Ad description
Four online ads, for properties offered for sale through Express Estate Agency Ltd:
a. The first ad, which appeared on www.rightmove.co.uk, was headed "5 bedroom detached house for sale Offers in Excess of £335,000 [property location]". Further text stated "The Express Estate Agency offers this ATTRACTIVELY PRICED PROPERTY to buyers who are in a position to buy relatively swiftly. This property has been PRICED to encourage a quicker than normal sale ... Early viewing is highly recommended due to the property being priced to encourage a quick sale". Text towards the bottom of the web page stated "By making an enquiry on this property you acknowledge that this property is strictly offers in excess of the marketing price provided. The market appraisal of this property has indicated a value in excess of our marketing price. As a consequence, and similar to any other vendor, the vendor is aiming to achieve as much as possible in excess of this marketing price provided".
b. The second ad, which appeared on www.rightmove.co.uk, was headed "3 bedroom semi-detached house for sale Offers in Excess of £125,000 [property location]". The ad featured the same text as described in relation to ad (a).
c. The third ad, which appeared on the advertiser's own website, www.expressestateagency.co.uk, was headed "Offers in Excess of £220,000 [property location]". The ad featured the same text as described in relation to ads (a) and (b).
d. The fourth ad, which appeared on www.zoopla.co.uk, was headed "2 bedroom end terrace house for sale [property location] Offers over £90,000". The ad featured the same text as described in relation to ads (a), (b) and (c). In addition, a column on the right-hand side of the web page included a section headed "Listing history". Text underneath stated "First Listed £100,000 on 14th Feb 2013 Asking price changes £95,000 5.0% Reduced on 27th Feb 2013. £90,000 5.3% Reduced on 26th Mar 2013".
Issue
Four complainants challenged whether the offer prices stated in the ads were misleading, because they understood that the vendors would only consider offers which were much higher than those stated in the ads.
Response
Express Estate Agency Ltd said they used only 'Offers In Excess Of' (OIEO) prices when marketing properties, which they understood were widely used in the property market by a number of estate agents. They said that at the time of writing, 88,000 of 850,000 properties on a popular UK property website were being marketed using OIEO pricing. Express Estate Agency believed the OIEO pricing model was more successful in generating interest for properties because the marketing prices were more realistic and competitive than using the more conventional pricing model of stating a price and inviting offers at or below that price. They considered the use of OIEO prices was similar to auctioneers using guide prices. Express Estate Agency said they refused to overvalue properties in order to win new instructions, which they believed was a practice for some in their industry, and they strongly believed OIEO prices were a better way forward for the average consumer.
Express Estate Agency provided excerpts from comments on online forums and the website of a property solicitor in which the writers described what they understood an 'OIEO' price to mean in terms of making offers on property. They believed those excerpts, and the fact that a large number of properties were currently marketed using OIEO prices, demonstrated that consumers understood that an OIEO price meant that the vendor expected to receive offers in excess of the asking price, but that there was no hard and fast rule as to how far above the OIEO price the vendor would expect the offer to be. They considered consumers understood that would depend on various factors including market conditions, the condition of the property, the length of time the property had been on the market, and the amount of interest in the property. Express Estate Agency considered price was only part of the picture and, for that reason, the term 'OIEO' could not be understood to mean that an offer just a little over that price would be accepted. They gave the example that a vendor might accept an offer below the OIEO price if it came from a cash buyer who could move on a date to suit the vendor. They said that, because property was such a significant purchase for most consumers, any who did not understand the term 'OIEO' ‒ which they believed would be a small minority ‒ were highly likely to research its meaning before viewing a property or making an offer.
Express Estate Agency said before marketing a property they established with the vendor what their 'bottom line' would be. The property would then be marketed at an OIEO price which was slightly below the vendor's bottom line. Vendors were told that if they increased (or decreased) their bottom line they should inform Express Estate Agency immediately so that the OIEO price could be amended accordingly, or the property could be removed from active marketing if they considered it was no longer commercially viable. Express Estate Agency said that vendors occasionally did not inform them of changes to their bottom line and that during viewings, which vendors conducted themselves, they increased the bottom line in the hope of achieving a better price. They considered they could not reasonably be held responsible if vendors took that approach, but nevertheless, for that reason, and because they were confident they could achieve the best price for vendors, they asked that they negotiated prices on vendors' behalf, and they had recently amended their vendor contracts to include a clause which required vendors to consider all offers made in excess of the asking price. Express Estate Agency said that, on average, their properties sold for 4% below the vendor's bottom line.
