Page last updated at 16:03 GMT, Thursday, 18 February 2010

Estate agency probe 'disappoints'

Terraced houses
The OFT found no collusion among estate agents on commission fees

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 largely clean bill of health to estate agents after a year-long study into standards in the industry.

However, it found a third of sellers were unhappy with their agents' fees.

An estate agents' body criticised the report for failing to suggest "robust" protection for buyers and sellers.

The OFT's report found that:

• most buyers and sellers are satisfied with their estate agent's service

• price competition among estate agents is still weak

• haggling over commission rates could save a buyer £800 when selling a £200,000 home

• existing laws on estate agency make it hard for competitors to use the internet to set up business and drive down prices.

Consumer protection

A poodle clipper today can be an estate agent tomorrow
Trevor Kent, Former president of the National Association of Estate Agents

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 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".

It said it had found no evidence that estate agents colluded locally to keep up their commission rates.

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.

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.

"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.

House hunters
The OFT investigated the England and Wales housing market in 2004

"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."

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-regulation

The OFT said that existing legislation relating to traditional estate agents was "comprehensive and wide-ranging, and that further regulation was unnecessary".

It found that in recent years people had become happier with the service that estate agents provided.

In 2009, 88% of buyers and sellers were satisfied with the service they received.

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.

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.

In a report published in June 2008, the former head of the OFT, Sir Bryan Carsberg, called for more regulation of the industry.

Internet selling

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 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.

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 the accuracy of the property descriptions posted by individual home sellers.

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.



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