Most sourcing agents dread the moment a client asks about fees. It usually comes from a fear of rejection, and it often sounds like "I don't do sales" or "I don't know what to say, or when to say it." But how you handle that one conversation tends to decide the whole relationship: whether it's "yes, let's move forward," or whether you're back at square one.
In this week's Mini Compliance Over Coffee, Tina Walsh made the case that transparency about fees isn't a nicety. It's the thing that protects you and wins you the repeat business every sourcer actually wants.
Why transparency wins business
Investors talk to each other, and social media is a fast way for an unhappy investor to warn others off. Right or wrong, that can damage a business quickly. The agent who is clear and simple about every penny they will ever take (when it's taken, how much, why, and its status) builds trust sooner. That trust is what turns one happy client into repeat instructions and referrals.
Get the fee structure right
Disclose every fee in writing before any commitment is made, and keep the structure simple. If a complaint is ever made, the redress schemes will look at how a fee is structured, when it's taken and for what, whether the amount reflects the service provided at that point, and its status (refundable, non-refundable or deductible). A fee structure so complex that nobody can follow it is a problem in itself.
There are several fee types you may come across:
Registration fee: paid by the buyer to onboard, covering ID and due diligence checks and giving the investor a little skin in the game
Reservation fee: paid to reserve a deal; reasonable if it's small or refundable, held in a client account, and clearly documented
Sourcing fee: the full fee for the transaction, traditionally paid on exchange or completion
Retainer: a monthly arrangement, best left until you have experience and can evidence value for money
Registration and reservation fees are sometimes deductible from the full sourcing fee. Where an agent asks for many thousands of pounds upfront before releasing the deal pack, be cautious. It can mean the deal isn't secured and they want their fee banked before they hand over the details.
The red line
Tina's ethical red line is taking a fee from the seller and the buyer on the same transaction without both parties knowing. You can't best represent both interests at once: the seller wants the highest price, the buyer wants the lowest.
The legal sector has long accepted this. In a divorce, one firm cannot act for both parties; they need separate representatives. In a property transaction, the same conveyancing firm can act for buyer and seller, but only through separate representatives looking after each side's interests. Dual fees follow the same logic. Currently in our sector you can charge both sides, but only if you disclose the structure to both and they agree to it.
Don't trust us. Trust the law.
Everything above is checkable. Before you work with any sourcing agent, or if you want to be sure your own house is in order, these are the places to look:
Watch the full episode:
If you want to be the sourcer investors recommend rather than warn about, NAPSA accreditation is where that starts: education.napsa.org.uk/napsa-membership-property-sourcers
