OFT clamps down on quick house sale firms
The £900m "quick house sale" market has been targeted by the Office of Fair Trading (OFT), with three companies under investigation for unfair practices that may have led to consumers losing tens of thousands of pounds.
Quick house sale firms offer sellers a faster sale than they can get on the open market, but the sale price is typically between 10 and 25% less than the market value of the property.
While some quick house sale firms work well for consumers who need to sell their home fast and without hassle, the OFT said the three firms it has targeted - which it cannot identify at this point in its investigation - may have been using practices that resulted in sellers "receiving significantly less than they were originally expecting".
Specifically, the OFT is concerned about gazundering, where companies reduce the price offered at the last minute after the seller is financially committed to the transaction; as well as firms that have made misleading claims about how much a seller will receive for their property.
It is also investigating instances where firms have been pushing for sales to go through as fast as possible, such as in seven days, when the typical sale time is three to four weeks. The OFT is also worried about firms that force sellers to sign long-term "exclusivity agreements" that prevent them selling to other buyers for up to six months, with severe penalties if they breach this contract.
Gaucho Rasmussen, OFT director, said: "Responsible quick house sale firms offer a valuable service to consumers who want a fast sale. However we have also seen potentially illegal behaviour and as a result the OFT has opened investigations into three companies.
"When sellers get a bad deal, they could lose a lot of money. We want to ensure that consumers can have confidence in this sector and put an end to these shoddy practices."
The OFT added that a high proportion (70%) of the complaints received about quick house sales came from vulnerable consumers, such as older people who want to sell their property quickly due to ill health.
As well as the three firms under investigation, the OFT has also written to 120 providers advising them to check that their business practices and contractual terms comply with their legal obligations. It has also proposed that the sector embark on self-regulation.
But one quick house sale firm believes the OFT has not gone far enough. Simon Blunt, director at House Buyer Bureau, said: "While the study by the OFT is very welcome as there are 'rogue traders' in the industry that are misleading and taking advantage of customers, the OFT has not gone far enough.
"A system with teeth needs to be put in place to weed out those companies that give the sector a bad name. The OFT proposal is to form an association of house buying companies with a Code of Conduct with voluntary membership. While this is a step forward for the industry, it does not go far enough. House Buyer Bureau strongly believes that membership should be compulsory to all house buying companies that advertise 'quick house sale' services."
As gazumping hits buyers, gazundering hits sellers, and is the practice of a buyer demanding the seller to reduce the property’s price to secure a definite sale. Gazundering is usually done during contract negotiation and frequently timed to prevent the seller from rejecting the lower price, as a rejection could jeopardise the sale. Gazundering usually happens when the property market is experiencing a downturn.