Property sourcing is an intriguing and complex field that requires a delicate balance of research, analysis, negotiation, and deal completion.
At its core, it's about finding the ideal investment property that benefits both the buyer and seller.
Investors hire property sourcing agents, also known as property sourcers or deal sourcers, to expertly identify and secure investment properties. They possess the knowledge and expertise to navigate the tricky world of property investments.
In this article, we'll explore their role and the importance of compliance.
Note: This article is for informational purposes only, and does not constitute and should not be treated as a substitute for legal, financial, or other professional advice.
The value of using a property sourcing agent
A property sourcer, much like a real estate detective, has the task of uncovering hidden investment opportunities. They analyse market data, identify trends, and locate profitable properties.
First-time or experienced property investors can get the help they need by working with a property sourcing agent. A good and trustworthy deal sourcer will find profitable properties for refurbishment and sale, as well as rental properties for steady cash flow. There are many advantages of using a property sourcing agent.
We've outlined the advantages of using a property sourcer in a dedicated write-up.
Why work with a compliant property sourcer?
The UK property market is dynamic and ever-evolving. Property sourcing has become increasingly popular for individuals seeking lucrative investment opportunities.
However, with this surge in demand comes the need for caution and due diligence. Hiring a compliant property sourcing agent safeguards your interests and ensures a successful investment journey
Compliance with legal and regulatory requirements is vital when it comes to property sourcing in the UK.
When working with a compliant sourcing company, property investors gain confidence and trust, avoiding legal and regulatory pitfalls.
Partner with a property sourcer that adheres to best practices
Compliant property sourcing agents actively adhere to the necessary rules and regulations. Various governing bodies and the UK government themselves are increasingly recognising and becoming aware of these practices, even though they may not be fully defined like those for a typical UK real estate agent.
Collaborating with a compliant agent ensures transparent, ethical investment transactions within legal boundaries, providing peace of mind. This mitigates the risk of legal disputes, financial losses, and reputational damage that may arise from engaging with non-compliant operators.
As a property investor, you should feel comfortable speaking to your prospective sourcer honestly and openly about your property requirements and circumstances. Don't be afraid to assess your property sourcing agent by asking relevant questions about their experience and other areas. You need to build trust and know they're "one of the good guys".
Let's get into what a compliant property sourcer looks like.
Director or employee of a registered UK company
Establishing a UK limited company or working for one is the first good sign of any professional property sourcers.
There are a plethora of reasons to consider, ranging from liability protection, enhanced credibility, tax efficiency, to gaining easier access to finance and employer benefits.
Setting up a limited company can help establish credibility with prospective clients and partners. It portrays a professional image and creates a sense of trustworthiness, which can attract more business opportunities and enable investors to act with less fear.
Property sourcing agents can operate as sole traders, but it presents a lot more risks for them (and you) in the event of any negligence on their part, and what you as an investor is able to do about that.
Member of a government-approved redress scheme
Checking whether your preferred property sourcing agent is a member of a government-approved redress scheme is a vital step in assessing their compliance and commitment to consumer protection.
There are 2 redress schemes in the UK. Being a member of one of them is mandatory. They are:
- The Property Ombudsman (TPO)
- The Property Redress Scheme (PRS)
Membership in either redress scheme provides no real benefit. Both schemes uphold high standards and ensure fair treatment of investors in the property industry. They provide you with an avenue to file, manage, and remedy any complaints that may arise for any reason.
Speaking of which, the sourcing company should have their own in-house complaints procedure as the first point of call. If they fails, then they should be open with you to progressing any complaint to the respective redress scheme.
Prioritise agents in redress schemes like TPO or PRS for dispute resolution and risk mitigation in UK property investment. You as someone who's investing in UK property, gain access to a dispute and risk resolution mechanism.
As an investor, its important to align yourself with compliant professionals who are serious about ethical practices. They'll have a mechanism in place to address any concerns that may arise during your property investing journey.
Registered with the Information Commissioner's Office (ICO)
In an era where data protection and privacy have become a serious and often hot topic, property investors must ensure they check that their preferred property sourcing company is registered with the Information Commissioner's Office (ICO).
Data protection regulations, such as the General Data Protection Regulation (GDPR) in the UK, have stringent requirements for businesses that handle personal data. Registering with the ICO demonstrates a property sourcing company's commitment to meeting these regulatory obligations.
It signifies that the company has implemented appropriate policies, procedures, and safeguards to ensure compliance with data protection laws.