Express Estate Agency highlighted that they included an 'OIEO disclaimer' in their advertising for every property which stated "By making an enquiry on this property you acknowledge that this property is strictly offers in excess of the marketing price provided. The market appraisal of this property has indicated a value in excess of our marketing price. As a consequence, and similar to any other vendor, the vendor is aiming to achieve as much as possible in excess of this marketing price provided". They said they had received advice from CAP on the wording of the disclaimer, which was subsequently endorsed by Trading Standards. They said they were willing to amend the wording of the disclaimer and to increase its prominence, but said that other estate agencies that used OIEO prices did not use disclaimers.
Express Estate Agency said the properties in the four ads about which the ASA had received complaints had been marketed in line with the vendor's bottom line in each instance. They believed the complaints arose because in each case the vendors had increased their bottom line without informing Express Estate Agency of that decision. They later clarified that they considered that in two cases the issue was not that the vendor increased their bottom line, but rather that potential buyers who had been outbid by other potential buyers were disgruntled.
Express Estate Agency said the property marketed in ad (a) came to market at the OIEO price of £385,000. The OIEO price was then reduced three times in three consecutive months, from £385,000 to £370,000, then to £350,000, then to £335,000. Two months after the final reduction in the OIEO an offer of £356,000 was accepted. They said each time the price was reduced they discussed with the vendor what their bottom line would be and the OIEO was brought down accordingly. Express Estate Agency provided screenshots of notes on their sales system which verified the price reductions and final sale price.
Express Estate Agency said the final reduction in price meant that the property became attractively priced and the vendor received numerous offers from different buyers. The complainant's offer was refused because they were confident a different buyer would offer more. They then received an even higher, unexpected offer which was accepted by the vendor. They said the vendor never made them aware that they wanted £350,000 for the property and their notes demonstrated that.
Express Estate Agency said the property in ad (b) came to market at an OIEO price of £135,000 with an initial vendor's bottom line of £135,000 to £140,000. Due to a lack of interest in the property, a month later the OIEO was reduced to £130,000 with a vendor's bottom line of £130,000 to £135,000. Four months later the OIEO was reduced to £125,000 and the vendor's bottom line was £125,000 to £130,000. They said that a further four months later, they increased the OIEO back to £135,000 because the vendor informed them he now wanted a figure around that price again. A screenshot of their sales system noted that the vendor's bottom line at that time was £140,000; Express Estate Agency said that even though the vendor's bottom line was £5,000 higher than the OIEO price at that time, it was well within the 4% margin referenced above. A few weeks later Express Estate Agency withdrew the property from the market because they considered the vendor's expectation of achieving £135,000 was unrealistic. They said they were never aware of the vendor asking for £145,000; if the vendor had told viewers they wanted £145,000 it must have been a misguided face-to-face negotiation tactic or they had increased their bottom line without informing Express Estate Agency.
Express Estate Agency said when the property in ad (c) came to market the vendor informed them they were hoping to achieve above the price of £230,000 which was stated in the contract. They said they had little interest from buyers at that price and so the property was reduced a week later to the OIEO price of £220,000, with the adjusted vendor's bottom line of £220,000 to £230,000. They still received little interest, but a month later the vendor unexpectedly informed them he now wanted £240,000 as a minimum. They said that as soon as they were made aware of that they withdrew the property from the market. They said the complaint appeared to stem from the vendor informing a viewer, before Express Estate Agency, that his bottom line had increased from the £220,000 to £230,000 range to £240,000. As soon as they were made aware of that revision they withdrew the property from sale.
