1's THOUGHTS ON ESTATE AGENT'S REFERRAL FEES

Are Estate Agent Referral Fees in Your Best Interest?

SHOULD REFERRAL FEES BE BANNED?

Property lawyers who pay estate agents referral fees mainly do so only because they cannot win the business on their own merit and cannot rely on having at least over 60% of their business from repeat clients or referrals from family/friends.

Estate agents who obtain referral fees usually have other parties involved in the transaction, which means they can earn a number of referral fees throughout the chain as well as gaining referral fees from other services that they recommend to you, i.e mortgage brokers and surveyors. It is an added bonus when they can earn between £100 to £200 or more per referral on top of their commission. There has been numerous moves by Government to ban referral fees without success and estate agents now consider these fees as part of their income – in fact many have said they would not survive without them.

Are you paying referral fees? In another survey 59 per cent of those who used a conveyancer recommended by the estate agent had no idea that a referral fee was probably paid to the estate agent. Regulatory bodies are now taking steps to address the lack of transparency of referral fees; agents and conveyancing companies must now disclose if referral fees are being paid and the average cost of the fees.

In our view property lawyers who need to pay referral fees do so due to their inability to obtain business because of the quality of service that they provide.

One question you need to ask is who is looking after me when the estate agent puts pressure on you to use a conveyancing company with whom the estate agent has a referral fee arrangement?

The situation has become more of a concern as there are many estate agents that are actually the shop window for an online conveyancing company. The buyer or seller is not aware that they are being pushed into using the services of the parent conveyancing company. Where is the transparency? Does the buyer or seller have a choice? Once again many of these online conveyancing companies have set up estate agent shop front windows on the internet because they cannot win business on their own merit.

There is another concern! Recently there are online conveyancing companies who have obtained so many bad online reviews that their only option is to create another company under another name. It is imperative that anyone looking at online conveyancing does a company search with Companies House, look at the directors and what other businesses they are involved in and read the small print carefully on their website to ascertain who is actually the parent company. After you have ascertained who the parent company is it is worthwhile completing a search on the internet for reviews and looking at their profile.

Two things you need to consider when referral fees are paid. The referral fee will, of course, form part of the fees paid by you to the conveyancer and consequently either increase the fees that you pay, or reduce the net fee to the conveyancer, which will then reflect on the quality of the service provided by the conveyancer who is receiving less than you thought and be under pressure to keep their service to a minimum.

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Are you aware that you become legally responsible for your new property on the day of exchange? That is why it is important that you ensure that you have buildings and contents insurance arranged on the day of exchange. Buildings and contents policies are available separately, but you may save some money by opting for a combined policy. TRANSFERRING AN EXISTING POLICY Contact the insurance company you have your current building and homes insurance with as soon as possible, and definitely a couple of weeks before you anticipate exchange of contracts will happen and ask if your existing policy can be transferred to the new house. This sounds like the easiest option, but there are things to consider that can affect the premium. For instance: • The size of your new house – if it’s bigger and valued higher than your current home it will cost more to insure. • The postcode – being in an area where burglary rates are high will push up costs. • Switching from one house to another house in the middle of a deal. Check if there’s a switching fee on your existing policy. First time buyers should always shop around for the best price for a new policy. And even if you have an existing policy, it’s worth investigating whether another company would offer a better deal. Just check that there are no cancellation fees on your existing policy that would negate any savings. COMPARE COVER When it comes to insurance, it’s easy to be swayed by price alone, but cheaper policies may not offer you the cover that you need. It’s important to get an accurate valuation of your property as well as its contents, so that you can choose a policy that provides sufficient cover. Take some time to study and compare what each policy offers you – comparison websites make it easy. Other things to consider: • Does your insurance cover property you’re putting into storage? • Is your current house insured if the exchange date for old and new properties is different? INSURANCE FOR MOVERS Check that your contents policy also covers loss of or damage to your property during the move. Most removal companies will have their own insurance, but it may only cover the things that they have packed. If you’re planning to do the move yourself, or want to pack the boxes yourself, you will have to arrange your own insurance. In both instances, always check the policy excess. When you’re booking a removal company ask about their insurance policy and make sure that they’re fully insured for the whole move. If you have items that are particularly precious, it’s worth getting them valued as you may need to highlight them to your insurance company and buy additional cover for them. By Tricia Miller