Referral fees from conveyancing are one of the most popular ways estate agents create revenue for their business. In most cases, they are a “finder’s fee” received by the agents for recommending a third-party service to the buyer or seller.
In practical terms, referral fees are the most common business arrangement between estate agents and conveyancing firms. In the past couple of years, this has been heavily scrutinised to an extent where The Ministry of Housing, Communities and Local Government announced that referral fees might be banned altogether, making estate agents lose one of their most important sources of revenue.
Have Referral Fees Been Banned?
On the back of the call made by the government, In October 2020, the National Trading Standards Estate and Letting Agency Team (NTSELAT) made a recommendation to make the fees more transparent as opposed to banning them entirely. The guidelines published by the National Trading Standards for the property industry consist of the following recommendations:
- Estate agents must act transparently and information on referral fees must be provided to buyers and sellers in advance, allowing them to make an informed decision.
- Estate agents must act in the best interest of buyers and sellers. To that effect, the consumers should be encouraged to “shop around” and be presented with all available options.
- Referral fees need to be clearly displayed in marketing collateral (online and offline) and be as specific as possible, including who the fees are received from and what is the value of each referral.
- Estate agents should educate the consumers about hidden referral fees.
This was welcomed as an olive branch to the industry and enabled estate agencies across the UK to revisit their referrals strategy.
James Munro, Senior Manager, National Trading Standards Estate & Letting Agency Team, said:
“We recognise that referral fees have a place in business if used ethically and transparently and with no pressure to use the referred service. It is important that customers are fully aware of the basis and value of a referral or recommendation so they are able to take an informed transactional decision. Mandatory disclosure of referral fees would ensure there is full transparency around this practice, helping to build consumer confidence in the estate agency industry and demonstrating the duty of care agents should have to both parties in a property sale.”
What can estate agents do to stay compliant?
Many estate agents simply put the information on referral fees in their Terms and Conditions, but this may not be enough should the NTSELAT investigate. By far, the most popular option is integrating online conveyancing quotes with the agents’ websites. With a powerful digital comparison tool for conveyancing quotes, buyers and seller can compare quotes from multiple legal firms in minutes and be provided with a comprehensive breakdown of fees.
To find out how easily you can integrate competitive quoting with your website, book a demo with one of our team.