Vince Cable upsets estate agents: good news for house sellers according to HouseHop.co.uk

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The estate agency industry is under threat following a consultation carried out by Vince Cable’s Department for Business Innovation and Skills. The consultation, which ended this week, aims to “allow new business models to emerge” that “could lead to a better deal for house buyers and sellers”.

The estate agency industry is under threat following a consultation carried out by Vince Cable’s Department for Business Innovation and Skills. The consultation, which ended this week, asked for views on proposals to amend estate agency legislation to “allow new business models to emerge” that “could lead to a better deal for house buyers and sellers”.(1)

However, judging from the responses from certain bodies representing estate agents and the property industry a “better deal for house buyers and sellers” – in other words, some competition – is not what they want at all.

Mark Hayward, president of the NAEA (National Association of Estate Agents), stated that: “We strongly oppose any measure that erodes vital consumer protection, which we believe these proposals will do.”(2)

Peter Bolton King, global residential director of RICS (Royal Institute of Chartered Surveyors), said that they were particularly concerned about “a growth of unregulated online agents, operating outside of the Estate Agents Act, with no requirement to provide redress arrangements.”(3)

So what’s the truth – a better deal for house buyers and sellers or reduced consumer protection?

It turns out that the consultation is the result of a study by the Office of Fair Trading (OFT) into home buying and selling. As the champion of the consumer, the OFT is not known for attempts to reduce consumer protection. Indeed, in its report the OFT found that “innovation in this sector, in particular through online services, could have a dramatic impact on the cost of buying and selling a home.”(4)

According to OFT Chief Executive John Fingleton, “In the present economic climate it is more important than ever that people get a good deal when buying or selling a home. Encouraging new business models, online estate agents and private seller platforms could put useful competitive pressure on traditional models and lead to better value for buyers and sellers.”(5)

In fact, according to John Tighe – a former lawyer and founder of the online estate agency and conveyancing website HouseHop.co.uk – online estate agents are regulated by exactly the same legislation as high street agents. Meaning that, contrary to the claim by RICS, they are required to belong to a redress scheme such as that of The Property Ombudsman.

Nor is it clear why the NAEA would believe that proposed changes would erode consumer protection, when the consultation makes very clear that “It is not the intention to remove any important consumer protection afforded by the current legislation.”(6)

So who’s telling the truth? Do you believe the Office of Fair Trading, with their job of protecting consumers, or do you believe the industry bodies set up to represent estate agents and the property industry?

Well, it’s been estimated that house sellers could save £2.9 billion each year by switching to online estate agents.(7) And as we’ve seen, online agents are subject to the same legislation and redress scheme requirements as high street agents. Legally, they are no different – just an awful lot cheaper.

Watch out for a big shake up in the estate agency industry in the next few years as house sellers begin to realise that they now have some real alternatives to paying big commission based fees.
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(1) Department for Business Innovation and Skills: Encouraging New Business Models: Proposal to amend the Estate Agents Act 1979, June 2012 and oft.gov.uk/news-and-updates/press/2010/18-10

(2) estateagenttoday.co.uk/news_features/Why-werent-we-told-Angry-agents-demand-answers

(3) estateagenttoday.co.uk/news_features/Why-werent-we-told-Angry-agents-demand-answers

(4) oft.gov.uk/news-and-updates/press/2010/18-10

(5) oft.gov.uk/news-and-updates/press/2010/18-10

(6) Department for Business Innovation and Skills: Encouraging New Business Models: Proposal to amend the Estate Agents Act 1979, June 2012

(7) HMRC website; Office of Fair Trading, Report 1186, page 73; House Hop report, August 2012

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John Tighe
HouseHop.co.uk
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