In November 2023, Rosie and Clinton approached a mortgage adviser to help them obtain a new home loan. Rosie and Clinton intended to sell their current home and use the funds from the sale as a deposit for a new property.
Their mortgage adviser obtained a pre-approval from a bank in December 2023. The pre-approval was for $900,000, for a move-in ready property, and was due to expire in March 2024. In March, Rosie and Clinton had not made any progress with selling their current home, so the mortgage adviser had the pre-approval extended until June.
In April, Rosie and Clinton told the mortgage adviser that they had bought some land and wanted to obtain a construction loan to build on the land. The mortgage adviser explained that they would not be able to proceed with their current pre-approval, as it was for a move-in ready property only. The mortgage adviser told Rosie and Clinton that he could secure a construction loan for them. However, Rosie and Clinton said they had already approached another mortgage adviser to help them.
Due to this, the mortgage adviser assumed that Rosie and Clinton no longer required his services, and he sent them an email confirming this. Rosie and Clinton did not respond to this email, so the following day the mortgage adviser calculated the time he spent working with Rosie and Clinton. He invoiced Rosie and Clinton for three hours of work, at $300 per hour.
Rosie and Clinton declined to pay the invoice, as they said they did not ask to end their relationship with the mortgage adviser and complained to FSCL.
Dispute
Rosie and Clinton thought the invoice was unfair. They said that they had not told the mortgage adviser that they wanted to end their relationship.
The mortgage adviser explained that Rosie and Clinton no longer required his services, as they had bought land to build on, so they were not able to retain their current loan pre-approval. The mortgage adviser also noted that he offered to help Rosie and Clinton obtain a construction loan, but Rosie and Clinton said they had already engaged a different mortgage adviser.
The mortgage adviser said that Rosie and Clinton had agreed to his scope of service, which stated that he would charge for his time if the clients did not act on his advice.
Review
We told Rosie and Clinton our initial view on their complaint. We acknowledged that Rosie and Clinton did not specifically say that they wanted to end their relationship with the mortgage adviser. However, Rosie and Clinton confirmed that they had bought land to build on and had approached another mortgage adviser to assist them with obtaining a construction loan. Based on this information, we thought that it was reasonable for the mortgage adviser to assume that Rosie and Clinton no longer required his services, or the pre-approval he obtained for them.
We thought that the fee the mortgage adviser charged appeared to be reasonable. The mortgage adviser’s scope of service said he would charge an hourly fee of $300 for the work he had completed, with an average charge of $900. We found that this accurately reflected the work the mortgage adviser had completed, as he had exchanged several emails with Rosie and Clinton, had two online meetings for a total of two hours, obtained a pre-approval, and extended the pre-approval.
Resolution
After reviewing our comments, Rosie and Clinton discontinued their complaint.
Insights for consumers
We encourage consumers to read their mortgage adviser’s scope of service. It is common practice for mortgage advisers to charge a fee for their time if they obtain a loan approval for a client, and the client decides not to proceed with the loan.
