Referral fees have been in the headlines again with the news that some estate agents have been accused of withholding ‘best offers’ from sellers, and giving preference to buyers who are financially qualified by mortgage brokers they have relationships with.
While this isn’t indicative of the whole market, referral fees can be confusing for those new to the home buying and selling process.
What are referral fees?
Referral fees are fees that are paid by some conveyancers or mortgage brokers to estate agents for recommending, or referring clients to them.
They are fairly common and are allowed by the industry, on the proviso, that you the consumer have been fully informed that on the back of a referral or recommendation a fee will be received by their estate agent.
However, it’s important to know that if you are buying your property through an estate agent, you should not feel obliged to take their recommendation on which conveyancer or mortgage broker to use.
The most important thing is to undertake your own research by shopping around to find the service provider who best suits your needs.
The importance of shopping around
Recommendations as a result of referral fees may be biased but it doesn’t make them wrong. Many people who use conveyancers or mortgage brokers endorsed by their estate agents are happy with the service.
However, our advice to anyone is to do some shopping around to find the right conveyancer for you.
Alongside its proposal to make referral fees transparent, National Trading Standards also recommends that estate agents themselves should encourage clients to see what else is on offer alongside a public awareness programme to educate consumers.
It is good practice for estate agents to be transparent about any referral fees they receive, so don’t be afraid to ask. If you’re not satisfied with the answer, however, ask the conveyancer or mortgage broker – while the same does not yet apply to estate agents, lawyers are obliged to disclose any referral arrangements they have and the average fee or range of fees.
See what others are saying about the recommended conveyancer. As well as family and friends, review sites such as Trustpilot and Reallymoving.com mean buyers and sellers can now benefit from the wisdom of the crowd.
When it comes to choosing your conveyancer, lawyers are required to clearly display information on their website which should help you to make an informed choice about what they offer. This information should include:
- Cost information in a prominent place. Lawyers are required to provide examples of their fees that cover a broad range of services and transaction types including conveyancing.
- Service information. This will include information on conveyancing timescales and possibly third-party feedback.
- Regulatory information. You should be able to easily identify who regulates the firm you are hiring. For lawyers regulated by the CLC, this includes displaying the CLC secure badge in a prominent place on their website. This allows you to verify the regulated status of the practice and to ensure that the website is genuine.
- Complaints process. All lawyers will have to display details of their complaints process, including access to the Legal Ombudsman and redress information.
- Referral details. While lawyers do not need to disclose specific details of referral arrangements on their website, they must say if they enter into such agreements and the average fee, or range of fees, they pay.
Conveyancing is crucial and with fees ranging from £500 to £1,500 or more, it’s important you’re confident in the person handling what could be the biggest purchase you make in your life.
How to check a conveyancing firm is regulated
When choosing who to handle your conveyancing, you should also check that the firm you are considering using is regulated by one of the legal sector regulators. Particularly if there is a mortgage involved, you will need a regulated lawyer/firm to do your conveyancing for you.
Regulation ensures that, should something go wrong, you will be protected and have a clear way to seek redress.
If you are buying or selling a property, you can find more advice on the topic as well as a list of CLC-regulated conveyancers here.
Stephen Ward is director of strategy and external relations at the Council for Licensed Conveyancers
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