Referral fees backfire on agents and encourage poor conveyancing - claim

The head of residential property at a law firm is warning that referral fees can backfire on estate agents who may have lost the support of local conveyancers.

David Knapp, partner and head of residential property at law firm Hart Brown, claims that there would be overwhelming support for an overall ban on such fees if a poll were taken of the conveyancing industry. 

But he goes further, saying that while short term referral fees help agents, the long term picture is less good.

“We have reached the point where the property sale cycle has come full circle and more and more of the buyers who bought properties using lawyers recommended by agents for the payment of a fee, are looking to sell” he says.

“On a very regular basis we are finding that a great deal of sellers are shunning the referral fee route on the basis of poor service at the point of purchase, and the geographical location of the lawyers. 

“Many of those lawyers paying referral fees are many miles from the towns in which the properties are being sold. There seems to be a near zero incidence of repeat business for those ‘winning’ business in this way” he adds.

“Savvy sellers are realising that they cannot just call in on spec to see their referred lawyer and that the only interest that the agent has in making the referral is financial. 

“Ironically, even this is fallacious as the agents lose the support of the local lawyer and the stream of business that a solicitor can provide to the local agent. Instead an independent agent will receive the work.

“Sellers are also beginning to avoid using the agents who dealt with the property when they purchased as the referral of a poor, remote and uncommunicative lawyer all those years ago has tainted their view of the agent.”

Knapp says he has person experience of an agency close to his firm’s offices in Surrey which refers clients to a firm of lawyers based in Yorkshire while another refers work to lawyers on the south coast.

“As the government has promised to look into the whole issue of referral fees, with the majority hoping that they will be banned, there seems to be a consensus of opinion that referral fees increases the likelihood of poor client service in what is always going to be by far and away the largest expense any property owner will ever make” says Knapp.

He urges people to “go local and on a recommendation, merit or after having carried out review research on the web” rather than following the referral of an agent who is just looking to supplement their fee.