OFT launches market study into providers of quick, discounted house sales
18 Apr 2013 03:49 PM
The OFT has yesterday launched a study into the 'quick house sale' market and is calling for people who have used, or considered using, these businesses to contact the OFT about their experiences.
Quick house sale providers offer to buy a house or find a third party buyer very quickly, usually at a discount from the full market value. While providers may offer a valuable service, the OFT is concerned that some practices might lead to homeowners receiving much less for their property than it is worth. Any losses could be very high.
The OFT is particularly concerned about the risks to people in financial difficulty - including those who have worked up large amounts of debt or are facing repossession. Consumers at risk may also include those who need to sell their property quickly following a relationship breakdown or the elderly, who might need money to pay for their care.
Practices that would give rise to concern include:
Unclear fee structures, for example imposing an unexpected fee following an encouraging initial valuation, as a condition for progressing the service.
Reducing the price offered at the last minute after someone is financially committed to the transaction.
Making misleading claims about the value of the property or the level of discount to be applied to the sale.
Falsely claiming to be a cash buyer.
Inducing consumers to enter into agreements that prevent them from selling to other buyers, with severe penalties for breach of contract.
The OFT has asked over 50 quick house sale firms to provide information on their business models and practices and would welcome evidence from people with experience of this sector, including valuation experts, estate agents, debt advisors and home owners.
Cavendish Elithorn, OFT Senior Director for Goods and Consumer, said:
'Businesses offering quick house sales may provide a useful service for homeowners who need to unlock cash in a hurry. However, they are often used by consumers in vulnerable situations and therefore we are concerned about the risk of consumers being misled and losing out on large sums of money.
'We want to hear from anyone who has used a quick house sale provider, whether they have had a good or bad experience with the business. We will protect the confidence of anyone who contacts us and their information will be invaluable in helping us to build up a picture of the market and establish whether we need to take action.'
Christopher Woolard, Director of Policy, Risk and Research at the Financial Conduct Authority, said:
'We welcome the OFT's market study. Consumers facing repossession of their home are in a very vulnerable position and it is important that they are not pressured into making poor decisions.
'This market study is an important piece of work that will explore current practices in the market and, where necessary, make recommendations to improve outcomes for these vulnerable consumers. We will continue to work with the OFT and others to address any concerns in this market.'
For more information, see the market study page. Anyone who wishes to contact the OFT can email firstname.lastname@example.org, call 08457 22 44 99 or write to the address below by 16 May 2013.
If you used a quick house sale provider, the OFT would like to know:
- How did you come to use, or consider using, a quick house sale provider?
- How many times did you make contact with the quick house sale provider during the process and what form did these contacts take (for example, meetings, phone calls, emails)?
- What alternatives to a quick house sale did you consider?
- What persuaded you to go through with the deal or to pull out?
- Looking back, are you happy with how things went? What went well and what could have gone better? Did the quick house sale provider's service live up to expectations?
Over 157,900 households had fallen behind on their mortgage payments at the end of 2012 (Council of Mortgage Lenders).
OFT market studies are carried out under section 5 of the Enterprise Act 2002 (EA02) which allows the OFT to obtain information and conduct research. Effectively, they allow a market-wide consideration of both competition and consumer issues. They take an overview of regulatory and other economic drivers in the market and consumer and business behaviour. Possible outcomes of market studies include: enforcement action by the OFT, a market investigation reference to the Competition Commission (CC), recommendations for changes in laws and regulations, recommendations to regulators, self-regulatory bodies and others to consider changes to their rules, campaigns to promote consumer education and awareness, or a clean bill of health.
The OFT conducted a market study into the sale and rent back sector in 2008. Following an OFT recommendation, statutory regulation was introduced. Sale and rent back is a property transaction whereby firms buy homes from individuals, usually at a discount, and then allow those individuals to stay on in the property as tenants.