An article in the Sunday Times titled Beware estate agents’ hard sell tactics reported a recent case of a homebuyer being pressured into using the estate agent’s in-house mortgage broker. The article reported instances of people not getting to see properties unless they used the agents’ own mortgage broker and solicitors, being refused access to see properties or being given the property details later than other buyers. Of course there are regulations which are supposed to guard against this sort of thing but, leaving that aside, why might it be a bad thing to use the in-house broker?
First, if the estate agent is really pressuring you into using their in-house broker then it must be in their interests somehow. One way or another that means money. Second, their interests are not aligned with the buyer – they are, after all, sellers’ agents.
Is the in-house mortgage adviser an independent professional?
So mortgage broking is an activity that creates profit and estate agents sometimes enter that market to earn a share of the profit. The problem arises when the “mortgage broker” is really only there to facilitate the purchase of houses rather than being a fully trained mortgage specialist with the client’s best interests at heart. There is a big difference between an independent professional mortgage broker, who will search the entire mortgage market for the best deal, and somebody trained to sit and churn through mortgage applications, and who may only be able to advise on a limited number of mortgage products.
Are you getting the best deal available?
The issue which arises with the in-house mortgage broker – highlighted in the article in the Sunday Times – becomes apparent when you realise that they may not be considering the whole market. Some of them operate on a very restricted panel of mortgage lenders, which means the client may not always be offered the best deal available to them. This could make a very substantial difference to the cost of the mortgage. An independent mortgage broker is duty bound to recommend the best deal for your circumstances, and will search the entire market for you.
Keeping your cards close to your chest
Estate agents exist to sell houses for vendors. They obviously prefer to get a higher price for a property than a lower one. So let’s say you are making an offer for a property and you tell the estate agent you cannot afford to pay more – but the in-house mortgage broker knows for a fact that you could borrow another £25,000 if you needed to. If they shared that information with the estate agent, it could totally undermine your position. It is harder to negotiate when the other side knows so much about your financial position.
What if you get a little doubt over the property? Let’s say you like it and want to buy it but there is another property that is even better that you are waiting to hear about. With an independent mortgage broker you can be honest and let them know there will be a few days delay but what will you tell the in-house estate agent broker? Could you lose the first property while waiting for the new one that you might not get?
Of course none of these things might happen but it is an illustration of why you don’t always want the estate agent to know everything about your circumstances. It’s important to check out who the “in-house” mortgage broker is working for so you know exactly where you stand.
Estate agents that outsource
Many estate agents refer clients to local mortgage brokers and, so long as they are independent, the problems highlighted in the Sunday Times article are not relevant. The key is about who the mortgage broker works for – do they work for the agent or do they work for you?