NAEA reconciliation with HIPs as OFT report is questioned?
The recent OFT report into estate agency has led Gary Smith, president of the National Association of Estate Agents (NAEA) to write an open letter to the Office of Fair Trading regarding possible loosening of regulations to further facilitate the involvement of Tesco in the property market.
The letter expresses concern over issues of consumer protection and looks for more regulation within the industry to help further protect the consumer.
Within the letter Mr Smith says,
“Under the Property Misdescriptions Act of 1991, it is a criminal offence for estate agents to make false or misleading statements regarding properties placed on the market. The OFT is advocating a change in this law to allow certain corporations such as Tesco to be exempt from the Act. This would place the burden of responsibility on the seller to ensure that all information on the marketing of the property is accurate.
Presumably the OFT will also be excusing the supermarket chain the bother of having to comply with the Money Laundering Act and having to provide an Energy Performance Certificate or Home Information Pack. For a senior Director of the OFT to be happy to advocate the sweeping aside of carefully considered legislation aimed at consumer protection, energy conservation and anti-money laundering, defies belief.
The average home owner cannot be expected to have the skills to assess the state of their own property, nor navigate their way through the complex regulations that they would need to abide by in order to sell a property.
The National Association of Estate Agents (NAEA) has always been in favour of protecting consumer rights. We recognise that buying or selling a home will, for most people, be the most complicated and greatest financial transaction of their lives. But these OFT proposals have been ill-thought through and do not take into account the complexities of the buying and selling process which a private seller would have to face.”
The full letter can be read here – Open letter to the OFT
In response to – OFT report Home buying and selling – A market study
Undoubtedly, the main story which most mainstream news channels are focusing on is the potential threat that Tesco entering the market presents to the traditional estate agent. However, for those involved with Energy Performance Certificates or Home Information Packs the NAEA statement may signal a change in NAEA policy towards the HIP and EPC. The Home Information Pack may become a friend rather than the more recent foe it has been in recent times. The NAEA letter acknowledges one of the consumer benefits of the Home Information Pack with the NAEA’s president referring to in the defence of feared relaxation of regulations which could lower barriers to entry for major players such as Tesco.
The present system the Estate Agents Act 1979 (EEA) and the Property Misdescriptions Act 1991 (PMA) does not seem to take account of the emerging online business models which are selling themselves by cutting out the agent with savings on fees. Whether bypassing an agent is infact false economy with the negotiation skills a good professional agent brings to the table appears set to be tested.
Is it possibly time for NAEA to look at the ‘real’ threat to their members. The HIP only represents a 4.5% fee of the total cost of moving (not withstanding reductions in conveyancing due to the HIP) with the OFT’s report questioning the fee levels agents charge.
“On the issue of stickiness (commission rates not changing as property prices rise and fall) over the property cycle, an obvious point to make is that commission rates do not appear to have changed significantly since our 2004 market study. Then our survey of sellers found that the average fee paid was 1.45 per cent. The average house price now is almost 20 per cent higher, while commission rates remain at a similar level – 1.6 per cent on average. In fact, not only has the mean level of commission rates not changed much, but the distribution has changed very little too. “
Will we at last see the conflict between NAEA and HIPs become a distant memory?
Will NAEA members reduce their fees in line with historic house price increases which could easily compensate for the ‘new’ HIP fee that they had previously claimed was restricting the housing market?
Will protection be relaxed to allow increased competition?
Will consumer protection suffer as competition rises?
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