'Quick house sale' firms face action by OFT
Three "quick sale" companies that promise to sell properties for struggling homeowners are to be formally investigated by a regulator.
The as yet unnamed businesses promised faster sales than could be achieved on the open market for a knock-down price.
But the Office of Fair Trading (OFT) is investigating alleged unfair practices that left some sellers tens of thousands of pounds out of pocket.
It found many other operators in the sector to be "open and fair".
Quick house sale providers offer to buy houses in as little as seven days, but at a discount - typically between 10% and 25% - of the full market value.
The OFT discovered cases which saw reductions of up to 53% of the home's market value, amounting to many tens of thousands of pounds.
The service may be used by those wishing to pay off debts, people facing declining health, or those relocating overseas or moving for a new job. It remains niche, representing only 0.5% of UK residential property sales. Total sales are estimated at between £500m and £900m.
The regulator found that, for the most part, the sector was "dynamic and innovative", benefiting many customers who wanted a quick, hassle-free sale.
However, its investigations, which began in April, uncovered examples of firms exploiting people's difficult financial circumstances. They included:
- Reducing the price at the last minute when the seller was already financially committed
- Making misleading claims about the property's value and the discount
- Stressing the speediest sale of seven days, rather than the typical three to four week timetable
- Inducing sellers to sign up to exclusivity contracts, which carried large severance penalties.
After putting the industry under the microscope, the OFT has now launched formal investigations into three firms, which have not been named. Consumer group Which? has called on the regulator to name the trio.
Another 120 firms have received letters from the OFT advising them to check that the way they operate complies with the law.
"Responsible quick house sale firms offer a valuable service to consumers who want a fast sale. However, we have also seen potentially illegal behaviour," said OFT director Gaucho Rasmussen.
"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."
Reacting to the OFT's investigation, Peter Bolton King, of the Royal Institution of Chartered Surveyors (Rics), said: "Clearly, there will always be a premium to pay for those who need to move rapidly but there is no justification whatsoever for unethical or underhand practices."
Gillian Guy, chief executive of Citizens Advice, said: "Often people want a fast house sale because they have to move at short notice for work or need to pay off debts. Rogue operators must be tackled so that people can be confident they are dealing with a trustworthy, responsible company."
Property Ombudsman Christopher Hamer said: "Consumers using quick house sale firms have no access to independent redress and the risks associated with this are significant. While I note that the OFT is pursuing a self-regulatory approach, the only way of realistically ensuring all such firms provide consistent service is through legislation."
During an investigation last year, the BBC spoke to two people who were angry at the way they had been treated by quick sale companies.
Malcolm Haywood, from Lincolnshire, wanted to sell his house quickly and agreed to a sale price of £120,000.
But just before the deal was signed, the company involved, Gateway Homes UK, dropped the price to £80,000.
Pat Hardy, from Teesside, signed a similar deal with Tom Craven Property.
She had agreed a purchase price of £75,000, but the day before the removal men were due to arrive, they lowered the offer to £40,000.
Both companies insisted that the number of complaints amounted to less than 1% of their customers.
The OFT has published a series of top tips for consumers considering whether to use quick house sale companies.
They include taking time to find out how the process works, making sure all the information required to make an informed choice about a sale is provided, and making sure providers put promises in writing.