Complaints rise, firms struggle and the High Street is fighting back, but you could save thousands

• Internet agents made 20,775 sales last summer, 7.6 per cent of all exchanges 
• Ombudsman received 398 calls about online estate agents last year 
•  This is compared to 244 the year before, a rise 63 per cent in complaints 

Online estate agents promise to sell our homes quickly, easily, and at a fraction of the cost of their High Street rivals.

But, as thousands of us put our homes on the market this summer, some internet agents are struggling, their share of the market has stalled, and complaints are rising.

Traditional High Street agents can charge commission on up to 3 per cent of the sale — £6,780 on today’s £227,000 average house price. The new breed of online agencies offered to slash the cost by thousands of pounds with a range of basic fees that can be paid upfront or down the line.

But Money Mail has found that many of their deals are not as sweet as they seem — and many will still charge you even if they don’t sell your home.

So would an online estate agent work for you?

Experts say some internet agents are little more than ‘call centre’ staff that simply list your property online — leaving you to do all the work, from taking photographs, to conducting the viewings and handling negotiations.

Online agent Emoov, which has since relaunched, went bust late last year, while shares in Purplebricks plunged earlier this year after it slashed its sales forecast and announced that two top executives were leaving.

Meanwhile the Property Ombudsman received 398 calls about online estate agents last year compared to 244 the year before — a rise of 63 per cent.

Typical gripes were around transaction handling, fair treatment and problems with timescales.

Internet agents made 20,775 house sales last summer — 7.6 per cent of all exchanges. But the latest stats from data firm TwentyCi, for the final quarter of 2018, show their share of the market has fallen to 7.2 per cent.

Buying agent Henry Pryor says he often hears complaints that online firms are only available via email and do not have knowledge of the property or area to add value to the sale process. He says: ‘The ones I am unimpressed by could be more accurately described as ‘call-centre’ agents perhaps, and their business model seems to be more of a listing service than a selling job.

‘In a strong seller’s market, slapping an advert online and sitting back waiting for the phone to ring often worked, but in a tougher market, houses need to be sold and selling takes time and effort.’ Yet the no-frills approach of online estate agents might work for sellers in certain homes. And if you live in a big city or development where property demand is high, a buyer might not be too hard to find.

Rosalind Renshaw, the editor of Property Industry Eye, says online estate agents may suit confident sellers who are able to conduct their own viewings, negotiations and push the sale through.

Yet some buyers, she says, prefer to be shown around the property by an agent rather than the owners, who are more attached. She also says that progressing the sale is the real challenge.

She adds: ‘Getting the initial offer is the easy bit. It is the getting the sale over the line that is more difficult.’

WHAT THE RIVAL FIRMS ARE OFFERING 

James Bunker, head of property at solicitors Vardags, says online estate agents do provide a much-needed and much-wanted service to sellers around the country.

He says they tend to attract sellers with properties in the mid-to-lower end of the property market, while those with higher value homes, quirky or unusual properties tend to favour traditional estate agents with expert knowledge and experience at marketing and negotiating. He adds: ‘It is a fallacy that such knowledge and skills do not add value in all property transactions, but never more so than when it comes to prime central London, and similar prime areas around the country.

‘Selling a property often involves a person’s most valuable asset, and entrusting it to someone other than an expert is something that should be done with caution.’

Mark Hayward, chief executive of estate agents industry body NAEA Propertymark, says online agents will suit some people’s lifestyles in a ‘digital age’. He says: ‘Choice is important; others prefer face-to-face interaction and will therefore choose a high-street agent.

‘For most people, their home is their biggest asset, so it’s crucial they spend time researching the best option.’

What are the Tenant Fees Act and the Deposit Cap?

The Tenant Fees Act restricts what money agents and landlords can ask tenants to pay in addition to rent.  Certain fees and charges are ‘permitted payments’. Everything else is a ‘prohibited payment’.

As part of the incoming legislation, the level of deposit landlords and letting agents in England can collect from tenants will be capped at the equivalent of five weeks’ rent for tenancies where the annual rent is up to £50,000.  For those tenancies where the annual rent exceeds £50,000, the deposit will be capped at the equivalent of six weeks’ rent.

When does the Tenant Fees Ban and Deposit Cap apply?

The Tenant Fees Act, and Deposit Cap outlined within this legislation, comes into force on 1 June 2019.  It will apply to:

• Agents and landlords in England
• New Assured Shorthold Tenancies (ASTs) and renewed tenancies (excluding statutory periodic tenancies for a period of 12 months) that arise after the legislation comes into force.

What does this mean for existing tenancy agreements?

If a tenancy agreement began before 1 June 2019, agents and landlords can continue to charge tenants fees written into that agreement (e.g. check-out or renewal fees) until 31 May 2020. From 1 June 2020 onwards, the tenancy term requiring that payment will become null and void.

Should a tenant make such a payment, it must be returned within 28 days. Failing this, agents and landlords will be treated for the purposes of the Act as having required the tenant to make a prohibited payment.

What are the penalties for taking a prohibited payment?

