Sale by tender

Unhappybuyer

Has anyone noticed the worrying trend in London of houses being offered as sale by tender? I have been trying to buy through one estate agent which has pretty much moved to this way of selling. But I've had to stop using them as it just seems a cynical way of charging the buyer a lot to purchase a property.
Sale by (informal) tender allows the vendor to sell their property for as little as £150 plus VAT and invites buyers to submit sealed bids for the property. What buyers are not told unless they push for the information is they will have to pay the estate agent 2% plus VAT for the privilege of buying if their bid is successful.
I don't understand how estate agents are getting away with this! And the only way to stop it is to refuse to view sale by tender properties. (Of course the estate agent doesn't care if I do this because they're raking it in.)
It can't be fair as the buyer doesn't appear to be able to negotiate on the 2% charge when you can as a seller. And if you look at estate agents offering it, nowhere on their websites do they tell you what the buyer will pay.
First-time buyers have a tough enough time getting on the property ladder. So why hasn't anyone noticed this yet? It just seems wrong.

DRP

Unhappybuyer wrote: »

Has anyone noticed then worrying trend in London of houses by offered as sale by tender? I have been trying to buy through one estate agent which has pretty moved to this way of selling. But I've had to stop using them as it just seems a cynical way of as charging the buyer a lot to purchase a property.
Sale by (informal) tender allows the vendor to sell their property for as little as £150 plus VAT and invites buyers to submit sealed bids for the property. What buyers are not told unless they push for the information is they will have to pay the estate agent 2% plus VAT for the privilege of buying if their bid is successful.
I don't understand how estate agents are getting away with this! And the only way to stop it is to refuse to view sale by tender properties. (Of course the estate agent doesn't care if you do this because they're raking it in.)
It can't be fair as the buyer doesn't appear to be able to negotiate on the 2% charge when you can as a seller. And if you look at estate agents offering it, nowhere on their websites do they tell you what the buyer will pay.
First-time buyers have a tough enough time getting on the property ladder. So why hasn't anyone noticed this yet? It just seems wrong.

there's been loads of posts on this subject recently.

it does seem wrong but all you can do is vote with your feet/£

Jason74

Indeed, a change in the law is urgently required whereby Estate Agents can charge fees to one party only, and that the agent is then obliged to act for that party. You'd stamp out that practice pretty quickly with that approach.

princeofpounds

It is stupid, but the problem is more with the conflicts of interest than the actual fee.

Buyers have a certain budget to buy a house. If they have to pay a fee out of that budget, then that reduces the funds they have to spend on the house itself.

Sellers who are stupid enough to use sale by tender methods think they are saving money on the fee, but are probably paying for it twice over because not only does sale by tender reduce the price that buyers can bid (by a fee that is doubtless bigger than their normal fee!), but it also drives off potential buyers who understandably don't like the system.

It's a similar thing when landlords use letting agents who appear cheap but charge the life out of tenants, not realising that every £ in tenant charges is a £ out of the accommodation budget that could be paying their rent.

The problem is more as Jason says, that it really confuses who the agent is working for. I'd hate handing money over to someone who is working for the other side in a negotiation, and so I would vote with my feet.

This kind of behaviour is really just symptomatic of an overheating housing market, and should ebb away again when the market becomes more balanced.

Edit to add - An economic way of looking at this is that as the agent is providing no value added service to the buyer. The buyer is still buying the same old house they were buying beforehand. Therefore almost by definition the money has to come of the same budget; there is zero incentive for buyers to re-allocate money from other uses to fund the fee.

DRP

all these agents (posted on this forum) seem to be charging 2% to buyers - where does this figure come from. It is way higher than what most agents will charge vendors...

Jenniefour

Seems to be going on in Brighton as well. Friend is looking at present, saw a lovely house but has ruled it out because of the fee payable by the buyer. Won't pay on principal.

Exploitation of the current hot market and shortage of properties. Conflict of interest as princeofpounds points out. Vendors need to wake up and realise they are not doing themselves any favours.

jayship

It was in the news recently as London property prices have increased considerably due to a shortage. Buyers are offering more than the guide price.


I believe the name Douglas Allan estate agents was quoted although there may be others. Unfortunately it is the sellers market in London.

MattinLondon

Yeah, it's mainly Douglas Allen and Haart. We're looking, but not at any sale by tender. While we can afford the deposit and other fees, to have to stump up another £5k cash is a bit much. Offering a lower amount on the house doesn't work either as the mortgage isn't going to cover the tender fee.