Trusting Estate Agents

By: Trevor Oakley

Trusting Estate Agents

Comedians have their minds full of lawyer jokes, such as 'What's the difference between a lawyer getting run over and a snake? A snake has skid marks in front of it!

One step down from lawyers on the ladder of shame are estate agents. They are the people who sell property. This article talks about how they privately push deals to cash buyers, and how developers get property with 'no money down.' Property is a hard business, and there are millions to be made and lost!

The free market rests on the common principle that the best price is found for a product or service. Attempts to interfere with that are seen as illegal in many countries.

I have for years seen properties sold under market value by estate agents. Those sales are done via social and business contact to cash buyers that the estate agent has obtained over years.

Recently, I attempted to buy a house and the estate agent refused to provide any sales details, as I was not a cash buyer. I was so stunned by this, that I complained. Following my letter, I was banned from visiting the estate agents (a national chain) and told they would call the police and charge me with trespassing if I breached their ban. This example shows how far people will go to make money and motivated me to write this article.

I will briefly outline how financing is arranged for a property purchase.

A cash buyer is someone who does not need a mortgage. That means someone who has assets that can be sold for a cash amount, or he has a house being sold and the proceeds will be available before the new purchase.

There are plenty of mortgage products available in the current market. The principal types of mortgages are buy-to-let, let-to-buy, and a normal homebuyer's mortgage.

A common practice by property developers is to attempt to buy under value by 15% (the mortgage deposit) or to obtain a 125% mortgage based on the first valuation. The concept is that after the developer bought 15% below market value, the developer can quickly re-mortgage or obtain a further advance and recover the deposit sum. This has meant the developer obtained the property without any deposit after the re-mortgage by using the equity. A 125% mortgage makes the assumption the property is undervalued.

A common way of finding properties undervalued is to find properties recently inherited following death (probate), properties being re-possessed, and when the owners are overseas (and hence out of touch with current pricing).

The Land Registry often provides the sale prices of houses by postcode, so you can check what is a market price within a local area. There are several commercial services offering a similar service, e.g. Nethouseprices.

Once armed with the financing and market details, you are in a strong position to find a good deal.

The estate agency business has been rife with misrepresentation. In an attempt to stop that, the Ombudsman of Estate Agents has been created and also there is a professional membership scheme of the National Association of Estate Agents.

The 1979 Estate Agents Act also offers protection. There have been several prosecutions on the basis of discrimination against purchasers. The 1979 Act states that an estate agent cannot discriminate based on additional services (e.g. mortgages) if could offer.

Finally, you cannot trust the estate agent.



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