Can estate agents lie about offers?

Can estate agents lie about offers

Few professions are treated more distrust than estate agents. Whether you agree with the popular opinion or not, you still might wonder can estate agents lie about offers?

 

Unlike a lot of the law surrounding property transactions, which is weighted toward the seller with only a fig leaf of protection for the buyer, the law on offers is clear. Under the Code of Practice for Residential Estate Agents, they have a legal obligation to treat both buyers and sellers fairly.

 

They should, therefore, not lie about offers to any party. That said, the rules and regulations say little about pushing the boundaries. So, you should always be aware and mindful of the situation.

 

Here is a range of tips and tricks to look out for to ensure that don’t waste time by allowing your estate agents to lie about offers.

 

 

What happens if an estate agent invents offers?

Sadly, the sky won’t fall if an estate agent invents an offer or two, nor will they end up residing at her majesty’s pleasure (or prison, as it’s more commonly known!). However, they will have broken the codes of conduct that are followed by the overwhelming majority of agents.

 

All agents are legally required to register with a redress scheme such as The Property Ombudsman and Property Redress Scheme. While these schemes aren’t there to regulate the industry, they do provide a way of resolving complaints that can’t be solved with the agent directly.

 

Every redress schemes provide advice, mediation, and compensation. If they can’t solve your issue, then they can also help you take legal action against the firm.

 

If they deem that an agent has broken their code of conduct, they can penalise them and expel them from the scheme. Under the code of conduct, agents agree to be honest when presenting offers and not invent details or offers.

 

 

 

 

Why do estate agents lie about offers?

It’s easy to dismiss the agent’s lies as bluffing or trying to increase their commission check. However, this overlooks the main reason that they might be being dishonest.

 

Little regulation

There is an inherent flaw in the system. The redress schemes and Propertymark scheme, aim to promote high standards yet lack the teeth to regulate the industry to ensure agents live up to these standards.

 

That said, being expelled from a redress scheme is damaging to a business as both vendors and buyers have no protection other than legal action and so will use another agent. Many estate agents want to remain in good standing with their redress scheme and so won’t lie about offers.

 

Trying to increase fees

As the average estate agent fee is 1.5%, it’s unlike that they will lie about offers to increase their income as they’ll need an offer to increase by at least £10,000 to see a decent raise in their fee. For example, the increase in their 1.5% fee on £10,000 is £150.

 

Ask any estate agent what their biggest fear is and losing a sale will be at top of the list. Most would rather earn less than have a sale fall apart. So, it’s in their best interest to be honest about offers and work hard to ensure every transaction is successful.

 

Gazumping

No discussion on offers would be complete without mention gazumping and ghost gazumping. Sadly, no rules or regulation are surrounding gazumping, and so a vendor is free to accept or invent an offer at any point with the aim of increasing your offer.

 

While rare, any form of gazumping can make the agent appear dishonest, even if they are following instructions from their vendor. That said, there is little you can do to prevent gazumping.

 

Take action

If you suspect an estate agent of making up offers, ask them for proof. If they can’t provide written proof of the offer, then you should lodge a complaint with there redress scheme.

 

 

 

 

Should estate agents disclose other offers?

An estate agent has no obligation to release any offers to a potential buyer. They are free to do as they see fit and so typically only present offers to the vendors.

 

If you’re a buyer, then the agent might drop a few hints such as “We’re looking for a figure starting with 3” or “the seller has already rejected an offer in the range of £270,000”. While this might sound dishonest, it’s usually a way for the agent to politely set expectations without giving the game away.

 

As estate agents work for the vendor and not the buyer, they will try to push a potential buyer for their highest offer from the start. You can always ask the agent how they valued the property and use this as a basis for your offer.

 

 

Can I ask to see other offers?

You might feel confused about what to offer to outbid others or be curious about what other offers are on the table. Again the estate agent is under no obligation to reveal any offers to a potential buyer. However, you can ask to see written proof of any offers.

 

As a standard request, the vendor’s agent should be willing to provide you with any proof you require. Typically, they will show you a signed letter from the seller’s solicitor, acknowledging receipt of a legitimate offer.

 

If an estate agent is unwilling to provide this written proof, this is a warning sign that the other offer is fake or the vendor is trying to ghost gazump you.

 

 

 

 

Are estate agents obliged to pass on offers?

Estate agents are legally required to present all offers to the seller until the contracts are signed. Sometimes this means even after your offer is accepted, another buyer can put forward a higher bid and stop you from buying the property, this is known as gazumping.

 

There’s little you can do to stop gazumping. However, you can try to build a relationship with the vendor and keep your property chain short to improve your chances of completing.

 

 

Lockout agreement vs Goodwill agreement

Can I use a lockout agreement?

After having your offer accepted, you should request that the house is removed from the market and ask to put a lockout agreement in place. Under this agreement, you’re given an exclusivity period to complete the transaction on the agreed terms without the fear of being gazumped.

 

You will have to pay the vendor a deposit and proceed with the transaction quickly or lose out. Also, as you agree on the price, should the market fall during this period then you will end up overpaying. Of course, you’ll benefit if the market rises as you’ve locked in a discount.

 

What is a goodwill agreement?

You could instead use a goodwill agreement. This is where both the seller and the buyer pay a deposit when the offer is accepted. If either party walks away from the sale, the other side keeps the deposit monies.

 

As you’re paying money upfront, this is again another cost you have to bear. You’ll lose this money if you withdraw from the sale at any point. For example, if your mortgage application turned down or the survey reveals structural damage.

 

Putting an agreement in place

If you decide to put either a goodwill agreement or a lockout agreement sound in place, then seek advice from your conveyancer or solicitor. They will be able to advise you based on your circumstances.

 

 

So, can estate agents lie about offers?

Technically your estate agent shouldn’t lie about offers, but that doesn’t mean they won’t push the boundaries. So stay alert when buying and selling property and if in doubt communicate in writing as this is a solid record over trying to remember phone calls, which can become hazy over time.