Home sale practice warning to firms
The Office of Fair Trading (OFT) said it has also opened formal investigations into three un-named businesses for alleged unfair practices that may have led to some customers losing tens of thousands of pounds.
People who sell their homes to a quick house sale firm usually receiving around 10-25% less than the market value of their property in return for getting fast access to cash.
But concerns have been raised about firms reducing the price offered at the last minute when the seller has already committed to the transaction, making misleading claims about the value of the property or the level of discount, and trying to lock consumers into contracts with heavy penalties if they sell to someone else.
The regulator warned that some firms risk giving the industry a bad name by exploiting a customer's difficult financial circumstances and giving them significantly less than they were expecting.
It said seven in 10 complaints received by the OFT about quick house sales came from "vulnerable" consumers who may have been particularly attracted by claims of a hassle-free service, with no viewings or hold-ups.
These include older people who may be suffering ill health, people who are heading for repossession and need a fast route out of their debt problems and those who are under pressure to stop a property chain collapsing.
In one case, a seller approaching retirement who could not keep up loan repayments accepted an initial offer of £73,000, only to have the offer reduced to £58,000 later that day.
The seller agreed to the new offer as they felt caught "between a rock and a hard place" and a courier was sent round later that evening for the seller to sign new documents.
The OFT said it has written to almost 120 providers it has identified operating in the UK, advising them to check that their business practices and contractual terms comply with their legal obligations. Discussions are also taking place with businesses in the sector on developing self-regulation.
It is also concerned that firms are stressing the fastest possible time in which a sale could be completed, such as a week, rather than the more typical time of around one month, on marketing materials and websites.
Gaucho Rasmussen, OFT Director, said: " 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.
'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."
People considering a quick house sale should not proceed unless they are happy they understand how the process is going to work, the OFT said.
They should bear in mind how the property is being valued, whether the offer price will change at any stage and how the deal compares with using an estate agent instead. Home owners with mortgage arrears should see if they can work out an arrangement out by negotiating with their lender.
The OFT said people should make sure they know how they are going to be paid, not accept verbal promises and make sure they get confirmation from the firm in writing.
Peter Bolton King, global residential director of the Royal Institution of Chartered Surveyors (Rics), said the body has long been concerned about some quick house sale companies.
He 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."
A Which? spokesewoman said: "The Office of Fair Trading should take firm action against quick house sale companies that have broken the law so that consumers, particularly those who are are vulnerable or in financial difficulty, can have confidence in this market."
Communities Minister Brandon Lewis said: " I want anyone facing the real and frightening prospect of repossession to know that quick house sale firms are just one of a range of solutions available to them.
"We are playing our part by maintaining our £470 million funding to ensure we continue to have one of the strongest safety nets in the world against homelessness.
"I would urge people facing financial difficulties to seek early advice from their mortgage lender and from an independent money advice agency, to ensure they have the widest range of options available to them."
Christopher Hamer, the property ombudsman, said legislation is the only way to ensure all firms offer a consistent service.
He said: " This report reveals that there is yet another area of the property sector where there is no formal regulatory framework.
"As with the residential lettings sector there is a minority, albeit sizeable, number of 'quick house sale' firms that do not appear to follow established standards or acceptable trading practices.
"The result is an unsafe environment for consumers at a time when they are making important decisions concerning the sale of their home perhaps when under severe financial or health pressures."
© 2013 Press Association