A frequent complaint is that an agent has advised a seller, when an offer is made on their property, that the prospective buyer is a cash buyer and hence is able to proceed quickly. It subsequently transpires that this is not the case, the prospective buyer being dependent on a sale or having to raise finance, so the sale takes longer than expected.

The majority of these complaints arise from miscommunication and misunderstanding and often due to a failure by an agent to understand the precise term ‘cash buyer’.

Agents’ obligations

Under section 10 of the TPO Code of Practice, an agent has an obligation to take reasonable steps to find out from the buyer the source and availability of funding of the purchase and to pass this information to the seller. The Code does not impose a duty to carry out a full financial assessment at the point that interest is expressed or when an offer is initially made on a property. Agents should ask the buyer whether or not there is a property to sell and whether a mortgage is required. It is acceptable for agents to rely on information provided by the buyer and pass this information on to their seller client in good faith, although agents must ensure that they have been diligent in following up anything that gives them reason to doubt what they have been presented with.

A buyer is only a cash buyer if he has realisable cash assets (funds) that will be available by exchange and completion.”

Particular care must be taken when describing a prospective buyer as a ‘cash buyer’. There is a very clear definition of the term ‘cash buyer’ within paragraph 18d of the TPO Code. I would only expect a cash buyer to be described as such if he has realisable cash assets. By this I mean there are sufficient funds which will be available by the estimated or proposed exchange of contracts and completion dates, or the prospective buyer has actually sold a property, that is, contracts have been exchanged, and completion will occur before exchange of contracts on the anticipated purchase and no mortgage is required to make up any difference in the purchase price. Where contracts have not been exchanged, the prospective buyer should not be described a cash buyer, that status would only be achieved if the prospective buyer’s sale had completed. If applying the description ‘cash buyer’, best practice requires that the agent should ask to see proof of such cash assets to verify the position before advising the seller accordingly.

The re-mortgage buyer

I have seen a number of cases recently where the complaint has been that the agent incorrectly advised the seller that the buyer was a cash buyer but, some, weeks into the transaction, this transpired not to be the case. I must emphasise that a buyer having no linked property to sell does not entitle an agent to necessarily refer to them as a cash buyer. In a recent case the sellers were advised that their buyer was a cash buyer; in fact, the buyer was raising mortgage funds through re-mortgaging another property and utilising those funds towards the purchase of the seller’s property. The agent had advised the seller that a re-mortgage was ‘like a first time buyer’ and described the buyer as a cash buyer. This was not the case. I considered that the agent had incorrectly advised the seller as to the status of the buyer and I upheld the complaint, and made a compensatory award.

The divorce settlement buyer

In another case the sellers considered that the agent had misrepresented the buyer as a cash buyer, when in their view, she was not, as she did not have the funds available at the time her offer was made. The sellers, on the basis of the information provided, had accepted an offer that was lower than the market price and claimed that they had, therefore, suffered financial loss. In this case I was satisfied that the agent was reasonably entitled to understand that the buyer was awaiting a financial settlement from a divorce, the proceeds of which she intended to use to complete the purchase. Although the buyer would be utilising cash, no steps were taken to investigate how long it would take to realise that. In the circumstances, I concluded that the agent had not fully explained the circumstances of the buyer and her proposed cash purchase. They failed to demonstrate that they had done this, either verbally or in their confirmation of offer letter and the memorandum of sale. I, therefore, supported this element of the complaint.

One seller complained that the ‘cash buyer’ was in fact awaiting a divorce settlement – she did not actually have the cash.”

If they had been clearer in their communications, it is reasonable to assume that the sellers would have had a better understanding of the lack of certainty of the buyer’s position and the impact this was likely to have on the timescales. I supported the complaint and made a compensatory award of £250.

The consequences

Misrepresenting the details of an offer to the seller through not communicating precisely may be classed as a misleading action under the Consumer Protection from Unfair Trading Regulations 2008; that would be a matter for Trading Standards to determine. If such a complaint was referred to me I would expect to see clear and accurate information being communicated to the seller, appropriate questions being asked if the agent was unsure about the veracity of the information presented and regular monitoring of the prospective buyer’s status. With those steps being taken an agent can be confident that they had properly taken into account the principles of the Consumer Protection from Unfair Trading Regulations 2008 and I would not uphold a complaint that the seller had not been made aware of the correct financial standing of the prospective buyer.