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Paul Batchelor · 27-07-2012, 02:35 PM

I source property full time and recently I have noticed an increasing number of so called BTL investors targeting professional experienced sourcers including myself at various property meetings and events especially in London.

They are expressing massive interest in properties the sourcer is working on, talking the sourcer into giving them the addresses to, they say enable them to do Due Diligence and visiting the property or tracing the owner and dealing direct, cutting the sourcer totally out of the deal, as well as getting most of the legwork done for them.

This is obviously due to the fact they do not have the many contacts required to feed them potentially suitable properties, and in addition estate agents not wishing to deal with them, which is totally understandable.

John Corey · 27-07-2012, 02:55 PM

Paul,

Some observations from where I sit. Much of this would not apply to you given I know your background a good bit better than most other people who tell me they source deals.

1. I think people who source deals are always in a bit of a tough position. From a legal and technical point of view, it is a bit hard to tie up a deal in a way that will consistently work. Most people who source do not appear to try or they use weak agreements. The sourcing agent might find a real deal if they are through. I just do not see them securing it in a professional and clean way. Maybe that is just my anecdotal evidence.

Assuming there is some truth to what I say, the sourcing agent is mostly focused on trying to control the information as they have no other way to stay in the middle.

2. Many people who source deals are doing so because they are new to the game, they need to earn some cash to get started and they lack experience. Not a great mix if I was the end buyer.

3. Those who do operate as a sourcing agent and who have done so for a while tend to work with specific buyers. They know who to trust and who performs as a buyer. Similar to estate agents who have their preferred buyers who take action. Estate agents do not bind their buyers to a contract before there is a deal. They depend on the contract with the seller to protect the agency's position. Hence they have to develop a relationship with their repeat buyers. Over time they know who to trust.

4. If a buyer wants to go around a person who sources deals, I would want them to do so on the very first address they are interested in. That way they would quickly show their hand and be known as a dead end for future business.

Paul Batchelor · 27-07-2012, 03:39 PM

Hi John
Thanks for reply. I fully appreciate your reply, and as you quite rightly say, most of the contents of my message does not apply to me personally, as you are aware of some of the people I source for. I posted as a bit of a heads up to other BTL investors / sourcers who maybe are passing on properties they cannot finance, fall outside their criteria, are out of area and so on. They possibly have done a lot of research and legwork only to lose the property due to a minutes carelessness divulging too much information to another investor. I speak to a vast number of investors who are totally credible, but struggle to find property especially in London due to lack of contacts and knowledge. I personally as you are aware am very selective about who I source for, and most of my clients are high net worth cash buyers and developers, or mortgage dependant buyers who have proved their credibility on previous deals or have come highly recomended by my database of cash buyers etc. Even then I ask them to prove that they have the financial ability to proceed to completion. If they are as credible as they say they are, usually they fully understand and supply the proof I have asked of them.

Very Best Regards
Paul

Vanessa Warwick · 27-07-2012, 03:52 PM

Hi Paul,

I call people like you describe "chancers".

I think a few checks, such as proof of funds, or confirmation from a mortgage broker, before releasing deal details will filter some out.

The other thing you could do is set up a private group of deal sourcers to name people who try and act in this manner and warn other deal sourcers about them.

Community self-regulation is often a healthy way to go when there is little that can be done in more formal ways.

Something as simple as a private group on FaceBook could sound the warning bell and stop these chancers from going from sourer to sourcer and acting in this unprofessional manner.

Paul Batchelor · 27-07-2012, 04:24 PM

Hi Vanessa
Thanks for reply. You are totally correct in the suggestions you have very kindly put forward.

Even though as I am certain you will appreciate I do these checks already on new and existing clients / purchasers, as I have been sourcing for about five years now. I have learnt the hard way as in losing deals and reputation with contacts, which takes a long time to regain.

Some less experienced sourcers maybe would put too much trust in a potential purchaser, getting a little careless with due diligence on their prospective property purchaser, maybe due to just concentrating on the finders fee that is coming their way, or not as the case unfortunately may be, instead of satisfying themselves that they have secured a robust client who is able to complete on the property, and has not told a pack of lies in regards to their financial status.

The sad fact is people will try to cut the sourcer out of the deal to save the finders fee and to find a deal where the legwork has been done for them. They do not realise the experienced sourcer can actually save them from financial suicide, due to his property knowledge and experience.

Experienced and professional sourcers do not source and package messy deals, possibly illegal and ones which will never stack, of which, as you know are on every street corner. A professional sourcer / packager cannot afford to risk his reputation producing these sorts of deals.

Very Best Regards, Paul

Adam Hosker · 27-07-2012, 04:45 PM

Hello Paul,

This is nothing new, back before the Crash our family used to do Property Sourcing on a larger scale and people always tried to circumvent.

- I had a funny call on our Letting Line the other day trying to Circumvent us to deal direct with the Landlord. Its a bad human trait.

Presumably you have put a deposit down with a Solicitor and exchanged a contact that ties you to sell the property and the vender to not offer it on open market or to others for a certain period.
This is how we did it at the end, it tied up some capital but it secured the offer.
In other words if you operate a savy business with contracts signed by all parties, you can chase your bypassed commission via Solicitors. You only have to wait for completion and the Land Registry gives you all evidence that is required.

In addition with our Marketing Materials we used to use Document Fingerprint Technology which identified the "member" that perhaps leaked the offer to third parties in which we could remove them and send a nice legal letter.

We currently operate a small scale Property Sourcing Company, only excellent deals mainly with specific buyers. As Venessa says above we require "Proof of Funds" from any member and as our sister company is a Broker we encourage their use were possible.

Vanessa Warwick · 27-07-2012, 04:50 PM

Hi Paul,

I know there are many tribesters, including myself, who are of the opinion that there should be some form of standard or kitemark to identify ethical deal sourcers.

I don't know if you are aware of the SAFEagent campaign, but something of that nature?

This needs to be led from within the deal sourcing community. Nick and I do not have time to organise such a group, but we would do whatever we could to support it and you would be welcome to use Property Tribes as a platform for the group.

I know Colin Parker was thinking of how to regulate from within, so it might be worth having a chat with him? Also John Paul.

If you created a set of "standards" that deal sourcers could sign up to, you could verify the deal sourcer, and they would then be allowed to use the kite mark. This would help cut out the seedy underbelly of the industry you operate in.

There are good deal sourcers out there, but the more unscrupulous ones tend to get all the attention from the media, and they are often the ones posting on forums to attract newbies into their orbit. The good deal sourcers just quietly get on with it.

Please let me know if there is anything I can do to help.

John Corey · 28-07-2012, 10:43 PM

If a sourcing agent is putting together a buyer with a seller and the sourcing agent is not a principal in the transaction (no contract to buy; just a marketing agreement with the seller), would the sourcing agent need to be regulated as an estate agent?

Vanessa Warwick · 29-07-2012, 09:28 AM

That was discussed in detail >>> here.

I don't think it has ever been tested in court, so something of a grey area.

Kim stones · 29-07-2012, 01:13 PM

Test.
Kim

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