The announcement comes as the OFT publishes a report on the sector, which found that quick house sale firms can be beneficial to consumers who need a fast, hassle free sale.
These firms offer consumers a faster sale than might be achieved on the open market, with the seller usually agreeing to receive a below market value price for their home in return. Sales are usually 10 to 25% below the market value of the property.
The OFT found the sector to be dynamic and innovative, with some businesses dealing with customers in an open and fair manner. However, it also found that some firms risk giving the industry a bad name by using trading practices that may prevent customers from making informed choices when selling their home, or exploit their difficult financial circumstances. Some of these practices may result in sellers receiving significantly less than they were originally expecting.
Examples are reducing the price offered at the last minute after the seller is financially committed to the transaction and making misleading claims about the value of the property or level of discount to be applied.
Some firms also have misleading marketing material that says a property can be sold in seven days rather than the more typical time of three to four weeks. There have also been examples of firms inducing sellers to sign long term exclusivity agreements that prevent them selling to other buyers, with severe penalties for breach of contract.
A high proportion, some 70%, of the complaints received about quick house sales came from vulnerable consumers who may be particularly attracted by claims of a hassle free service, with no viewings or hold ups. Older people, for example, may wish to sell their property quickly due to declining health, or home owners in financial difficulty may look for a quick sale to help reduce their debts. Others using quick house sellers include those disposing of an inherited property, or relocating due to a change of job or to emigrate.
The OFT has also written to almost 120 providers advising them to check that their business practices and contractual terms comply with their legal obligations. Discussions are also underway with businesses in the sector on developing self regulation.
In addition, the OFT has published top tips to help people thinking of using a quick house sale firm. These are being used by consumer advice bodies including Citizens Advice, Money Advice Service and Which? Alongside this, quick house sales providers are being encouraged to share these tips with their customers.
‘Responsible quick house sale firms offer a valuable service to consumers who want a fast sale. However we have also seen potentially illegal behaviour and as a result the OFT has opened investigations into three companies,’ 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,’ he added.
One company that is sharing its guideline is Quick Move Now which welcomed the news that less scrupulous firms are being investigated. ‘We have long been frustrated with the poor, and sometimes dishonest, service that some of our competitors provided to customers, and we were concerned that we were being associated with such companies. We have worked closely with the OFT in order to improve the service offered to customers across the industry and has shared its guidelines for others to follow as best practice. We welcome the advice announced by the OFT today and hope it will result in unscrupulous companies being removed from the industry so that consumers always receive a fair and honest quick sale service,’ said director Danny Luke.
The firm believes that there should be further action such as an end to unfair option agreements, formal clarification of whether a company is a broker or a cash buyer, a compulsion to declare the true time scale in which a house sale is realistically achievable as determined by availability of funds and an official industry charter and ombudsman.
‘The OFT concluded that some quick house sale companies, such as Quick Move Now, offer a genuine and useful service to those people who need to sell their property in a short time frame. However, it also found that the majority of companies claim to be able to buy houses for cash, when in reality, they actually need to source investors or mortgage funding before being able to go ahead with the purchase, resulting in a sale that is not quick at all and may be subject to price changes,’ explained Luke.
‘These companies will going forward have to operate as estate agents, comply with legislation and Property Ombudsman oversight and cannot legitimately claim to be quick sale companies. The OFT is satisfied that the transparency, honesty and customer service quality of Quick Move Now is of the highest standard, and customers needing a quick, convenient and hassle free sale can be reassured that this is what they will get,’ he added.
Consumer giant Which? said that the OFT should take firm action against quick house sale companies that have broken the law so that consumers, particularly those who are vulnerable or in financial difficulty, can have confidence in this market. They should also name the three firms they are currently investigating.
‘Anyone thinking about this as an option should shop around and check if their provider is signed up to a code of practice or redress scheme, or is regulated by an official body.
Which? recommends taking out independent legal advice before committing to any agreement,’ said a spokesman. ‘If you're unhappy with the provider's service you should complain to them, but if they can't resolve it and they belong to a redress scheme, you should take the matter to the ombudsman,’ he added.