Express Estate Agency said the property in ad (d) came to market at OIEO £100,000, with a vendor's bottom line of £105,000, but with the knowledge that the vendor might consider slightly less if Express Estate Agency could save them some money off their next property. They said the property did not receive much interest so a couple of weeks later the vendor instructed them to reduce the OIEO to £95,000, because their bottom line had reduced to £95,000 to £100,000. However, they still did not receive any offers on the property and a month later the OIEO was again reduced to £90,000 with the bottom line being reduced to £90,000 to £95,000. They said an offer of £95,000 was then put forward a month later by a buyer and was accepted by the vendor. They said they had never been aware of the vendor wanting anything but a figure very near the OIEO price. They later said that the initial OIEO price of £105,000 genuinely reflected their understanding at the time of their initial conversation with the vendor, and, with a final agreed price of £95,000, that understanding turned out to be accurate.
Assessment
Upheld (in relation to ads (b) and (d) only)
The ASA understood the OIEO pricing model departed from the more traditional method of marketing properties in England (using an asking price and seeking to achieve the value advertised or as close to that figure as possible), and we considered consumers therefore might not be familiar with OIEO pricing. We considered, however, that regardless of the format in which the price was presented, consumers had a general understanding that the stated property prices in ads were the basis for beginning a process of negotiation and the final price agreed by the vendor would be dependent on a range of factors. Notwithstanding that, we considered that consumers would understand the claims “Offers in Excess of [price]” and “Offers over [price]” to mean that the stated price represented the minimum price the vendor would be willing to accept for their property. The vendor would be very unlikely to accept an offer below that price.
We noted Express Estate Agency had stated that when preparing to market a property they first established with the vendor what their ‘bottom line’ was and set the OIEO price slightly below that. We noted that, with regard to the four properties referenced in the ads, the vendor’s bottom line was generally recorded as a £5,000 or £10,000 range, and that in most instances the OIEO price was set at, or £5,000 above, the lowest price in that range. Because we considered that consumers would understand the OIEO price to be the minimum price at which the vendor would be prepared to sell their property, we considered it was acceptable to set the OIEO price at or above the lowest price in the vendor’s bottom line range. However, we noted that in two instances, the OIEO price had been set below the lowest price in the vendor’s bottom line price range: the final OIEO price for the property in ad (b) was £135,000, but the vendor’s bottom line was noted as £140,000; and the original “Offers over” price for the property in ad (d) was £100,000 but the vendor’s bottom line was noted as £105,000. Because we considered consumers would understand the advertised OIEO and “Offers over” prices to be the minimum price at which the vendor would be prepared to sell their property, we concluded it was misleading to set the OIEO or “Offers over” prices lower than the lowest price in the vendor’s bottom line price range.
We noted we had seen evidence that the vendors’ ‘bottom lines’ were in line with the OIEO prices in ads (a) and (c) and we therefore considered they were not misleading. However, because that was not the case with regard to ads (b) and (d), we concluded those ads were likely to mislead.
We investigated ads (a) and (c) under CAP Code (Edition 12) rules 3.1 3.1 Marketing communications must not materially mislead or be likely to do so. (Misleading advertising), 3.7 3.7 Before distributing or submitting a marketing communication for publication, marketers must hold documentary evidence to prove claims that consumers are likely to regard as objective and that are capable of objective substantiation. The ASA may regard claims as misleading in the absence of adequate substantiation. (Substantiation) and 3.17 3.17 Price statements must not mislead by omission, undue emphasis or distortion. They must relate to the product featured in the marketing communication. (Prices), but did not find them in breach.
Ads (b) and (d) breached CAP Code (Edition 12) rules 3.1 3.1 Marketing communications must not materially mislead or be likely to do so. (Misleading advertising), 3.7 3.7 Before distributing or submitting a marketing communication for publication, marketers must hold documentary evidence to prove claims that consumers are likely to regard as objective and that are capable of objective substantiation. The ASA may regard claims as misleading in the absence of adequate substantiation. (Substantiation) and 3.17 3.17 Price statements must not mislead by omission, undue emphasis or distortion. They must relate to the product featured in the marketing communication. (Prices).
Action
We told Express Estate Agency to ensure the “Offers in Excess of” or “Offers over” prices stated in their ads corresponded with the lowest price in the vendor’s ‘bottom line’ range.
