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Abiding by the rules when offering a promotional commission fee

“When an estate agent offers a promotional commission fee they must ensure that they must themselves abide by the terms of the offer and the TPO Code of Practice,” Katrine Sporle, The Property Ombudsman

Katrine Sporle
THE COMPLAINT

Commission document imageA case that The Property Ombudsman was asked to review came from home sellers, concerning the offer that they had received and the commission fee payable to the estate agency.

The sellers signed a Sole Agency Agreement authorising the agent to market the property at an initial asking price of £295,000.

The fixed fee agreed was £4,560 plus VAT (£5,472) but the sellers also took advantage of a promotion that the agent was offering at that time.

That agreement stated that if the sale price achieved was less than 95 per cent of the asking price, they would qualify for a significantly reduced fee of £500 inclusive of VAT.

The property was on the market for some time with little interest. The sellers were, therefore, delighted when they were told by the agent that the buyer had made an offer of £281,000.

Katrine Sporle image

Karine Sporle, TPO

As this figure equated to 95.25 per cent of the asking price and therefore was just over the threshold of the promotional offer, the sellers queried the amount with the agent.

After some discussions, the sellers agreed to accept the buyer’s offer. According to the sellers, at that time they were unaware of any other offer the buyer had made. It was only when they spoke to the buyer a few months later that they discovered that prior to her offer of £281,000 she said that she had submitted an offer of £280,000.

INVESTIGATION

The sellers were adamant that the agent had not acted in their best interests when they failed to inform them of this offer as they had lost their opportunity to accept the lower offer and benefit from a reduced commission fee.

Both the sellers and the buyer made a complaint; the sellers wanted a refund of the commission fee that they had paid and the buyer wanted compensation of £1,000, saying that the sellers would have accepted the lower of £280,000 had they been advised of the amount.

The agent said that they believed that they obtained the best possible price for the sellers. The buyer said that she made an offer of £280,000 but was told by the agent that the sellers were seeking £281,000, hence her final offer of £281,000. The agent explained that the only formal offer received from the buyer was £281,000, saying that the buyer did not submit an offer for £280,000.

The property had been on the market for some time, so the sellers were delighted when the agent told them about the offer of £281,000…

There was some discrepancy as to whether the buyer had made an offer of £280,000 or indicated that she was proposing to make an offer of £280,000, the contemporaneous file notes simply being unclear. In this case, whether the sum of £280,000 was an offer or an expression of interest, given the promotional terms, whereby the highest offer was not necessarily the best price, the Ombudsman would have expected the agent to have advised the sellers of this amount.

However, it was apparent that during the complaint process the agency director investigating the complaint clearly advised the sellers, as part of the complaint response, that the buyer had made an initial offer of £280,000, rather than merely discussing this amount.

The Ombudsman could not disregard this statement.

While it was recognised that an agent acting on behalf of their seller will naturally try to obtain the best possible price for their client, in these circumstances it lacked integrity for the agent to fail to inform the sellers of the buyer’s offer or expression of interest of £280,000 before seeking an increase.

It was not in the sellers’ or the buyer’s best interest for the buyer to increase her offer, whereas for the agent to advise the buyer to increase her offer at that time ensured that the buyer’s offer would trigger the higher commission fee rate. In this case, given that the property had been on the market for some months with no interest shown, and the terms of the promotional offer, it was reasonable to conclude that the sellers would have accepted the buyer’s offer of £280,000 had the agent submitted this offer in accordance with their obligation under the TPO Code of Practice.

OUTCOME

The Ombudsman supported the complaint and the agent was directed to:

  • 1. Compensate the sellers with the sum of £4,300.00 in recognition of the avoidable and undue aggravation, distress and inconvenience suffered as a result of the agent’s failures. This equated to the increase in the commission fee paid.
  • 2. Compensate the buyer with the sum of £1,000.00 in recognition of the avoidable and undue aggravation, distress and inconvenience suffered as a result of the agent’s failures.

All parties accepted the decision and the agent explained to TPO that they had learnt from the matter and were going to provide additional training and guidance for future cases.

August 21, 2018

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