Inquiry into estate agents after surge in complaints

Claims that estate agents are exploiting buyers and sellers in a booming property market are to be scrutinised in a year-long government investigation.

A review of agents' practices by the Office of Fair Trading (OFT) has been prompted by a record 10,000 complaints in the past year. These included allegations that agents were charging exorbitant fees, encouraging gazumping and illegally forcing buyers to sign up for financial services such as mortgages or insurance.

There are concerns that amid spiralling prices and the most acute shortage of new homes since the Second World War estate agents are employing increasingly underhand tactics and stoking the boom.

An estimated 50,000 individual agents work in 12,000 branches in England and Wales. Last year the ombudsman for estate agents received more than 5,500 complaints, an increase of 25 per cent on the previous year, with a further 5,000 complaints to trading standards officers.

John Vickers, director general of fair trading, said: "Buying or selling a home is the largest transaction that most people make, so it is essential that consumers are able to understand the process and the options open to them. This comprehensive study will tell us whether the market is working well for consumers."

OFT investigators will hold random interviews with recent buyers and sellers and conduct a "mystery shopping exercise", where agents pose as buyers or sellers. The investigation will take into account evidence from the ombudsman for estate agents and the Consumers' Association, which is due to publish a report on the role of surveyors in the buying and selling process next month.

The OFT, using powers it was granted last year to investigate markets where it feels consumers are getting a poor deal, will question estate agents about the return of gazumping, where sellers push up the price after a deal has been agreed. Agents' fees and commissions are also expected to be scrutinised. At present, sale through a sole agent can amount to 2 per cent of the price, while using multiple agents typically amounts to 3 per cent.

The investigation will compare markets outside England and Wales, including Scotland, where solicitors have a greater role in the buying process.

Pete Tynan, of Which? magazine, said: "We suspect that last year's complaints about estate agents are the tip of the iceberg. Buying a house is notoriously stressful and it's no wonder that people turn to estate agents for help. We believe that people are used to estate agents falling below the mark and too often accept dodgy sales practices such as paying extortionate fees and being pressured into buying financial products."

The Government has indicated in the past that it would like to make the housing market fairer. A "seller's pack" scheme, in which houseowners would have to supply prospective buyers with a survey, land searches and a draft contract to speed up the sale process, was included in Labour's 1997 election manifesto. But it was opposed by estate agents who claimed it was unworkable.