Property Quick Sale Companies Face
Investigation By Office Of fair Trading
The Office of Fair Trading (OFT) have announced that they are investigating 3 property quick sale companies for unfair practices after it was alleged that some customers had lost out on many thousands of pounds.
Property quick sale companies offer to buy property from distressed vendors within a short time frame, however some companies have brought the practice into disrepute.
The announcement comes as the Office of Fair Trading publishes a report on the sector, which found that property quick sale firms can be beneficial to consumers who need a fast, hassle-free property sale.
In fact the OFT found that many other property quick sale companies in the sector were operating in an “open and fair” manner.
Quick sale property providers offer to purchase properties from struggling consumers within as little as seven days, but at a discount – typically between 10% and 25% – of the property’s full market value.
People may want to sell their property quickly for a variety of reasons, declining health, financial difficulty, disposing of an inherited property, relocating due to a change of job or even emigration.
The OFT found the sector to be dynamic and innovative, with some businesses dealing with customers in an open and fair manner.
However, the OFT’s report also found that some companies risk giving the industry a bad name by using trading practices that may prevent customers from making informed choices when selling their property, or exploit their difficult financial circumstances.
Some of these practices may result in sellers receiving significantly less for their property than they were originally expecting.
Practices that concern the OFT include:
- Reducing the price offered for the property at the last minute after the seller is financially committed to the transaction.
- Making misleading claims about the value of the property or level of discount that would be applied.
- Falsely claiming to be a cash buyer
- Stressing the fastest possible completion times (eg. ‘seven days’), rather than the more typical times (three to four weeks) on websites and marketing materials.
- Inducing sellers to sign long-term exclusivity agreements that prevent them selling the property to other buyers, with severe penalties for breach of contract.
70% of the complaints received by the OFT about property quick sales companies came from vulnerable consumers who were attracted by claims of a hassle-free property buying service, with no viewings or hold-ups.
Discussions are underway with numerous businesses in the UK property sector on developing self-regulation and the OFT has written to over 100 property quick sales providers advising them to check that their business practices and contractual terms comply with legal obligations.
In addition, the OFT has published top tips to help residential property sellers thinking of using a property quick sale company. These are being used by consumer advice bodies including Citizens Advice, Money Advice Service and Which?.
And property quick sales companies are being encouraged to share the OFT tips with their prospective customers.
OFT Director, Gaucho Rasmussen, said: “Responsible quick property sale firms offer a valuable service to consumers who want a fast sale. However we have also seen potentially illegal behaviour and as a result the OFT has opened investigations into three companies. When sellers get a bad deal, they could lose a lot of money. We want to ensure that consumers can have confidence in this sector and put an end to these shoddy practices”.
Peter Bolton King, of the Royal Institute of Chartered Surveyors (RICS), reacted to the OFT’s investigation, saying: “Clearly, there will always be a premium to pay for those who need to move rapidly but there is no justification whatsoever for unethical or underhand practices.”
Chief Executive of the Citizens Advice Bureau, Gillian Guy, said: “Often people want a fast property sale because they have to move at short notice for work or need to pay off debts. Rogue operators must be tackled so that people can be confident they are dealing with a trustworthy, responsible company.”
At this stage, the OFT are not prepared to identify the property quick sales companies that are subject to this investigation and no assumption should be made that any companies being investigated have broken the law.
While the property quick sale sector represents between 0.5 – 1% of all UK residential property sales, total residential property sales in the UK are estimated to be in the region of £0.5 Billion to £0.9 Billion (GBP).
Property vendors completing a property quick sale typically waive up to 25% of the true market value of the property, although the OFT has seen below market reductions up to 53%. In each case, the discounted purchase price amounts to many thousands of pounds.
However, it may just be a case of sour grapes from disgruntled vendors who needed to act quickly in order to avoid repossession and felt that they were owed something because the property was resold to other buyers for far more than the quick sale price they agreed.
There is nothing wrong with companies or individuals offering to purchase property from sellers who want to act quickly, but they should take the time to read and understand the nature of the agreement they are entering into.
Property quick sale companies exist to help distressed vendors reach a swift conclusion not to rip people off and if some firms are employing underhand tactics then they deserve to be prosecuted for bringing the property investment industry into disrepute.
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