We know the fee process can be confusing, especially when you’re being approached on a number of different platforms by sourcers claiming to have ‘a great deal’ but you ‘have to act fast’ – which brings us to our first point…
Never, ever send large sums of money to a property sourcer upfront
We cannot emphasise this point enough. We come across investors almost every week who have sent a sourcer sometimes thousands of pounds upfront under the ‘promise’ of a ‘great deal’.
Unfortunately in a number of cases the deal never comes about – is promised to be deducted from another deal which never happens – or the sourcer has run to the hills as they are not compliant or operating legally – they are just after your cash.
So please, do not send ANY money to an Sourcer upfront.
If you have – or someone you know – unfortunately ended up in a similar position to above please review our ‘Making a Complaint’ step-by-step guide. Otherwise please go to our investor complaints page and complete (making sure you have all of the information required).
Sourcer Upfront Fees – Two Approaches
When you send large sums of monies upfront to an agent you are always at risk of losing those funds, sometimes never to be seen again!
What fees the agent take MUST be made clear in any agreement that you sign with them, including, how much is take, when payable, how payable and clearly state if: non-refundable, refundable or deductible, if refundable where the monies will be kept and what insurance protection is in place, so whats the difference…
Non-refundable
Not refundable at any stage under any circumstances – You hand over, you don’t get back!
Refundable
Can be repaid to you but usually with some restrictions around the refund, such as, if seller withdraws from sale. Ensure that you read what reasons are listed and question if unsure.
This type of fee MUST be held in a ‘client account’, separate from the companies day to day business account and should have insurance protection for the account.
Sourcing agents currently struggle hugely with, getting access to a client account and also fit for purpose insurance to cover should anything go
Deductible
This means that any fee taken is deductible from the end sourcing fee payable. So if the sourcing fee for a deal is £3,000 and the upfront fee was £500.00, then upon completion of sale/purchase you would only have to pay £2,500.
Of course it is acceptable to ask for some fees upfront, where you have to be careful is how much you hand over, under what circumstance, if any, it would be refunded and if relevant where will it be held, is it safe.
Sourcing agents, when fully compliant and professional have a lot of upfront work and fees to pay, before your final sourcing fee is in their possession and so a moderate upfront fee is fine. Just make sure you are clear on which approach the Sourcer is using, so you know what you are agreeing to.
Client Sourcing Fee Guide
Please note this is just an example of what sourcing fees could be – each sourcing agent has their own way of charging and may be different to the figures below.
Buy to Let (BTL)
*Single Property: £3,000 per property
**Multiple Properties
2-3 Properties: £2,500 per property
4+ Properties: £2,000 per property
HMO
Single Property: £5,000 per property
Multiple Properties
2-3 Properties: £4,000 per property
4+ Properties: £3,000 per property
HMO Conversion
Single Property: £3,000 per property
Multiple Properties
2-3 Properties: £2,500 per property
4+ Properties: £2,000 per property
Development Sites
Commercial Development Site
Sourcing Fee: 2% of purchase price (min fee £8,000)
Residential Development Site
Sourcing Fee: 2% of purchase price (min fee £8,000)
Mixed Use Development Site
Sourcing Fee: 2% of purchase price (min fee £8,000)
Lease Options
Sourcing Fee: £1,000 per year of Lease agreed (Min £3,000 & Max £6,000)
*Single Property – One property purchased at any given time
**Multiple properties – more than one property purchased at the same time (e.g. Multiple unconnected properties purchased at same time, portfolio or block of flats)
Want to Stay Updated?
We will continue to develop this guide as legislation or the process changes. If you’d like to stay updated on this and any other relevent investor information, including matching sourcers to you – please register by completing the form below – or by visiting our Investor page.
