Sarah Reynolds looks at the recent report published by the Office of Fair Trading (OFT) highlighting the outcome of a study it had carried out into the quick house sales sector and the alleged unfair practices of some of the businesses involved with these sales that may have led to certain customers losing tens of thousands of pounds.

Quick house sale providers offer to buy a house or find a third buyer very quickly and hassle-free, however this is usually at a knock-down price (typically between 10-25%) of the full market value of the property.

The OFT launched the study in April this year following concerns about the risks to sellers in vulnerable situations, such as older people needing to move quickly due to declining health or those needing to clear debts and/or to avoid repossession.

The areas investigated included unclear fee structures, reducing the price offered at the last minute when the seller was already financially committed, misleading claims about the value of properties and the discount and inducing sellers to enter into exclusivity agreements with large severance penalties.

The business practices of most concern related to:

  • Offer price – the initial offer quoted is subject to survey and other conditions, but it is not always made clear how the offer has been calculated and any other factors which may cause the initial offer to fall lower at a later date.
  • Speed of service – this is usually the main reason which attracts home sellers to use the service in the first place, but it is often not made clear enough that factors such as legal and financing issues can lengthen given timescales.
  • Exclusivity – exclusivity agreements seem to be a common occurrence and can tie in sellers to using that company, so that even if the price offered decreases significantly, they are unable to go elsewhere.
  • Identity of actual buyer – not all providers are being clear with home sellers about their service – i.e. are they going to buy direct from the seller, find a buyer (and broker a deal), or simply pass on the details to another provider?
  • Funding – not all providers are explaining the buyer's financial position clearly enough. In some cases, the buyer may not even have the available cash funds and therefore this will obviously affect the speed and certainty of the transaction.

As a result of the study, the OFT has published a list of "top tips" for consumers considering whether to use quick house sale companies. These include taking time to find out exactly how the process works, making sure all the information required to make an informed choice about a sale is provided, and making sure that providers put their promises in writing.

The OFT has also since written to 120 operators in the sector to "advise" them of the issues identified in its report in order to ensure that they are complying with their legal obligations. It has also opened formal investigations into three as yet unnamed providers.

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