Estate agents faking an offer on a property

Question

I was recently viewing a property to buy in the UK, with an asking price of £400k. On the day of the viewing, but before my appointment, the estate agent informed me that two offers had already been made that same day, and both had been accepted. Although he couldn't reveal the amount of these offers for legal reasons, it was "not worth me making an offer below the asking price". So, I make an offer for £407k, and this was accepted. After thinking this through, I am now wondering how likely it is that these two other offers were genuine, and how likely it is these two offers never actually existed, but were made up to encourage me to make an offer over the asking price.

As another anecdote, after a previous viewing at a different property, the estate agent informed me that an offer for the asking price had just been accepted, and asked whether I would like to make an offer to myself. I replied that I was not interested in making an offer, but then only to find out a few days later that an advert for the same property was re-listed at £10k below that original asking price. Yes, I know that often the finances don't work out and the buyer has to back out, but it certainly seems possible that in that case too, this other offer was fake.

So, my questions are (and relating specifically to the UK, but other comments welcomed):

1. When estate agents state that other offers have recently already been made and accepted, is it common for these to be fake? If anybody has any real insider knowledge about this (e.g. if you are / have been an estate agent yourself), comments would be welcomed on how often estate agents make up other offers when trying to get a buyer to increase their offer.

2. Is it actually defined in law that it is illegal for estate agents to suggest that other offers have been made, when this is completely untrue?

3. If I was suspicious about the estate agent faking an offer, how could I go about finding out the truth? If I were to ask the estate agent, he would certainly say to me that it was not within his capacity to reveal the details of his other clients who made these offers. So it seems difficult to ever know, even if you were very suspicious.

Answer 1

1. Actually, nobody can ever know 'how common it is' without asking a significant percentage of those working as estate agents. Even if you were able to do this, there is a philosophical problem with relying on people's answers to know whether they are dishonest or not...

2. There is a considerable difference between 'what most people would consider dishonest' and what is actually illegal, particularly since the agent has no responsibility to you, but does have a fiduciary responsibility to the seller to obtain the best price possible. As an illustration; I was in court for a double-glazing case where affidavit evidence stated that it was normal practice [in one company, to the extent of being in the training manuals] to quote a price 20% above normal, make a fake phone call to the office, and then offer a 20% discount for a sale made today. Anyone who falls for this has apparently no legal redress, as it falls within the nornal caveat emptor principle, and your situation would be similar.

3. There is one possible exception; if the agent refused to pass on your offer, even one below the asking price, he was defrauding the seller, who has the right to know of all offers before making a decision. The agent will certainly (and properly) refuse to give you the seller's details, but you could probably write a letter (perhaps addressed to "The Seller" and delivered to the house) explaining what happened. Almost certainly there will be no result except to relieve your feelings, but just possibly the seller will disinstruct this agent and either find another or sell without.

(It would be then be theoretically possible for you to make an offer direct for slightly below the asking price and for the seller to accept because he does not have to pay agent's fees. This would of course be dishonest, but not illegal; and the argument would be between the seller and the agent, not involving you. I couldn't recommend this even if it did prove possible: but it is entertaining to contemplate the biter bit.)

Answer 2

On 2) If it is a case of phantom bids from the agent, then that is fraud in the UK. However, it will be difficult to prove unless you get it in writing or record conversations etc.

On 3) If the seller lives in the house, then the best counter I can think of is to send him/her a letter directly with your offer also.

While the agents must by law pass on all offers unless otherwise agreed with the seller, in the case of phantom bids, then they will be unlikely to pass them onto the seller in writing.

You might not find out about whether there was fraud or not, but unless the seller was in on such a ruse, then he/she would ask the agents to accept if he/she was happy with your offer.

Answer 3

1. Yes, I believe it is common in some cases for people to lie about alternative offers in order to drive up asking price or encourage a quicker offer. But there are also brokers who would never consider it. People are night and day. How common it is depends on the culture of real estate transactions in a particular region and the particular person you are dealing with.

2. Legality depends on your jurisdiction, and there is a distinction between illegality and what can be done about it. Technically it may be fraud or in violation of ethics regulations. Consult an attorney in your jurisdiction who does not regularly work with this broker.

3. You can't necessarily know. You have to assume a selling agent is lying about everything and protect yourself by ignoring most of what he says and having a good attorney. I would especially do that when the agent tells you he has already accepted two offers on the same house, because that means he has already broken a deal today and is planning to break the second if you give him more money.

The best approach is probably, practically, to mostly ignore the claim about the competing offer and take it as a price change. If you'll pay more and be happy, fine. If you aren't willing to pay more, walk away. If they're faking the offer, they'll almost definitely come back to you and then you can even potentially negotiate a price cut.

However, check with a local real estate attorney first about whether this increases the risk of litigation over the property that you won't want to get involved in.

Answer 4

I have no idea how common this is, but it's called fraud in the inducement. Even if you can prove it, the problem is damages. You might get out of the contract at best, especially if the seller testifies that they would not have not accepted any offer less than $400k. In other words, it might be hard to get the agent to write you a check for $7k.

The agent could also claim innocence - that they made a mistake. Or perhaps raise a defense that you unreasonably relied on an oral promise.

Answer 5

This sounds like bait and switch for me. According to this article in Wikipedia, it is illegal in England under the Consumer Protection from Unfair Trading Regulations of 2008.