The Office of Fair Trading (OFT) has begun formal investigations into three quick house sale firms for alleged unfair practices that may have led to some customers losing tens of thousands of pounds.
At this stage, the OFT cannot identify the companies that are subject to this investigation and it says no assumption should be made that any companies being investigated have broken the law.
The announcement comes as the OFT publishes a report on the sector, which found that quick house sale firms can be beneficial to consumers who need a fast, hassle-free sale.
These firms offer consumers a faster sale than might be achieved on the open market, with the seller usually agreeing to receive a below market value price for their home in return – typically forgoing between 10 and 25 per cent of the market value of the property.
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 firms risk giving the industry a bad name by using trading practices that may prevent customers from making informed choices when selling their home, or exploit their difficult financial circumstances. Some of these practices may result in sellers receiving significantly less than they were originally expecting.
Practices of concern include:
- Reducing the price offered at the last minute after the seller is fiancially committed to the transaction.
- Making misleading claims about the value of the property or level of discount to be applied.
- Stressing the fastest possible times to completion (for example ‘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 to other buyers, with severe penalties for breach of contract.
70% of the complaints received about quick house sales came from vulnerable consumers who may be particularly attracted by claims of a hassle-free service, with no viewings or hold-ups. Older people, for example, may wish to sell their property quickly due to declining health, or homeowners in financial difficulty may look for a quick sale to help reduce their debts. Others using quick house sellers include those disposing of an inherited property, or relocating due to a change of job or to emigrate.
The OFT has also written to almost 120 providers advising them to check that their business practices and contractual terms comply with their legal obligations. Discussions are also underway with businesses in the sector on developing self-regulation.
Meanwhile, the OFT has published top tips to help people thinking of using a quick house sale firm. These are being used by consumer advice bodies including Citizens Advice, Money Advice Service and Which?. Alongside this, quick house sales providers are being encouraged to share these tips with their customers.
Gaucho Rasmussen, OFT director, said: “Responsible quick house 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.”