Estate agents already have a poor public reputation which persists despite industry efforts to improve the situation – and this week’s Panorama probe into conditional selling won’t help.

But it’s becoming obvious that conditional selling of mortgages and conveyancing is something only big corporates with shareholders to please are the main culprits of – let’s remember the Panorama programme featured the UK’s largest estate agency, rather than a clutch of regional independents at it.

It is also clear from discussions I’ve had over recent days that many small agency owners are furious that their businesses and the frontline staff who work for them, are now paying the price for corporate behaviours that they would never contemplate.

Nevertheless, in mitigation I have heard it argued that many estate agencies don’t make enough money from their vendor commissions alone to keep afloat and that even smaller firms rely on referral payments from mortgage and finance brokers and other third-party providers in one way or another.

There is some truth in this – although it doesn’t excuse the bare disregard for customers seen in the Panorama programme.

Sales commission

So why does conditional selling exist? The relentless competition within the housing market to sell homes, which is a precarious way to generate revenue most days, mean fees have been dropping in recent years, not helped by companies like Purplebricks and Yopa offering their services for a fixed fee which, for more expensive properties, can be less than half a percent of the sale price.

And let’s not forget Strike, which offers its services for free, relying it says solely on third-party referrals to generate revenue.

And there is also the problems of fall-through rates, which mean agents invest significant sums to market properties only 70% to 80% of which get to completion.

Also, low sales commission fees are another reason the broker model is taking off. If you’re an agent with ten or twenty years’ experience and a healthy black book of contacts, why would you carry on working for a big corporate that gives you a £500 completion bonus for each sale and bags the rest for its shareholders?

Broker model

Firms that offer their ‘partner’ agents up to 70% of the vendors’ commission cheque look very attractive and mean, unsurprisingly, such agents and agencies are less interested in flogging financial services to their ‘hot customers’ – unlike the big corporates.

Regulation is needed but policing estate agents to stop conditional selling is impossible – no council trading standards team or even the weakly-funded national version has the resources to keep tabs on every estate agent in the UK.

Instead it is the lenders who should be doing the heavy lifting here – these multi-billion pound entities should be sorting out how the brokers who sell their products earn their commission.

I would also suggest that the commission payments paid to agents should be added compulsorily to the mortgage offer in principle regardless of their source and how that payment impacts the mortgage’s cost explained. That way real transparency will ensue.