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We live in the UK and are hoping to move home. We wanted to put an offer in on a house. We have already spoken to our bank who have given us a letter stating the amount we are able to borrow. (Its the asking price of the house but they are willing to give more.)

The estate agent for the sellers has asked to see this letter and we have shown it to him, so he knows we can afford the full amount. But I feel at a huge disadvantage to the negotiating process. Its in the estate agents interest to push the seller to not accept our lower offers, he says he cant tell them the amount because that would be a conflict of interest but surely him just knowing is a conflict of interest.

He has used phrases over the phone that suggest he is letting them know this, "I'll say this is getting close to your maximum.." etc.

If we approach another estate agent for a different house I'd like to avoid this situation, do I have to tell the estate agents what the bank is willing to offer? Or can I otherwise work around this?

  • There is no conflict of interest here, because the agent works for the vendor and not for you. The agent has no duty to you that might conflict with their duty to the vendor. You're right to be cautious about giving an agent insight into your exact financial position. You don't have to tell the estate agent anything, and they are required by law to pass your offer on to the vendor anyway, unless the vendor has previously told them something like "Don't bother telling me about offers unless you've verified that they have a mortgage offer for the full amount." – Mike Scott Nov 6 '15 at 17:00
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Estate agents face 2 somewhat contradictory legal requirements.

On the one hand they are required by law to promptly pass on all offers received to the vendor that match the vendor's stated criteria (so for example they can disregard "silly" offers if the vendor has specified a minimum price).

However they are also required not to "knowingly or recklessly" pass on misrepresentations about "the financial standing of that purchaser" (or certain other things).

This is in the snappily titled The Estate Agents (Undesirable Practices) (No. 2) Order 1991.

So what is an estate agent to do when you make an offer?

The usual interpretation is that they have to make reasonable efforts to ascertain that you actually have the ability to satisfy your offer. One way of doing that is to see that you have an agreement in principle from a lender (which is what the letter you have from your bank is sometimes called).

Another option is to have you talk to an in-house mortgage broker who will ask about your circumstances and confirm whether you can afford what you're offering.

Either way of course you are revealing information that may potentially colour negotiations and the only protection you have is other rules preventing the estate agent from passing on that information.

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At the end of the negotiation you will have to show the letter that gives the amount. But this is only after the paperwork has been signed locking in the details.

Your agent should have advised you not to show the sellers agent the letter. The sellers agent doesn't work for you, showing them that number did tell them the maximum you can afford. Of course this isn't the maximum you want to pay for that property, but you gave them a key piece of information.

Lets say they keep their promise to you "he cant tell them the amount because that would be a conflict of interest"; you have already heard him use phrases such as "I'll say this is getting close to your maximum..". He uses subtle changes in words and tone to convey this information to the sellers. He keeps is promise to you and his obligation to the sellers.

In a sellers market there can be situations where the house has multiple bids at or over the asking price. The seller doesn't want to negotiate with bidders who can't get a mortgage. In this case they may insist on seeing the letter. Not showing it means they focus on the bidders who do show their letter. In that case you might have to show the letter. I have heard of banks preparing a different letter pledging a lower amount but indicating the true number is actually larger.

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    FYI in the UK buyers don't normally have their own agent. – Ganesh Sittampalam Jul 26 '15 at 11:41
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You don't have to show the real estate agent any letters from your bank. The selling agent works for the Vendor not you. All you need to do is make your offers and let them know you have pre-approval from your bank.

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    I associate the term pre-approval with a mortgage in the US. Please clarify if you are speaking with authority on how things work in the UK or are just making assumptions based on how it works in the US. – Eric Jul 26 '15 at 12:10
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    @Eric - I don't care how it works in the US ! The US is not the centre of the World !!! Pre-approval is basically the letter that the OP has gotten from their bank with the amount they can borrow, and there is no need to show this to the selling agent whilst you're making offers. – Victor Jul 27 '15 at 10:48
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    @Victor Your answer is very short and does not give any indication that it has information specific to the UK housing market. I don't think it's unreasonable to ask you to clarify in your whether you actually have experience in the UK housing market. – Eric Jul 27 '15 at 15:02
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    @JoeTaxpayer - as a buyer's agent, yes this is a different situation, but the OP is talking about the selling agent. I would not show anything to the selling agent whilst I was negotiating on the property. Once agreement has been reached and you are signing the contract, then you can show them whatever you want. – Victor Jul 28 '15 at 10:11
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    @Eric - can you tell me any country where it is a requirement (part of the law) to show to the selling agent your pre-approval letter from the bank whilst you are making an offer. Once the vendor has accepted your offer and you are signing the contract, yes then you can show the selling agent what ever you want, but not during the negotiations. – Victor Jul 28 '15 at 10:17

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