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My neighbor is selling his house and the estate agent has listed it below market value, but in return is offering to pay the stamp duty and bill to refurbish the kitchen in the house he is moving to.

Are they legally allowed to do this under table arrangement?

I assume they are doing it with the intention of provoking some crash in the local housing market, which in return they can profit from.

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    Your assumption seems a bit far-fetched to me. My guess would be that the estate agent wants to make a sale quickly, maybe because she's personally in need of cash, and she's basically offering to rebate part of her commission to the seller to encourage him to cooperate. If the seller and the agent (and maybe the agent's employer) are all okay with this, I don't see any reason for it not to be legal. – Nate Eldredge Jun 25 '19 at 17:22
  • In the U.S. a low asking price is sometimes used to generate interest and offers. The offers are then ofter above the asking price in order to win the bidding, as it were. Result can be that the house sells quickly at the market price or even above it. – George White Jun 25 '19 at 19:44
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An agent can advise the seller that for a quicker sale, a house should be listed at a lower price. If it is to the agent's advantage to make a quick sale, the agent can reduce the commission by whatever amount s/he chooses to help induce the seller to agree to a lower asking price. As long as this is done openly (to the seller) this should be legal.

In some jurisdictions the agent's actual commission must be listed in the closing documents. In those cases, such rebates would probably have to be listed. I don't know if this is true anywhere in the UK.

Note also that "market value" is not an absolute, objective figure. it is merely a prediction of what price a seller and buyer will agree to. For unique goods such as real estate, it is even more problematic than cases where many identical widgets are sold at a fixed price. No two houses or lots are quite identical in the qualities that make them of value to a buyer, so there is never a guarantee that a sale will be at a similar price to that of a "comparable" property.

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