Blog: The truth about estate agents and mortgages

Home buyers are often advised to steer clear of in-house mortgage brokers foisted on them by pushy estate agents. But while the heavy-handed manner in which some agents bully buyers into using their in-house broker is rightly criticised, it's not the whole picture.

The in-house, often young and inexperienced, mortgage salesperson who works for the estate agency usually has access to - at best - a handful of lenders. It is highly unlikely that he or she would be able to recommend the most competitive rate on the market, because they simply don't have access to it. Without being patronising, they are unlikely to understand anything too complicated or be able to add any real value, assisting borrowers with complex funding requirements, for example. In most instances, it's fair to say borrowers would be better off doing their own research and finding their own mortgage.

But there is a whole other breed of professional: the independent mortgage broker who works closely with estate agents but is completely removed from the above scenario. These brokers are whole-of-market, which means access to mortgages across the board, not just those offered by a restricted panel of lenders. A frequent criticism of mortgage brokers is that some lenders will only deal direct with the public and not allow intermediaries to sell their mortgages. While this is true for a handful of lenders, a good independent broker will inform the client if there is a cheaper deal direct from a lender. That's because those brokers are responsible, treat customers fairly and put the client first.

Not only do independent brokers have access to mainstream loans, some of them really come into their own when it comes to the high-net-worth client who needs to borrow from the private banks - maybe because they require a loan of more than £1m, have a modest income but large, reliable bonuses, or are buying offshore through a trust structure. This is where experience and expertise comes in: the clued-up intermediary know ways of structuring funding that the client may not be aware of. He adds value because he knows which lender would best suit the client and can help structure a bespoke product, with tailored rates and fees if required.
Most of all, it's independence that counts. High-end agency brands may refer applicants to brokers such as Private Finance, but we are truly independent. These top-end agents would rather not have an in-house mortgage brokerage, preferring to keep one at arm's length. That suits us fine. We don't discuss with the agent the in's and out's of the buyer's financial position. And we certainly don't discuss the buyer's income, which means the agent couldn't use this information to ‘bump up' the asking price; a frequent criticism of in-house brokers. The fact is that there are very strict rules regarding data protection and what information can be shared: the agent acts for the seller and the broker acts for the buyer.

There are no strong-arm tactics when it comes to referring business. The agent simply asks the buyer whether they have arranged mortgage finance yet, and, if not, whether they would mind a call from a broker. They can say ‘no' and it won't be held against them. It certainly wouldn't mean they were penalised against if they were competing with another buyer for the same property and that buyer wanted to talk about funding possibilities. But if they haven't got finance in place, then they may lose out to the buyer who is organised and ready to go, particularly in a contract race where speed is of the essence.

We pay commission if funding is sanctioned but it's a fallacy that this makes agents money-grabbing at the expense of decent behaviour. One agency we deal with insists that these payments go to charity, not the agents themselves. This may seem incredible but the agents are still motivated to refer business to us because it could make the difference between achieving a sale and not achieving one, which believe it or not, is the agent's job. If the client would struggle to get funding otherwise, an independent broker assisting them get the right mortgage means a successful sale, a satisfied vendor and a happy buyer. It's a win-win situation.

While the agent is acting on behalf of the seller, who is acting for the buyer? The truly independent mortgage broker is. Don't knock it until you've tried it.