There are consultations currently taking place to find practical solutions to the Government’s concerns surrounding estate agent referral fees. Current proposals set by the MHCLG (Ministry of Housing, Communities and Local Government) aim to amend or possibly eliminate estate agent commissions for service referrals, such as EPCs and conveyancing.
Currently, one of the most controversial issues in the industry, the letting fees review of 2017 is expected to be put into effect next year. It emphasises the increasing challenges for estate agents to demonstrate the value of any related transactions, and to demonstrate transparency in accordance with the existing Unfair Trading Regulations and Consumer Protection. Fears from a currently lukewarm market, along with new legislation that will reduce existing income flows, may create severe problems in the industry.
A further eradication of agency fees creates a real risk of adding more ambiguity into the debate around the future of the online model and forever changing the landscape of the high street estate agent in Britain. However, the real argument is believed to focus on whether fees are justifiable or if the market would perform more effectively and allow consumers to access better value at lower prices if fees were banned or capped. The belief that services would become automatically cheaper with no referral fee is incorrect, due to the fact that agents are able to negotiate favourable rates that may not be available to the public directly.
Agents can also undertake preparatory work that could potentially expedite the task, with a route to market for conveyancers and other companies that is cost-efficient. Additionally, the market is far from fairly competitive. For example, new analysis into conveyancing quotes has discovered that direct online providers were on average 20 per cent more expensive than the same service accessed via a leading independent agent based locally. The choice of supplier may also be crucial in finding the true value of the service, especially when regarding completion times. It is unclear how members of the public could make informed choices on price, speed and quality of supplier.
Agents also play a vital role in progressing sales to completion, which is perhaps their most crucial task, as well as building strong relationships with suppliers. This allows smooth running of conveyancing processes, for example, and ensures efficient communication is maintained with the customer. However, the argument for transparency is compelling and logical, and is far more important than the buying of commissions within the small print of extensive documentation. There are, of course, agents that charge large referral fees, and these risk damaging the reputation of the industry and are not justifiable.
If it could be guaranteed that the public could make an informed choice, this would encourage a more effective and efficient marketplace, whilst reassuring the Government that the sector is able to self-regulate. In truth, it is the public’s right to choose between speed, price and quality, but not have to pay an unjustifiably high price for substandard services. Surveys are now taking place for presentation to the MHCLG, with extensive debate opened to agents across the country. It is vital that the sector stands up for honest and hardworking traditional agents and represents the industry correctly to the Government.
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