For property investors, the appeal of investing and the promise of high returns can sometimes overshadow the critical importance of thorough due diligence. We hear from so many investors who just want the deal and are not bothered about the compliance.
Social media is full of lead magnets and enticing headlines about deal sourcing, advertising "25 percent below market value" or "high return on investment opportunities" that claim a deal will not last long. This is all good and well until something goes wrong, a complaint needs to be made, an offer falls through, or a legal issue arises.
At NAPSA, we have seen first-hand how even experienced property investors can encounter costly setbacks when working with non-compliant deal sourcing and deal packaging agents.
In this short video, Tina Walsh - CEO of NAPSA - explains the four big mistakes we see investors continue to make when working with non-compliant property sourcing and deal packaging agents, and how you can avoid them yourself:
The Risk of High Upfront Fees
One of the most common mistakes in property investing is transferring substantial funds upfront without verifying the agent or the legitimacy of the deal sourcing opportunity.
In a recent case reviewed by NAPSA, an investor paid over £175,000 to secure a portfolio of HMOs. The outcome was disappointing: the properties did not exist or had already been sold to someone else.
Because the sourcing agent did not use a client account or provide an escrow facility, the money was placed directly into their business account and was unavailable when the deal collapsed. This left the property investor with no recourse and a substantial financial loss.
The Limitations of Legal Recourse
Some property investors believe that a signed non-disclosure agreement or pursuing a claim through small claims court offers them enough investor protection.
However, an NDA is not a contract and does not guarantee financial security. Small claims courts also have financial limits and often cannot recover funds if the agent has no assets.
We are currently aware of property investors who have had to take collective legal action against a sourcing agent. Without access to approved redress schemes, like The Property Ombudsman (TPO) or Property Redress, these investors lacked a free and independent route to resolve disputes. Had the agent been registered with a redress scheme and compliant with property sourcing regulations, they would have been better protected.
Finding Trusted Professionals
It is crucial in property investing to treat a £200,000 property sourcing deal with the same scrutiny as buying a used car.
Investor protection relies on verifying compliance. Always check if your agent is registered for AML supervision, appears on HMRC records, and has genuine membership with a redress scheme. Proper deal sourcing and deal packaging procedures are vital to avoid unnecessary risks.
The positive news is that you are not alone. NAPSA supports property investors in finding reputable sourcing agents. By joining Property Connect for free, you gain access to agents who are committed to compliance and delivering investor protection through every transaction.
Join Property Connect for Free Today
Not to mention, you can also search our platform any time to find and contact our approved agents at no extra cost. Start your free search today: https://napsa.org.uk