Kate Faulkner comments on the Office of Fair Trading Report on Home Buying and Selling

publication date: Feb 23, 2010
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

According to the latest review on housing (one of many!) the OFT claim “A shake-up in how homes are sold, including updating legislation to allow new entrants into the market, could lead to a better deal for house buyers and sellers”.

Their main reason for this thought appears to be because the “housing market remains dominated by traditional estate agents with weak competition between them on price. As property prices rise during housing booms, so too do estate agents' fees.”

It’s an interesting conclusion and having worked in this market for over 20 years, my experience of estate agent competition is that it’s quite intense. UK agents also charge a much lower commission than their overseas counterparts. So how exactly is the OFT claiming ‘weak competition’ on price and backing up the suggestion that selling through an agent is an ‘expensive’ process?

The good news from the Office of Fair Trading though is that apparently “overall satisfaction with estate agents, however, has improved in recent years” and it appears buyers and sellers are beginning to realise that many of the problems during the buying and selling process are more to do with the legals and other people in the chain as opposed to ‘everything’ being the agent’s fault.

As this sector has received a lot of legal and regulatory changes, the OFT concluded that “existing legislation....is comprehensive and wide ranging....and that further regulation is unnecessary...The focus should be on enforcement of current rules to guard against serious breaches.”

The OFT go on to conclude that “innovation in this sector, in particular through online services, could have a dramatic impact on the cost of buying and selling a home”. This might be true, but one of the issues is that a huge amount of money has been poured into private sales websites in the last 10 years. The only ones that have really worked are estate agents that have embraced the net and offered ‘advertising only’ packages through to the full service.

In summary, the key changes that the report seems to be suggesting are:-

1. “Additional rules..... around fees received by estate agents for referring buyers to providers of ancillary services such as mortgage advice, surveys, and conveyancing”

2. “Encouraging new business models, online estate agents and private seller platforms”.

3. Recommending more people negotiate on commissions paid to estate agents, as according to their research, “64% of sellers in England and Wales did not negotiate a lower fee”.


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