Trading Standards can order an agent or landlord to repay a prohibited payment to a tenant, together with interest.  They can also impose a financial penalty of up to £5,000 for each breach of the legislation.  Repeated breaches are a criminal offence which can lead to unlimited fines and/or banning orders.

A Section 21 notice seeking possession of a property let on an Assured Shorthold Tenancy cannot be used until any prohibited payments have been returned to the tenant.

How does the legislation affect tenancy deposits?

The legislation does not affect agents or landlords from taking tenancy deposits; they are a permitted payment.  Deposits for ASTs still need to be protected in a government-approved tenancy deposit protection scheme.

There is no requirement to refund deposit amounts exceeding the applicable five or six eek limit where a fixed-term agreement entered into before 1 June 2019 becomes a statutory periodic tenancy.

Where a tenant renews their tenancy by signing a new fixed-term agreement on or after 1 June 2019, any amount of their existing deposit which exceeds the applicable five or six week limit for the new tenancy must be refunded.

Further information: Guidance for Landlords and Agents

First-time buyers on the lookout for a new home may find it cheaper to simply avoid using the government’s Help to Buy Equity Loan scheme, according to a survey by price comparison site ReallyMoving.

A first-time buyer using Help to Buy would find themselves paying an average of £303,000 in February 2019 on a new home, compared to £270,000 for a first-time buyer not relying on the scheme.

This disparity results from first-time buyers having had to pay an average premium of 12 per cent when making purchases through the scheme in February 2019, when compared to first-time buyers who never joined the scheme.

Help to Buy is typically sought after by first-time buyers as a means to help them get a foot on the housing ladder, but strong demand for the scheme could actually be making it more costly, and the research raises the question of whether or not developers are charging higher prices on homes enlisted in the scheme.

First-time buyers dominate

ReallyMoving revealed this extra cost, after the government reported that it estimated Help to Buy had helped as many as 400,000 people onto the housing ladder.

First-time buyers were estimated to have accounted for as much as 57 per cent of total homebuyer activity in the UK in early 2019, according to ReallyMoving.

During this period of first-time buyer dominance, the Help to Buy Equity Loan premium also reached a record high, rising from just 7 per cent in August 2018 to an average of 12 per cent by February 2019.

As many as 18 per cent of first-time buyers expressed the intention of building an entirely new home instead of seeking a pre-existing or second-hand one, according to ReallyMoving.

Possible problems selling

Rob Houghton, CEO of ReallyMoving, said: “Help to Buy is indeed helping first-time buyers get onto the housing ladder, but these figures suggest that they may be paying more than the property is worth in order to get the help they need to raise a deposit.”

Explaining the added costs associated with the scheme, he claimed: “This could be either because developers are charging a premium or because first-time buyers are encouraged to buy a more expensive property because the scheme gives them greater spending power.”

Houghton acknowledged that first-time buyers resorting to the scheme could find potential problems when finally deciding to sell, saying: “They may find their property is worth less than they paid for it, made worse by the fact that they could be competing with new developments nearby that are available with Help to Buy, while their own property is no longer ‘new’ and therefore ineligible for the scheme.”

The government has proposed the scrapping of Section 21, which entitled landlords to make ‘no-fault’ evictions. This move could potentially create indefinite tenancies, according to the National Landlords Association (NLA).

For many years, landlords have been allowed to use Section 21 notices during evictions, which did not require them to state a clear reason for wishing to take possession of property from tenants. Under new proposals, landlords would find they have to give valid reasons for seeking to evict their tenants.

Under the new proposals, landlords would not be able to evict a tenant without reason after a fixed-term tenancy had concluded. Tenants would no longer face eviction at short notice as a result. Landlords currently make use of Section 8 notices to evict tenants for breaching terms of a tenancy.

The proposals come after a campaign calling for the scrapping of Section 21 by pressure group Generation Rent.

Dan Wilson, director of Generation Rent has claimed: “Tenants have a right to a safe home, but can only exercise it if the government stops landlords from evicting without reason.”

New deal for renters

Communities secretary James Brokenshire announced the new government proposal, saying: “The private rented sector has grown rapidly over recent years, with more than four million people now living in privately rented accommodation…yet the housing market has not kept pace with the changes in society and leaves many tenants feeling insecure.”

“The proposed measures will provide greater certainty for tenants”, he added, “and make the housing market fit for the 21st Century, whilst creating a more secure rental market for landlords in which to remain and invest.”

Onus on government

The NLA, who are critical of the moves, claimed landlords are forced to turn to using Section 21, as they have “no confidence” that the courts can handle Section 8 applications “quickly and surely”.

Richard Lambert, CEO of the NLA, commented: “England’s model of tenancy was always intended to operate in a sector where Section 21 exists. This change makes the fixed term meaningless, and so creates a new system of indefinite tenancies through the back door.”

Lambert put the onus on the government, saying: “It’s entirely on the government’s ability to re-balance the system through Section 8 and court process so that works for landlords and tenants alike … if the government introduces yet another piece of badly thought-out legislation, we guarantee there will be chaos.”