Should Estate Agents be able to sell their own homes

without declaring an interest?

 

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The things Estate Agents get up to

Recently we were asked to carry out a survey on a property that the purchaser's main reason for asking us to carry out the survey was because the house that was being sold was being sold by an estate agent within a national estate agency practice and this had not been declared to them when they first viewed the property.  It was only subsequently, and by accident, that the potential purchaser found out that the property was owned by an estate agent within the estate agency.

Estate Agents and Ethics

This does raise the question of ethics and estate agents.  In our experience, having worked with our offices at the rear of estate agents that had nothing to do with us and having also been a partner within a company that had an estate agency, estate agents are about sales and not about ethics; although some may have ethics let us repeat estate agents are about selling properties.  Estate agents are in the great position of selling properties without any responsibilities or liabilities.

Large National Estate Agents

Whilst we have not had a direct involvement with any of the large national estate agents recently we have, so to speak, watched on the sidelines for many years and prior to that we were actively involved with some of the large estate agents.  We would say, from this background, that if anything estate agents have become more about sales in recent years and there seems to be more and more pressure for estate agents to sell, sell and sell.  When we say sell, sell and sell we mean that they are not only selling houses they are also selling mortgages, valuations (remember many estate agencies own their own Surveyors as well), financial advice (although not directly as estate agents are not legally allowed to) and most of them have also become letting agents.  Making no bones about it, estate agents are very skilled at sales after all this is the core of their business.

Estate agents do not recommend surveys

We have literally sat in estate agents waiting for keys to carry out a survey whilst an estate agent has very skilfully talked someone out of having a survey on a property they are looking to buy.  Obviously as a Surveyor we are bias towards everyone having a survey and will declare our interest but equally the estate agents should declare their interest with regard to wanting buyers not to have a survey carried out as it may lose them a sale because a problem is found which in turn loses them their commission.

Are estate agents on commission?

The answer is Yes.

Usually estate agents are on a very low basic wage often with a very high incentive/commission to sell properties.  From our understanding they are judged purely on the quantity of sales not the quality of their sales.

For example after sales service is much lower down the list of priorities than a new sale where they push a sale through.  Generally an estate agent has still got the buyer to jump over a number of hurdles before they have a sale.

You may be interested in our other surveying articles on:-

Estate Agents

Can you trust an Estate Agent?

The Estate Agent says that the building problems are already allowed for in the price

Should I have a Structural Survey?

Hurdles before a sale

The hurdles prior to a property sale are:-

1.  Approval for mortgage

2.  Approval for valuation

To some extent they have control of particularly if the estate agent is owned by a mortgage lender such as a bank, building society or insurance company; you would be surprised just how many do own estate agents and many own Surveyors too which they often refer to as panel surveyors as it sounds much better than their own surveyors.

Therefore it is only when an Independent Surveyor, such as ourselves, is involved in the situation of purchasing property that the potential purchaser gets an independent view.

You may be interested in our other surveying articles on:-

Estate Agent, there is no point in being honest

Do Estate Agents tell the truth or do they just want the house sale?

Why do estate agents own surveyors?

Most estate agents own or are involved with surveyors directly or indirectly, this came about during the 1970's housing boom when the majority of people were allowed a mortgage.  This moved many people who were in rented properties into the market for their own housing; an Englishman's castle is his home is a well known phrase (equally applies to Welsh, Scottish and Irish).

What happened was that banks and building societies wanted more than just the mortgage, they wanted better control over the housing market and bought estate agents setting up national chains across the country.

In the Surveying world there are many stories about estate agents becoming rich overnight as a bank or building society paid over the odds to buy up the estate agency.

Estate agencies still maintain many of the local trading names for example Countrywide estate agents, which are also mortgage lenders (solicitors and Surveyors) trade under:-

Abbotts Countrywide Estate Agents Buckell & Ballard Estate Agents Alan de Maid Estate Agents Chappell & Matthews Estate Agents Austin &Wyatt Estate Agents Bairstow Eves Estate Agents Beresford Adams Estate Agents Bridgfords Estate Agents Carsons Estate Agents Dixons Estate Agents Entwistle Green Estate Agents Faron Sutaria Estate Agents Frank Innes Estate Agents Freeman Forman Estate Agents Fulfords Estate Agents John D Wood & Co Estate Agents Mann Countrywide Estate Agents

