Backhanders when buying property. Does it go on as much as you think? Does it stop you getting fair property deals? Is it illegal?

You see, Estate Agents get bad publicity.

Many people think they get up to naughty tricks and back handers.

Also known as a ‘Bung.’ But is this really the case or just an unfair stereotype?

Reality: property backhanders go on, but it’s not a fair representation of the entire Estate Agent’s market.

Some Facts To Be Streetwise About:

You get more backhanders in independent Estate Agents.

An independent Estate Agents is the single ‘owner occupied’ Agency, rather than a nationwide or geographic chain or franchise known as a ‘corporate.’

The contracts and restrictions are less strict, and the more ‘wheeler dealer,’ type Estate Agents are attracted to the independents. They can get into bed with top dog investors who may pay them for deals.

Employees and managers of corporates are often restricted contractually from buying any property. The business is more systemised and controlled.

If you’re worried about backhanders and unfair treatment you can target corporate, nationwide chains more for buying or selling property.

It’s mostly investors who use backhanders and bungs to get good deals and stop other buyers from viewing and making offers.

But this is not the only way to get the Estate Agency onside.

Some More Tips On That In A Moment…

A backhander or Bung is technically forbidden by the Bribery Act 2010. Though it’s grey. If an incentive is seen to be given relating to receiving better deals then it is likely to fall under the Bribery Act.

Those grey areas we’ll cover, and you won’t see many cases end up in court and investors in prison.

Those Grey Areas:

Gifts. If a gift is seen to relate to the incentive of buying a property you are in dodgy waters. If a gift is a gift unrelated to the purchase then you are likely to be fine. Their is a difference between an unrelated gift and a back hander.

Many professional investors will show gratitude and gifts of cakes, chocolates, flowers, track days, sports tickets; unrelated to the purchase of the property in order to forge a preferable relationship.

Invoices. Many Estate Agents now are charging and invoicing through their books for ‘finder’s fees.’ If there is an above board paper trail of invoices and a service has been paid for, you are likely to be protected.

If you want to check the legitimacy of this then ask if they are declaring this to the seller. If they are then this should negate the conflict of interest concern.

In fact professional investors like paying these fees as they believe they get preferential deals and extra service and protection from gazumping.

Don’t forget the Agent’s don’t want property sales ‘falling out of bed,’ as much as you; they lose their fees and waste their time.

One In The Hand Is Worth Two In The Bush

That’s why they’d sometimes ‘protect,’ a sale; one in the hand is worth two in the bush.

A lower price guaranteed sale is better than a high priced wishful one.

You see backhanders and ‘finder’s fees more in London. And areas like London; mini London’s. It’s more common in areas of high growth, like the capital.

Here Are Better Ways To Get Fair Preference From Estate Agents (Without Back Handers):

  • If you’re an investor, and you’re flipping properties, buy and sell with the same Estate Agent so they get double fees and easy work.
  • If you have a home to sell, put your sales through the ones you want to buy from and they’ll earn twice out of you.
  • Never haggle their price (the fee) down. Pay the highest fees you can as it’s an investment and you’ll save the extra money in speed of sale and obtaining the highest possible price.

If you have comments, questions or concerns please post.

We buy properties for a living; love a good property debate and will answer your questions.

Mark Homer
Mark Homer

Co-founder at Progressive Property, 600 + properties bought & sold. Full time property investor/analyst/geek & World Record Holder Author of No.1 Amazon best-selling book Uncommon Sense, Low Cost High Life and Commercial Property Conversions.