by Adam Hosker
11:17 AM, 8th May 2014, About 10 years ago
Would YOUR Estate Agent collude with their in-house mortgage broker to get paid more?
As you would expect, an Estate Agent receives more commission (and a very happy vendor) if they are able to increase your offer, the same applies to Mortgage Brokers if you take a bigger mortgage in order to pay more for a property.
You would not enter price negotiations by telling the salesman what is the maximum purchase price you can afford would you?
With the “maximum loan” established by the estate agents in-house mortgage broker, this can be provided to the Estate Agent with inside information he wouldn’t otherwise have access to – think about that one! Might they use this information to persuade you to make a higher offer? It’s not unknown for a counter offer or a mystery cash buyer to suddenly appear when the estate agents is told by his in-house broker that you could easily borrow more. What do you do then?
The FCA is clear about such dodgy dealings with there “Market Abuse Directive Instrument” regarding manipulating transactions with the effect of fixing the price of a property. It would be a very naughty broker to do but also very hard to prove. Collusion is, however, also featured within the UK’s Fraud Acts.
Unfortunately this collusion can be hard to identify but there is a clear conflict of interest when an Estate Agent (working for the vendor) works hand in hand with a Mortgage Broker (working for you).
This practice was featured in a BBC Programme in 2006 showing in-house mortgage brokers colluding with Foxtons estate agents. Despite the mortgage broker being presented to buyers as independent – both companies were owned by the same people.
Fortunately; you are not obligated to use in-house mortgage brokers. You can instead ask an independent mortgage professional to work on your behalf. They can work with Estate Agents to confirm progress and ability to obtain finance without sharing your personal information.
With the Fraud Acts, Office of Fair Trading, Data Protection Act, Estate Agents Act and a mortgage brokers obligation to Treat Customers Fairly under FCA provisions – we would hope this is not common practice.
Have you experienced an agent requiring the use of an service provider or had your offer declined after visiting an Estate Agents in-house mortgage broker?
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