View more on these topics

Independent View

While the regulators continue to deluge the financial services industry

with new rules and compliance procedures, the Government remains virtually

silent on doing anything about the abuses that continue to go on in the

residential property market.

We have all suffered. Mystery bids that appear from nowhere just as you

are about to exchange contracts, forcing you to increase your offer. Agents

who recommend a purchaser at £200,000 who sells the property three

months later for £300,000.

It is a scandal that it is still possible for absolutely anyone – from an

out and out fraudster to an incompetent – to set up shop as an estate agent

and advise individuals on the most important sales and purchases of their

lives.

At the moment, the only regulation of the residential property market is

through professional organisations such as the Royal Institution of

Chartered Surveyors and the National Association of Estate Agents.

It is totally voluntary, largely unpoliced and with limited access to

redress except through the courts. This is wholly unsatisfactory when you

consider that, for the average person, their home is their most valuable

asset.

When considering the amount of regulatory effort that has gone into

protecting the consumer from unscrupulous financial advisers, selling

products which on average are seldom worth more than £50,000, even

after a lifetime&#39s savings, why is nothing done to regulate the salespeople

who sell properties?

It is totally unsatisfactory that only 35 per cent of high- street estate

agents belong to the Ombudsman for Estate Agents scheme and the vast

majority of individuals working in these offices on a day to day basis are

totally unqualified. Selling property is one occupation where you do not

need even one GCSE.

The newly appointed Estate Agents&#39 Ombudsman, Stephen Carr Smith, is doing

his best and has got voluntary membership of the scheme up from 22 per cent

of high-street estate agents to 35 per cent in the past year.

But the scheme itself is flawed. Under the old regime, when it represented

commercial estate agents, maximum compensation was £100,000, low for

commercial property but probably enough to cover all but the very worst

cases of loss for residential property buyers. But, in an attempt to get

more estate agents to join, compensation was dropped to £50,000 in

January 1998 and to £25,000 in February this year.

This is insufficient. Where misrepresentation or fraud has occurred,

losses could easily run into hundreds of thousands of pounds. If estate

agents are all honest, competent individuals, there will never be a call

for compensation at this level, so they do not have to worry about the

costs.

The residential property market provides the opportunity for the

Government to try out a simple form of regulation which would be infinitely

preferable to our cumbersome and expensive Financial Services and Markets

legislation, which is still working its way through Parliament.

It is arguable that the various industry ombudsmen, soon to operate under

the umbrella of the Financial Ombudsman Scheme, have done infinitely more

to protect consumers and more importantly to provide a free system of

redress and compensation than all the rest of the regulators put together.

If the Government made membership of the Ombudsman for Estate Agents

mandatory for all residential estate agents, we could then see whether

licensing, training and competence standards and all the other compliance

requirements were essential to protect consumers.

Presumably the fraudulent or incompetent estate agents would find

themselves fined to the point where they either cleaned up their act or

went out of business.

Moreover, the requirement for compulsory professional indemnity insurance

would mean, in practice, incompetent estate agents would not be able to

remain in business because they would be unable to get cover so much

cheaper and more effective than the billions regulation is currently

costing the financial services industry.

Recommended

Panel servitude

There is an ever growing trend in the independent sector for IFAs not onlyto deliver but to demonstrate clearly that theyare truly independent. Thisis being achieved with the help of highly functional product research toolsthat enable IFAs toformulate client-focused product recommendations.Consumers are more than ever looking to their IFA to prove both thequality and independence […]

IFAs missing out on term sales

IFAs are losing out on valuable business opportunities by not consideringterm insurance for their clients, according to figures from Swiss Re Life &Health.The company&#39s research shows that direct salesforces sell nearly twice asmuch individual term insurance as their IFA rivals, with DSFs accountingfor 61 per cent of all sales compared with just 32 per cent […]

Daily interest from Leeds and Holbeck

Leeds and Holbeck Building Society is entering the daily calculated interest rate market with its new flexible mortgage product. The interest rate is fized at 5.85 per cent for the first six months, at which point it switches to a flexible variable rate, currently sitting at 6.90 per cent. The product includes no fees or […]

Two mortgages may be required for dream home says CML

Homebuyers may lean towards taking out two loans in the future, one to pay for the property and one to turn it into their dream home, says new research from the CML. The report looks at challenges facing the private home builder in the first decade of the 21st century. It concludes that the UK […]

Investment

The Brunner Investment Trust – April 2017

Welcome to the latest update for The Brunner Investment Trust PLC from the Trust’s portfolio manager, Lucy Macdonald. Market Review Global equities have rallied over the first quarter of 2017, buoyed by signs of strengthening growth and optimism over company earnings, although this rally has faded towards the quarter end. US equities posted their strongest […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com