Working with an ICO-registered property sourcer provides investors with peace of mind, as it ensures that their personal information is being handled in accordance with legal requirements. This enhances trust and transparency in the property investment process.
It also ensures investors have recourse to the ICO for data protection concerns, upholding their rights as data subjects.
Registered for HMRC Anti-Money Laundering (AML) supervision
Another essential compliance requirement is the need for property sourcing agents to have an active registration with HMRC for Anti-Money Laundering (AML) supervision.
In UK property investing, large sums of money are most often moved around, especially upon completion of any property sale.
The need for robust measures against money laundering and illicit activities cannot be overstated. Property investors should prioritize working with a sourcing agent who can actively demonstrate their registration for HMRC Anti-Money Laundering (AML) supervision.
Property sourcers need to be aware of the rules and regulations that govern their actions, particularly if they handle clients' money. Failure to register or renew their HMRC AML registration can result in penalties.
They should have clear policies and procedures in place that meet the requirements of AML practices, and these should be maintained with regular reviews.
The UK government has taken a stringent stance on anti-money laundering (AML) regulations to curb money laundering and terrorist financing in the real estate sector. Deal sourcers should be familiar with performing due diligence on their clients, scrutinising and verifying their identities, tracking transactions, and flagging any suspicious or unusual activities.
Covered by Professional Indemnity (PI) insurance
To fully protect themselves from potential financial or reputational loss, national property sourcers must be in possession of an active Professional Indemnity (PI) insurance policy.
This type of insurance provides coverage in the event that a sourcer makes a mistake leading to their investor client suffering from financial harm or loss. Without this cover, both parties could find themselves in trouble or in the red if something goes wrong.
Agents with professional indemnity insurance protect investors from financial liabilities, offering security and peace of mind. It showcases accountability and addresses potential liabilities.
It also offers reassurance and peace of mind, showcasing the agent's commitment to accountability and addressing any potential liabilities.
Investors can navigate real estate investments confidently by choosing an property sourcer with professional indemnity insurance. This safety net mitigates financial risks and safeguards their interests, providing a greater sense of security.
As a bonus: the deal sourcer might or should also have public liability insurance. This is particularly important if they're arranging and leading viewings for you and others as investors. It can protect property sourcers in the event of a physical accident occurring during property viewings.
Using contracts and agreements with clear terms of business
Using clear contracts is essential for transparent and mutually beneficial relationships between investors and property sourcing agents.
So, what exactly are those legal documents?
- Terms of Business
- Fee Agreement
- Option Agreement
- Non-Disclose Agreement (NDA)
- Data Protection Agreement
It's worth noting that a professional property sourcer doesn't need to be using everything above, since some documents can overlap in terms of the clauses and statements present in each.
Nevertheless, it's good if they cover most of them in one way or another.
Clear contracts outline responsibilities, deliverables, and fees, reducing the risk of misunderstandings possible issues later on.
Additionally, they offer legal protection and establish a framework for dispute resolution, ensuring that both you as an investor and the property sourcing agent are protected and have recourse in case of breaches or disputes.
By using clear contracts and agreements, property investors can engage with sourcing agents more comfortably, thereby increasing the likelihood of experiencing a professional and transparent investment journey.
Compliance in property sourcing is a big topic
Compliance is a notable area for property sourcing companies. They must take it seriously, and you as an investor need to do the same.
We highly recommend you go through the items above, almost like a checklist, when approaching a sourcing agent of your choice. The more boxes ticked, the better hands you're in from a legal, risk and compliance standpoint.
Registered UK companies that operate as property sourcing agents should meet the best practices of data protection, contractual agreements and insurance. In doing so, they must be members of the ICO and a redress scheme, while registering for HMRC AML supervision.
These key checkpoints lay the foundation for a compliant and trustworthy property sourcing company that you can rely on to implement a more secure property investment strategy.
Where can I find genuine property sourcing companies?
Now that you're familiar with what to look for when considering working with a deal sourcing expert, you're well-equipped to start approaching one or more and obtain the help you need to find your next property deal.
Still unsure? We covered a lot of this stuff in a podcast episode hosted by Expat Property Story. Give it a listen and help supplement your knowledge on the topic.
Get ready to secure your next UK property investment
Discover a trusted UK property sourcing agent today. Explore our directory to search for your preferred property sourcer or utilise our property sourcer matchmaker service, where we will pair you with the best one that aligns with your property requirements and situation.
