Home buying and selling: a market study

Citation

(2010), "Home buying and selling: a market study", Structural Survey, Vol. 28 No. 4. https://doi.org/10.1108/ss.2010.11028dab.009

Home buying and selling: a market study

Article Type: Newsbriefs From: Structural Survey, Volume 28, Issue 4

The Office of Fair Trading (OFT) has reported on a study about reforming traditional estate agency practices. The study looked at the market for home buying and selling services in the UK. In particular, the following were considered:

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  competition on price and quality between service providers, principally estate agents;

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  the prospects for entry by new business models, including internet-based models;

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  the existing regulatory framework and whether it provides the right balance between protecting consumers who are buying or selling a home and ensuring that the market remains open to competition and innovation; and

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  the relationships between estate agents and other service providers such as mortgage brokers, surveyors, solicitors and other professional advisors.

The OFT made the following recommendations:

We believe that the best way to tackle the lack of price competition is through promoting and encouraging new business models. Innovation in this sector would provide greater choice for consumers and would put pressure on the traditional ways of buying and selling a home. Regulation for these new models could safely be lighter and the current legislation may be preventing, or discouraging, innovation. We recommend that the existing legislation should be updated as soon as possible. We found that most online estate agents can now access the major portals. We do not, therefore, believe that there is currently a need to intervene to ensure that online estate agents are able to access the major internet property portals. This is an area we will be monitoring closely in the future. We have considered carefully the arguments for and against introducing a dedicated regulatory regime for estate agents, and have weighed the potential costs of doing so against the risks consumers face in this sector, the evidence we have of consumer harm, and the likely success of a licensing approach in preventing such harm. Our view is that there is not a strong case for introducing more regulatory structures and rules in this sector. We are not, therefore, recommending positive licensing. Serious misconduct by estate agents should be dealt with by efficient enforcement and penalties which are high enough to deter such misconduct. We will work to improve co-ordination between trading standards, OFT and the Ombudsmen for a more rapid, prioritised response to complaints about estate agents which raise serious concerns. The prospect of additional income may give the estate agent a financial incentive to prefer some buyers over others. We recommend that, as part of its work on the future of estate agency regulation, government consider further whether the potential for conflicts of interest should be removed, including a ban on such payments. It is hard to see either a significant positive, or negative, impact of HIPs in their current form. Nevertheless, HIPs make information available to prospective buyers early in the process, and some buyers said they found the information useful and that it influenced their decisions, so it could be argued that HIPs in their current form have a positive impact. We would expect any gap between wholesale and retail prices to reduce over time, as consumers become more familiar with HIPs and as direct sales become more common. We do not, therefore, recommend any intervention on this issue at the present time.