Miller Countrywide Estate Agents Morris Dibben Estate Agents Palmer Snell Estate Agents Geering & Colyer Estate Agents Hetheringtons Countrywide Estate Agents Spencers Countrywide Estate Agents Taylors Estate Agents Wilson Peacock Estate Agents King & Chasemore Estate Agents R A Bennett & Partners Estate Agents Rentons Countrywide Estate Agents Andrew Reeves Estate Agents Sotheby's Estate Agents Ashton Burkinshaw Estate Agents Countrywide Residential Lettings Andrew Butler Chartered Surveyors

Hamptons International Estate Agents Churchill Lettings Forest Bureau Lettings Agent PMS Property Property Quarters Lettings Estate Agents Blundells Estate Agents Slater, Hogg & Howison Estate Agent Gascoigne-Pees Estate Agents Stratton Creber Estate Agents Watson Bull & Porter Estate Agents Countrywide Scotland Estate Agents Lock & England Estate Agents Accord Lets Countrywide SLM

Vertical integration

We believe this is known as vertical integration, which is when you are not only the supplier but also the retailer and is what the mergers and monopolies commission have looked at with regard to breweries and public houses.  We would say that there is a similar situation with mortgage companies and estate agents.

The only problem the banks and building societies then had when selling a mortgage was if the Surveyors did not consider the property suitable equity for whatever reason.  This resulted in many banks and building societies not only buying up estate agents but also buying up surveyors.

Although we do not know, we are sure that the same thing happened with regard to solicitors and we now have huge companies that have, in our opinion, massive cartels where they own not only the mortgage lender, estate agent, solicitor and the Surveyors.

We think there is a whole ethical issue here where an estate agent is recommending Surveyors that they own, not to mention them also recommending a solicitor that they own.

Whilst there is said to be Chinese walls with these situations we would question how a company that ultimately owns and pays for wages of the estate agents the solicitors and Surveyors we would suggest that it becomes very hard for them to make unbiased decisions.

Chinese wall defined by Wikipedia the free encyclopaedia

In business, a Chinese wall or firewall is an information barrier implemented within a firm to separate and isolate persons who make investment decisions from persons who are privy to undisclosed material information, which may influence those decisions.  This is a way of avoiding conflict of interest problems.

In general, all firms are required to develop, implement, and enforce reasonable policies and procedures to safeguard insider information and to ensure that no improper trading occurs.  Although specific procedures are not mandated, adopted practices must be formalized in writing and be appropriate and sufficient.  Procedures should address the following areas:   education of employees, containment of   inside information, restriction of transactions and trading surveillance.

You may be interested in our other surveying articles on:-

Secret shopper on Estate Agents

Unhealthy alliance between Estate Agents and Surveyors

Independent Surveyors and Valuers

If you are buying a property not only should you have a Royal Institution of Chartered Surveyors Surveyor carry out the work but also we strongly recommend that they are a member of the Independent Surveyors and Valuers Association.

Here is the website address of the Royal Institution of Chartered Surveyors

www.rics.org

Here is the website address of the Independent Surveyors and Valuers Association

www.surveyorsweb.co.uk

Why we always recommend having an independent building survey?

Always have an independent building survey as this will pin point any property problems.  Caveat emptor means buyer beware and is why you need to have a building survey to find out if there are any problems within the property; the estate agent certainly will not advise you of any.

Remember the independent building Surveyor that you employ will be the only person working for you with your interests at heart

Building Surveys versus Structural Surveys

Nearly everyone still calls us to ask for a full structural survey however in recent years the term building survey has been used.  It more accurately describes what the client wants as you want a Surveyor to look at the whole of the property, not just the structure so this would then include for such problems as woodworm, wet rot and dry rot and other structural issues and some non-structural issues, for example we will often comment on close by trees, drainage problems, old electrics, old gas installations; all things that are not necessarily structural but can cost you money.

Knowledge and Technical knowledge

We are not certain what other Building Surveyors include in their surveys but we always combine the technical knowledge we have with the day to day experiences that we have from looking at properties, to give the best insight to buyers as to possible problems.  Often we have said that if we can see a slight problem on the surface it may well be hiding other problems beneath such as poor workmanship and materials; meaning the property suffers from problems.

 

Clear straightforward and clearly written and illustrated information on your property

As Independent Surveyors we provided detailed structural survey reports where we divide our reports into easy to read sections with detailed information about the property you have asked us to survey.

We divide the Executive Summary into ‘The Good', ‘The Bad' and ‘The Ugly', to help distinguish what in our mind are the main issues of the property in question.

 

Photographs and sketches

We believe that photographs taken at the time of our survey together with detailed sketches will help the potential buyer of a property fully understand any property problems and issues clearly.

For example