Estate Agents' Sharp Practices

The Sunday Times recently reported that rising prices have once again brought the worst in estate agents as they urgently try to find houses to sell and satisfy desperate buyers.

Following are some of the worst practices that the Times list - each with a Jewish response towards them. Most of these situations and rules apply not only to property but also to any business transactions with a buyer, seller and broker.

Undervaluation/Overvaluation

With such a shortage of properties estate agents will do almost anything to get your business. A common trick is to overvalue your property getting you to register with them and then eventually you will have to sell at lower cost having wasted many months and potential benefit from getting money earlier on.

Run-down properties, often owned by the elderly are not actually put on the open market and are under valued. Agents will sometimes give first refusal to their friends or business associates. They do not market the property or refuse to pass on offers to the vendors. They are then sold on to a builder who will renovate them and sell them on at a good profit. The agent is then gives a cut of the profits in the final sale. Alternatively the agent himself will then offer to purchase the house for a slightly better price and then later sell it on for a tidy profit.

The new higher rates for stamp duty have opened up yet more possible scams. With stamp duty coming in at 2.5% at £250,000, properties that should be selling for £220,000 are overvalued and offered at £245,000 with the promise of a £5000 saving on the stamp duty.

The Rabbi's response: Agents have the status of experts in the field and are expected to know what a property is worth. They have a responsibility to get it right and to be honest. He must respond as accurately as possible when asked the value of the property by the seller. To hide the truth and then benefit from it is simply theft. Selling an item, a business or a property for more than the going rate and artificially inflating the price when a market price exists once again does a disservice to both the buyer and the vendor. The agent has responsibility to both. Saying anything just to keep the customer happy is not a Jewish concept.

Furthermore, if the agent or broker claims that the item is being sold on the open market and it is not, he is simply a liar. Jewish tradition holds out very little hope for liars.

Fees and Sole Agency

Often the agents will tell the customer they have a legal obligation to sign a sole agency agreement as a condition for taking on the property. There is no such requirement though it can be used to make you pay a higher fee. Agents will always quote the highest possible fee, but are always ready to bargain. The going rate is 2% and for more expensive properties around 1.5%.

The Rabbi's response: When a service has a price that is set by the market, and that is the going rate, it is clear that everyone expects to pay that price or get a small reduction. No one would agree to overpay, unless they were getting a special and better service. If that is available it should be available to all. Certainly lying is not a valid sales technique in our tradition.

Inaccurate details

It is still common to find a property inaccurately described. Remember that agents are not required to answer general questions about problems with the property. If you ask about general defects he can fudge his answer so long as he or she does not deliberately lie. Only if you ask specific questions about damp or subsidence for example will he be required to tell the truth.

The Rabbi's response: While caveat emptor remains the legal position in many situations, the Jewish traditional law demands full disclosure about any defects that may exist in any item being sold. Ambiguity is not a way out. The vendor and his agents must be upfront and honest in all that they say concerning the property or business sold.

Sweeteners

With many buyers going for every property, estate agents have been known to accept sweeteners in the form of cash payments to put people at the top of the viewing lists. Similarly those eager to sell will promise to pay extra to market their properties more effectively.

If you do not sign up for the financial packages that the agent provides your offer will not even reach the vendor. Only those who sign up to policies that provide the agents the highest commissions are given the first opportunity for the better properties. Both buyers and sellers lose out; the sellers do not get information on all the offers available and the buyers end up overpaying for the financial package they need to make the purchase.

Many agents will promise sellers a purchaser within 24 hours. All agencies can bring some into you property within 24 hours. Often this will be an associate who will offer a ludicrous low price or sometimes someone who is clearly inappropriate as a buyer.

The Rabbi's response: Once again, agents and brokers must be honest about the services that they offer. If they will offer a higher quality service for a greater payment, that is fine, so long as they let everyone know about it and give everyone a chance to pay for the better service. If the agent is purporting to be looking after the vendors' interests, that is what he must be doing. Anything else what be tantamount to theft.

Some one claiming to act in the best interests of a buyer or seller must indeed do so. If the seller expects the agent to pass on all offers received, the agent has a responsibility to do so. Further he must disclose to the buyer that better terms are available elsewhere and that he recommends this financial package because of the greater commission he will receive.

In Conclusion

It is clear that a property market under the auspicious of the Torah law would radically different to the one we have now. Honesty would be the basis of every transaction. Honesty would not only be the best policy, it would be the only policy.