Welcome to the world of property sourcing. This wonderland of business has exploded over the past couple of years – mainly due to the excessive amount of training programs that encourage this business in order to generate extra cash flow for their property investing aspirations. Many people have devoured into this world heads on, and have been very successful at doing so. You may see case studies of individual sourcing agents from all around the country – successfully securing deals for investors and spending that money immediately on luxury items, rather than reinvesting into their business.
There is, however, 1 thing that most training companies miss out on informing these agents of. The fact that they are trading as a REAL ESTATE AGENT. And for that to happen, you need to become a Real, real estate agent by having the correct compliance terms in place to protect you and the customer from any wrongdoing. Failure to do so and you may end up BEHIND BARS.
This leads many to question – how long will this industry last before something hard hits and it’s worse off for all of us? It’s an interesting dilemma and one which can be attested to a valid argument. Simply put, deal sourcing agents must abide by the law in order to fully reap the rewards of becoming a trading real estate business. Failure to do so and you can acquire large penalties off the government, and even worse – a court claim. Going down this road, you need to be protected by proper insurance to make sure that nothing gets lost or no misrepresentation goes down. This begs the question, what do I need to be on the right side of the law?
What Do I Need To Become Compliant?
Not to worry, here’s a simple, step-by-step guide in order to become more compliant than you ever thought was necessary.
- Find a good insurance broker and get Professional Indemnity Insurance. It’s very important that you find a broker who offers a custom, bespoke package for deal sourcing agents. We recommend Duncan Clark Insurers as they offer this kind of package. Total time to get processed – Approx 1 week
- Register with The Property Ombudsman. This is 1 of 3 redress schemes within the UK and usually seen as the most prestigious. “The Property Redress Scheme” (PRS) is another one, but they offer the same thing and are both officially recognised. You need to have Professional Indemnity Insurance before even registering with a redress scheme. Total time to get processed – Approx 1-3 days
- Register with ICO (Information Commissioners Office) – Simple and straightforward. You are now legally required to store investors information on a secure database (such as Google Drive) and will not share any data with 3rd parties. Total time to get processed – Approx 1-2 days
- Register with HMRC for Anti-Money Laundering. Save the best till last! This processes is by far the longest and will take up to 42 days to process. It is also the most expensive and time-consuming. The good news is, once you do this and get approved, you are now a fully compliant sourcing agent! Well done you!
Breakdown of Costs
Total cost (Updated for today’s prices);
Professional Indemnity Insurance – £270.00
The Property Ombudsman – £294.00
ICO – £40.00
HMRC – £440.00
Total costs involved – Approx £1100
Simple. Now you know the steps involved to becoming compliant. Now go out there and TAKE ACTION. Failure for becoming compliant within this industry will damage your reputation if someone finds out and I would recommend this is the first thing you do. There are a couple of reasons why;
You’re making your business more established & marketable. Having a good brand and full compliance under your belt means you’re more likely to be seen as an authority figure. The compliance is also marketable in itself, as it protects you and others from failing to comply with government and building regulations.
Don’t Get Caught Out
Let’s say for example you were an aspiring property investor. You’re cash rich and time poor. You want a great property but don’t have the time or energy to go and view potential houses all day – so you hire a sourcing agent. The agent shows you a packaged deal which you think is amazing! You’ve never seen this much return on investment for a property before. So you buy it. Then you carry out your due diligence and the numbers are not racking up. The property is not in the same condition as promised and the area is not as busy as you’d hoped. Ask yourself;
If you asked for a refund, but the agent disappeared – who could you complain to?
That’s why it’s crucial for when buying deals from sourcing agents that you check the validity of their own compliance. You can even ring up the organisations themselves and quote the registration numbers, just to check they are legitimate and not copy-pasted from elsewhere.
Below we have given you the resources needed in order to sign up to these companies – so you know exactly what to do. But before that, a couple of things worth nothing about sourcing agents;
- Be sure to check their background and do your necessary due diligence
- It is illegal for a compliant sourcer to JV with a non-compliant sourcer, so bear this in mind if they are JV’ing with someone else
- Make sure to sign an NDA if you are working with someone, as this means they are serious about the information and trust you not to pass it on to anyone else.
Insurance – http://www.dcib.net/
Redress Scheme – https://www.tpos.co.uk/
Data protection – https://ico.org.uk/
HMRC – https://www.gov.uk/anti-money-laundering-registration
The Tip of The Iceberg
Remember, this information is just the tip of the iceberg when it comes to compliance. When working with any investor, you must collect documents such as ID, Proof of funds, Proof of Address, amongst others. I highly recommend this for further reading;
Other than that, make sure to enjoy the journey into property investing! Sourcing agents can be an excellent way of leveraging your time. Be sure to take full advantage of this when working with any sourcing agent and be sure to get them on your side for every step of the way.
We offer a weekly mailing list which is full of great off-market deals we’re loading out to eager property investors. These deals usually sell on the same day – so be sure to sign up and not to miss any of the next great offers! There is a link below this blog to sign up.
Interested In Becoming a Sourcer, But Need Some Extra Guidance?
As of September 2019, I am opening spots for exclusive mentorship. This is only open to 5 people, and will be closed after that for the foreseeable future. Just some brief points of what to expect from this;
1) Setting up a website like this one https://elementsourcing.co.uk & getting you fully compliant
2) Giving you 1 strategy to focus on until profitable, based on your area (Sourcing is not a 1 size fits all formula)
3) Pulling back the curtains on what it takes to WIN as an agent in this noisy age
4) Systems, Spreadsheets & Automation practices
5) Regular coaching sessions
If you’re interested, please email [email protected] with the title ‘Mentorship’ and explain why this would be a good fit for you.
All the best.