Gallagher’s property. Gallagher, recalling the situation in which a company representative persuaded her to sell the property below market value, said: ‘She’s probably done me out of quite a bit of money – I feel angry and conned.’
Such a story is only one example within a wider context of selling malpractices that have been operating under the public radar. During the same investigation, Vallance identified that out of the 15 potential buyers for a particular property, two were labelled as ‘hot buyers’, a term referring to prioritised customers who had agreed to use Connells’ in-house services.
A cash buyer was interested in making an offer on this property, yet Connells considered the offer ‘not good enough’, with an office administrator saying: ‘They will probably more likely aim to get somebody who’s signed up with us and wants to use our conveyancing, as opposed to someone who is a cash buyer. That’s just how Connells are.’
Calls for a Crackdown
Even though this malpractice has been widely known as an open secret within the property community, little action has been taken to curb conditional selling, largely due to how the practice continues to exist under nebulous legal parameters.
Emily Franks, director of Emily’s Mortgage Services, said: ‘there are some poor practices that are ruining property transactions across the UK and we need to take action because it has been happening in the industry for years and, at a time where clients are potentially more vulnerable than ever, this is not okay.’
The HomeOwners Alliance has recently joined with FT Adviser to pressure the Government to ban conditional selling. According to the HomeOwners Alliance, 300,000 buyers a year reported feeling pressured into using in-house services in order to increase their chances of acquiring a property.
Paula Higgins, chief executive of the HomeOwners Alliance, said: ‘Our research shows that one in four buyers and sellers feel pressured into using estate agents’ in-house services – often being told they’ll lose the property if they don’t comply. This isn’t just unethical, it’s a clear conflict of interest that undermines consumer choice and inflates costs.’
This public condemnation of conditional selling is aiming to support the ongoing public petition, which calls on the Government to ‘implement regulations that ban practices like conditional selling among estate agents, ensuring transparency and fairness. Such measures should compel estate agents to disclose any financial incentives related to their recommendations and encourage the use of independent brokers.’
Future of Conditional Selling
‘An outright ban might be well-intentioned but is unlikely to succeed in practice,’ Rob Hailstone, founder and CEO of Bold Legal Group, said. Yet Hailstone stated that ‘there is no doubt that the sector remains open to abuse, and that is why proper regulation is long overdue. Estate agents, like other professionals in the property industry, should be subject to robust, enforceable standards.’
It remains to be seen whether the Government will respond to this call. Nonetheless, the Panorama documentary has highlighted the prevalence of conditional selling in the UK property market, and it is therefore useful to recognise this practice when engaging with estate agencies, whether as a buyer or seller.
