While they may not rate highly in honesty surveys for professions, can estate agents lie about offers?
Part of the process when buying a property often leads to speculation over whether an estate agent is being honest about other potential buyers making a bid to push the price up.
You may believe that you are being told to ‘move quickly’, or there is a ‘bidding war’ to buy the property in question. Estate agents also use other terms to encourage buyers to offer more.
It may appear to be tempting since the estate agent will be earning more if they push up the offer price for a particular property.
However, estate agents are legally obliged to be honest and abide by a professional code of practice.
There’s no doubt that someone buying in a fast-moving house market may believe the estate agent is lying in a bid to entice a higher offer from them.
Here, we take a closer look at the issue of whether an estate agent can lie about the offers they have received.
Is it illegal for an estate agent to lie about an offer?
There are two issues to consider over whether it is illegal for an estate agent to lie about any offer they may have received. They are:
- Reputable estate agents will have a code of practice to follow as part of their professional membership for organisations;
- It’s unlikely that an estate agent will go to prison for lying about offers, but it will harm their reputation.
It’s important to appreciate that reputable estate agents will be registered with the Property Ombudsman, which is an independent scheme for offering redress for letting and estate agents.
Basically, if you have a complaint about an estate agent and this cannot be resolved amicably, the Property Ombudsman is where you go if you want to escalate a complaint and have it resolved.
The Ombudsman offers advice and a mediation service to come to a satisfactory conclusion, and they can also award compensation if all else fails.
All estate agents must agree to a code of practice
It’s part of their membership that all estate agents must agree to their Ombudsman’s code of practice, and if found guilty of breaching the code, they will be penalised and potentially expelled from the scheme.
Part of the scheme’s rules make clear:
- An estate agent must not make up or invent details about any other offer they may, or may not have, received.
There’s more information about the Property Ombudsman’s Code of Practice on their website.
Will an estate agent lie about offers?
Following on from the previous answer, it’s important to appreciate just how important the membership of the Property Ombudsman scheme is.
For this reason, it’s highly unlikely that you will find an estate agent making up rival offers in a bid to increase your offer.
That’s because displaying the membership of the Property Ombudsman shows that they are reputable and trustworthy.
It’s unlikely that vendors and buyers will want to deal with an agent who is not part of that redress scheme.
Along with the legal implication, there’s another good reason why estate agents will probably not lie about rival offers:
- To lie about a rival bid means the estate agent is running the very real risk of the buyer withdrawing from the sale;
- Lying about a bid is probably not worth the small amount they will earn should the buyer increase their offer;
- Being untruthful about rival bids means they could lose the commission worth several thousands of pounds.
Put simply, for an estate agent to be less than truthful about a rival bid is probably not worth the financial risk.
The estate agent works on a commission
And here’s why: the estate agent is working on a commission earned from the final sale price of the property.
But say they are earning the average 1.5% in commission, and you increase your bid by several thousand pounds, that has a minuscule effect on their final invoice amount.
What to do if an estate agent is lying about bids
Should you suspect that the estate agent you are dealing with is making up rival offers, you need to consult the Code of Practice published by the Property Ombudsman.
It’s here that you’ll find the information you need to challenge the agent and if it’s not resolved satisfactorily, then you will have the right to escalate a complaint to the Property Ombudsman.
They will then offer a mediation service, and if the agent has been found to be lying, they offer compensation.
It’s important to appreciate that when you challenge an estate agent about rival offers, you need to understand that they don’t have to tell you how much the rival bid is for, but you should ask for written proof that someone else has made a counteroffer.
If no written proof is forthcoming, then this will bring an end to the situation, and you’re probably right to suspect that the agent is trying to push up the price, probably on behalf of their client.
But if written proof is provided, then the estate agent is being honest and working in their client’s best interests by asking you to offer more.
Can the estate agent disclose other bids?
This can be a tricky situation because there’s nothing in the law, or in the Property Ombudsman’s Code of Practice, to prevent an estate agent from disclosing how much someone else is bidding on a particular property.
However, this is not standard practice for estate agents working in the UK – they will simply highlight that someone else is making a bid.
We mention this because should an estate agent be reluctant to give you details of the amount being offered, this does not mean that there is no offer being made.
It’s simply that the estate agent is reluctant to tell you what the counter bid is.
Again, it’s important to appreciate that the estate agent is not working for the buyer, they are working for the seller’s best interests.
They might give you a guide as to how much is being offered and this is part of their negotiation tactics.
How do I know if a counter offer is real?
Put simply, you won’t.
As we have explained, you have to take it on good faith that the estate agent is being honest in telling you that a third party offer has been made, but they will not tell you exactly how much that offer is for.
For many people, this means you’re unlikely to know whether the offer being made is real or not and is simply a way for the estate agent to bump up the selling price.
You are within your rights in asking the estate agent for written proof, and the agent should be happy in giving you the evidence necessary to placate your fears.
This written proof usually takes the form of a signed letter that comes from the seller’s own solicitor and will acknowledge that a legitimate offer has been made and received.
Obviously, should the estate agent be unwilling to offer written proof, then this should be a warning sign that there is no counteroffer and the rival bidder is possibly being faked by the agent.
Will most estate agents pass on rival offers?
The simple answer as to whether estate agents have an obligation to pass on an offer is ‘Yes’.
That’s because the estate agent has a legal requirement to present all the offers being made by potential buyers to the seller.
This must be done up until the point when the contracts are being signed.
However, this also means that as the buyer who has had an offer accepted, another potential offer can be placed in front of the seller, which may be accepted before the contract has been signed.
Remember, the selling process once you put in an offer can take several weeks to complete and unless you ask for the house to be taken off the market, then you run the risk that another offer will be made.
When you have a rival offer that is higher than yours accepted, this is known as gazumping.
What is a lockout agreement?
Having mentioned that the buyer who puts in an offer that’s accepted can request that the house is removed from the market, there is another issue called a lockout agreement.
This will see the seller handing over a holding deposit when their offer has been agreed but on condition that the property is taken off the market for an agreed period of time.
This then removes the risk of a rival offer being made at the last minute and enables the seller to have the contracts signed.
A lockout agreement also shows to the seller that you, as a buyer, are serious about buying the house and want to proceed quickly.
The downside to a lockout agreement is that you need to be spending money upfront.
This also restricts any room for manoeuvre when negotiating on the price because you are tied in financially to buy the property.
What is a goodwill agreement?
Having looked at lockout agreement, there’s also the potential of a goodwill agreement.
With a goodwill agreement, both the seller and the buyer will pay a deposit when the offer on the property has been agreed upon.
The big difference is that should either of the parties then pull out of the sale, the other side will keep their deposit money.
Again, you’ll be paying money upfront, and should any problems arise, and you withdraw from the sale, then you lose your deposit.
Among the potential issues for this to happen are to have a mortgage application turned down, or find a serious problem after the house has been surveyed.
If a goodwill agreement or a lockout agreement sound like something you want to undertake, then you need to speak with a conveyancer or a solicitor who will provide advice based on your personal circumstances, to determine whether these are the best choice for you.