OFT crackdown on ‘quick house sale’ firms
Quick house sale companies are under the spotlight from the Office of Fair Trading. Should you ever use one?
The Office of Fair Trading (OFT) has launched a formal investigation into three ‘quick sale’ house companies.
These companies promise to sell the homes of struggling homeowners at a faster rate than an open market sale.
But the three companies, which have not been named, have been accused by the OFT of misleading homeowners and leaving them thousands of pounds out of pocket.
Quick house sale
Quick house sale firms claim to offer homeowners a hassle-free way to sell their properties as sales can be completed in as little as seven days.
In return for a fast sale, houses are sold below the market price. The homeowner typically misses out on around 10 to 25% of the total price though there are claims this could be as high as 53% on some sales.
The OFT investigation has pointed a spotlight on this area of the housing market which it says is 'for the most part’ operating properly, but with a few companies giving it a bad name.
For example, in some instances house prices have been reduced at the last minute and companies have made misleading claims about the value of the property. Sellers have also been encouraged to sign long-term exclusivity contracts which have severe penalties when breached.
Vulnerable customers
As normal house sales can take three to four months to complete, choosing a quick sale company which cuts out things like having to organise house viewings can be an appealing aspect.
But nearly three quarters of complaints are to do with vulnerable and elderly people who were misled into signing up for a quick house sale.
The OFT has now written to 120 companies urging them to check the way they operate.
The OFT has also produced a top tips guide for those considering a quick house scale, which includes details about how these schemes work.
Sale and rent back
There are worrying similarities between the way in which quick house sale and 'sale and rent back' companies operate.
With sale and rent back, a homeowner sells their property to a specialist company for a cut price and then rents it back as a tenant. People who have fallen into financial difficulty and are struggling to pay off a mortgage are the people that tend to use these firms.
But they have proven to be extremely risky in the past and should be seen as a last resort as in almost all cases the owner is exploited and left out of pocket.
There are now rules in place for sale and rent back companies and they are regulated by the Financial Conduct Authority (FCA) giving customers a little more protection. For more on how sale and rent back has been cleaned up read Good riddance to this property scam.
The quick house sale sector is relatively small in the UK, making up around 0.5% to 1% of all house sales. However, this shouldn’t mean the companies involved are allowed to make up their own rules.
There is talk of self-regulation but I think there should be FCA regulation, as there now is with sale and rent back. The guidelines published by the OFT are a step in the right direction but they don’t go far enough.
These companies prey on vulnerable people and rely on sales from customers who are desperate of cash. This is how they’re managed to get away with using potentially illegal tactics and unless the OFT shows a little more aggression, they will continue getting away with it.
How to avoid being ripped-off
If you are planning on using a quick sale company it should only be as a last resort. They rely on apathy and desperation to rip-off customers, but there are some things you can do to avoid losing out.
Working out exactly how much your home is valued at, through a website such as Zoopla or Mouseprice, is a good start. Making sure any information you give to the company is accurate and up-to-date will also help the process run smoothly. Read What's your property worth?
When you get an offer from the provider, ask them how this has been worked out and make sure you know if it’ll change before the deal goes through and if so by how much. If you’re not happy with any part of the sale, question the provider. And watch out when signing up to any long-term contracts.
Always ask for the costs of the sale to be listed up front and before signing any contracts seek legal advice. You can also negotiate any price given - don’t let the provider rush you into a decision you’re not happy with.
At any point if you’re not satisfied with the service provided you can complain to an outside company, such as the Advertising Standards Agency, Citizens Advice or the Trading Standards Service.
More on buying and selling property:
Good riddance to this property scam
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