What happens if sellers change their minds?
THE laws surrounding estate agency seem to be full of grey holes but now a new one has come to light in relation to ‘cooling off’ periods for sellers.
The Office of Fair Trading believes that legislation introduced in October 2008 means we now have to give people who are selling or letting their property a one week cooling off period if they have signed up to an agency agreement in the comfort of their own home.
Under the ‘Cancellation of Contracts Made in a Consumer’s Home or Place of Work etc Regulations 2008’, consumers must, in relation to certain contracts, now be given a ‘Notice of the Right to Cancel’ when a contract is made, advising them they have to do so within seven days of signing.
If this applied to estate agency and the seller wasn’t given this advice, the contract would be unenforceable — and could land the agent with a fine of up to £5,000.
However, under Schedule Three of the Regulations, there is an exemption which states this does not apply to: “a contract for the construction, sale or rental of immovable property or a contract concerning other rights relating to immovable property”.
It is quite obvious that this provision is designed to include agency-type arrangements as a sub-section of Schedule Three then goes on to state that the exemption does not apply to certain contracts such as those for double glazing.
The view of our lawyers and other major agency chains is that relevant consumer contracts relating to the sale or rental of immovable property include estate agency agreements, lettings agreements, conveyancing services, Home Information Packs and Energy Performance Certificates and we have made this clear to the authorities.
However, there is conflicting advice in circulation which states this exemption does not apply in relation to marketing of a property in connection with the sale.
The cooling off right included in this legislation is supposed to reflect the provisions of EU Council Directive 85/577/EEC which is aimed at door-to-door salesmen who surprise consumers into buying goods and services.
It is not intended to deal with professionals who have been specifically invited to visit the consumer and discuss something for which they are prepared and are familiar.
In fact, the original EU legislation states at Article One: “This Directive shall apply to contracts under which a trader supplies goods or services to a consumer [...] where the visit does not take place at the express request of the consumer.”
The way these things work is that the UK legislation is supposed to reflect the EU legislation.
In this case, it clearly does not and we should not be penalised by the failure of our Civil Service and legislators to do their job.
Portals — it’s time to protect your interests
THE growth in estate agency web portals is a mixed blessing for agents wanting to promote their services to a wider audience.
On the one hand, we now have a plethora of free websites for home owners wishing to sell; at the same time, many of these sites are now trying to lure in agents in order to strengthen their own proposition.
But do so at your own peril. The more you strengthen the hand of such sites, the more you reduce your own fee-earning potential.
At the same time, we have Rightmove continuing to flex its muscles and our fear is they will now start targeting sellers directly, offering them enhanced listings, which will inevitably make customers question what they are getting from their agent.
The portal’s business model has been one of growth by stealth, and how clever they have been when you consider that agents give Rightmove free advertising in their marketing materials, shop fronts and newspaper ads.
Agencies have become increasingly dependent on Rightmove with more buyers going via their portal than to the agent direct. Rightmove owns the customer unless you have a strong internet strategy.
So what would my next step be if I was Rightmove? I would sell premium advertising direct to consumers, open a site for private sellers overseas, provide a free telephone answering service and increase my price.
Then I would use my market dominance to charge agents for seller introductions under the brand ‘Rightmove Member Agent’ and begin building the Rightmove estate agency franchise.
So, if you don’t wish to end up as a sales representative of Rightmove — and pay for the privilege — my advice is to support the free portals such as Mouseprice and pay per lead, and that way you will protect your own interests in the process.
How to turn lead into gold
ONE of the biggest challenges facing the estate agency industry during 2009 will be the lack of mortgages available to buyers.
State-funded lenders such as Bradford & Bingley and Northern Rock are prepared to offer 70 per cent loan-to-value (LTV) mortgages but are too worried about the risk of falling house prices and unemployment to lend at the 90-95 per cent the market needs.
The Chancellor recently announced the Government was considering an insurance scheme funded by the taxpayer whereby it would, in effect, underwrite potential losses on tranches of existing mortgage debt so that lenders would not have to worry about exactly how much of each tranche is toxic.
The insurance cover would allow banks to treat these tranches of loans as all good and free up some capital for more lending.
So why doesn’t the Government simply extend this taxpayer-backed insurance scheme to new tranches of loans?
The extra 20-25 per cent of LTV is still risky but the insurance will allow the banks to lay off this risk and return to lending.
That way, the risk would be spread, first-time buyers will get back on the ladder and we will see a greater volume of activity in the market.
Plus, we will finally see some results from all the money that the Chancellor has pumped into the banking sector — and not just objectionable bonuses for those who need it least.