Property sourcing or deal packaging has become a very popular ‘entry level’ strategy for starting in the property investment sector. Sadly, most sourcing agents that start out, make little or no money and worryingly, a lot of property investors lose, sometimes large sums of money, to sourcing agents.
There are many ‘How to Source’ training and coaching programmes in the UK right now, teaching attendees that they can make thousands of pounds in sourcing fees per month quickly and while that may be true to a point, what most don’t teach and some never mention at all, is the not so sexy part of the sourcing industry: how to legally comply with the required ‘codes of conduct’ and ‘regulations’, of which there are many.
This article gives you as an investor, all the information that you need to keep your hard-earned cash safe, when working in the sourcing sector and using the services of a sourcing agent.
Most investors are ‘cash rich and time poor’ and so the services of a professional, ethical, legal and compliant sourcer can be very welcome.
The sourcing agent can take the ‘leg work’ away from the investor, present potential investment deals, which are found for that investor and their specific strategy and required investment return, allowing them to make an informed decision as to whether to purchase or not.
Relationships with professional sourcers can build over time, with trust and last for years. A good, reliable, compliant sourcer can be worth their weight in gold!
When I first started sourcing in January 2012, it became apparent that the majority of the other sourcers had no idea about compliance, or worse still, simply ignored it; the really scary thing is that little has changed since then.
As an investor, you may feel that it doesn’t matter, as long as ‘the deal fits your criteria.’ However, the real problem is that should you use the services of a non-compliant sourcer and the deal ‘goes wrong’, you are at very high risk of losing your hard-earned cash and what’s more, never seeing it again!
I am regularly contacted by investors, who in some cases, have lost many thousands of pounds to an unscrupulous, non-compliant sourcer. The losses vary in amount and their intended use for example:
They paid a reservation fee or deposit to secure a deal – Deal ‘fell over’ no fault of buyer – Refusal to refund fee.
The description of the property or site (deal) was not accurate – Unable to use for specific strategy – Reduction in income potential.
The level of refurbishment described was inaccurate – Cost to set up much higher than stated.
End value of the property is substantially lower than claimed.
The consequences can be anything, from losing thousands in reservation fees or deposits, to the investor being stuck with a property that is not fit for purpose, does not cash-flow and the valuation is significantly less than expected.
The solution is simple, ‘due diligence, due diligence and more due diligence (DD)’. It never ceases to amaze me how easily some investors hand over thousands of pounds to a sourcer, a person that, in a lot of cases, they have never met and know little about.
I have developed a system of ten simple questions to ask any sourcer, which are then followed up by ten simple actions, if used together, they might well save an investor the loss of their hard-earned cash, as well as a lot of worry and stress.
Q1. What is your company set up?
DD. If Limited Company (Ltd.) or Limited Liability Partnership (LLP) use Companies House to double check their company registration number and who the shareholders are. Does the name of your connection match with shareholders of that company?
If a sole trader, use social media (Facebook, LinkedIn and any website) to check them out and ask questions. Check for consistency or lack of, across all social media platforms.
Q2. Do you have any insurance?
DD. It is a membership of a ‘Property Redress Scheme’ requirement, which has a minimum of £100,000 professional indemnity (PI) insurance. Please don’t just accept their word for it, ask to see a copy of their insurance certificate. If it is not a specific policy for ‘sourcing’ or ‘property sourcing’, the insurance provider may not pay out for a claim; get clarification and proof, which should come from the insurance provider and not just an assurance from the sourcer.
Will the sourcing agent be providing a service to manage the refurbishment of a property purchased? If “Yes,” then check that their insurance policy covers this, most don’t, as the cost of such cover can be high.
Q3. Which Property Redress Scheme are you a member of?
DD. Any sourcer can be a member of either of the two government approved schemes below:
The Property Ombudsman (TPO) – You can search for members here:
The Property Redress Scheme (PRS) – You can search for members here:
Check the appropriate register for the sourcer name and or registered number. If in doubt, email the redress scheme and ask for confirmation of membership and what services they are registered for. The service provision is important, as if they are registered for property management and not sales, any complaint may be difficult.
Q4. What is your Redress Scheme registered number?
DD. If they are registered, they will have a registered number. If they have only just registered, sometimes there could be a delay in notification of the registered number. It might be prudent to wait until a registration number can be checked.
Q5. Are you registered for Data Protection supervision?
DD. All sourcers must be registered with the Information Commissioners Office (ICO) – You can search for members here:
If they have only just registered, sometimes there could be a delay in notification of the registered number. It might be prudent to wait until a registration number can be checked.
Q6. What is your Data Protection registration number?
DD. You will need their registration number to be sure that you are searching for the correct person.
Q7. Are you registered for Anti-Money Laundering supervision?
DD. All sourcers must register for Anti-Money Laundering supervision – You can search for members here:
Q8. What is your Anti-Money Laundering registration number?
DD. You will need their registration number to be sure that you are searching for the correct person.
Q9. Do you have an in-house complaints procedure?
DD. An agent is required to have this in place and it is this procedure that you would have to follow should anything go wrong. A redress scheme will not hear your complaint if you have not already gone through the agents’ complaints process; ask to see a copy.
Q10. Do you have a Terms of Business Agreement (or another contract)?
DD. An agent will usually ask you to sign something to secure you. Make sure that the agreement is very clear about how you will work together, when you have to pay, how much you will pay, if payment upfront is refundable, non-refundable, or deductible and where it will be held. How do you terminate the agreement? How much notice do you have to give? Read any document carefully and make sure that you understand what you are signing up to. Finally, do not let them fob you off with excuses that they don’t need to be registered straightaway to do a couple of deals. They should be fully compliant prior to introducing or brokering even their first deal.
NAPSA – The National Association of Professional Sourcing Agents, provides the first free to use, search facility for Property Investors – Simple to search by location and investment strategy to find a relevant sourcing agent.
Every sourcing agent on the platform has provided proof of a high standard of sourcing compliance and professionalism, which should give you the confidence and reassurance to search, find, chat and build a relationship with. NAPSA does all the work for you and covers the ten questions above plus much more, before any agent is visible on the site. Leaving you to do what you do best, invest in property.Final thoughts, whatever route you choose to take, please don’t take it for granted that your upfront fee is safe; it’s too late when its spent and you have lost your hard-earned savings!Best wishesTina Walsh
Website:
Email: hello@napsa.org.uk
