Estate Agents Charging Buyers Fees for Homes Taken Off the Market

Estate agents are now imposing significant "reservation fees" on buyers, sometimes running into thousands of pounds, to take properties off the market. One such case, highlighted by The Property Ombudsman (TPO) earlier this year, involved a buyer paying a non-refundable £13,650 fee to secure a £325,000 property at auction, amounting to 4% of the purchase price. However, the buyer withdrew from the sale upon realizing the extensive work needed on the property, forfeiting all fees paid. Surprisingly, the property was later sold for £5,000 more than the buyer's offer.

 

This trend of reservation fees is increasing, particularly with the adoption of "modern methods of auction" by estate agents. These methods allow buyers to bid online and finance their bids with mortgages. The Property Redress Scheme (PRS) has also observed a rise in reservation agreements, where buyers are charged an admin fee to secure an offer, typically ranging from £500 to £2,000.

 

Sean Hooker, head of redress at the PRS, expressed concerns about potential abuse of these fees due to lack of regulation by the Government, despite being urged to introduce legislation five years ago. He emphasized the need for transparency in fees and clear guidelines on legitimate reasons for buyers to pull out and receive a refund. However, as these fees are technically "voluntary," agents can charge arbitrarily.

 

Complaints regarding reservation agreements are relatively low, as buyers either proceed with the sale or accept the non-refundable nature of the fee. Last year, the TPO received 36 enquiries and made nine decisions on disputes related to these fees.

 

For buyers participating in auction-listed properties, the situation is even less clear. Paula Higgins, from the HomeOwners Alliance, expressed concern over excessive fees, citing cases where reservation fees reached 11%. She noted a growing number of instances where buyers failed to recover these fees.

 

In response, a spokesperson from the Department for Levelling Up, Housing and Communities emphasized the existing requirement for property agents to belong to a redress scheme, enabling buyers and sellers to file complaints about poor service. However, the issue of excessive fees charged by agents remains a concern.

 

Whitestone Solicitors

Rochdale

Tel; 0800 810 1010