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Hi Everyone! 

 

Thanks for reading my first post to the forum. I am newbie investor and currently trying to source my first property deal. 

  • Mortgage Fees - to add or not to add to the loan? If there was a fee of £999 would you pay it upfront or add it to the loan? 
Buying from a deal sourcer
  • The fee - I have been sent a deal from a sourcing company. They require the sourcing fee (of £8740 with £1000 refunded on completion) to be paid upfront and it is non-refundable if the deal falls through from the vendor's end. It is only transferable to another deal from the same sourcing company. Has anybody come across this approach? From what I have read, most deal sourcers request their fee on completion of the deal. Its a very high spec 7 bed licensed HMO in Liverpool, newly renovated and fully tenanted until June 2016. Vendor is paying stamp duty as incentive - is this normal? Does this sound a bit fishy to the experienced investors out there or am I missing a trick?
  • Creditability - the deal has been sourced by Empire Property Group - does anyone have any experience working with this company? I could only find a couple of reviews online some bad/some good. The company that forwarded it on was Property Sourcing Made Easy. 
  • Reserving - as the property is in Liverpool and I am London based it is going to be quite difficult for me to view on short notice and the vendor is on holiday atm. Would you pay the reservation fee and sourcer fee for the deal without viewing it? 

These might all sound like big no no's or be the norm, unfortunately, I don't have the experience at this stage to know which is what! So would love to hear from this friendly and very knowledgeable community! 

 

Thanks so much, 

Sarah 

 

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Hi Sarah,

 

Welcome!

 

First off I am assuming you meant it's tenanted until June 2017 not 2016?

 

Mortgage Fees: If you want to use the money for another deal or as a buffer then I would add it on to the mortgage - then you get to borrow another small sum of money at the same rate as your mortgage.

 

Sourcing and the fee: I have never personally used a sourcing company but I have been to a sales pitch for one, which put me off. Regarding your fee and sourcing - more below.

 

Reserving: Firstly, the fact that it's a 7 bed HMO, someone should have keys so that you can view. Has the sourcer even seen it internally? If the vendor is on holiday - why the rush for a reservation fee? Just the fact they've said the vendor is on holiday (i'm guessing, implying that you can't go an see the property) stinks to me, and that would be my first sign that something is wrong. Also you should never buy a property without viewing it personally. At least until you have people that you would entrust with spending hundreds of thousands of pounds of your money! 

 

I would also be very uncomfortable with an almost £9k fee upfront. My first thought was RUN AWAY from this 'deal' as fast as you can when I read " ...fee to be paid upfront and it is non-refundable if the deal falls through from the vendor's end - only transferable...". 

 

Why on earth would they not refund the money if they have sourced a deal which their vendor couldn't complete.

 

This may or may not be far fetched, but Imagine they have sourced you this wonderful 7 Bed HMO deal which never completes due to the Vender. The sourcing company tells you, "Sorry, sometimes it can't be helped, but don't worry, that £9k will come off of the next deal that you complete with us!" They then send you a steady stream (for months or years) of terrible 'deals' which are not deals at all.

 

You are then left with 2 options; You either take one of the terrible deals that they are offering you, that may not be BMV at all (but you feel obligated to take otherwise 'you've lost £9k') Or you indefinitely wait for a better deal to come along (providing they don't have T&C's on how long that money will roll over onto the next deal for - which I'm sure they will).

 

"Vendor pays the stamp duty" is also odd. Why wouldn't the vendor just reduce the asking price by the same amount as the stamp duty? Tax dodge? Is the fee the sourcing company charged based on the final sales price? If applicable, would the Vendor be paying the new extra 3% stamp duty as well?

 

If you are set on going ahead with this sourcing company I would be asking questions like: 

  • Are the sourcing fees held in a client account until completion?
  • Is the money secured/insured in case the company goes bust?
  • Are they part of any trade body?
  • Are the regulated by the FSA/someone else?
  • 4-5 references from previous clients that you can talk to personally or meet with.
  • Their 10 last Completed deals.
  • How many deals do their client complete every year?
  • Take a look at other deals they currently have on their books
  • Get a copy of their professional indemnity insurance and other relevant insurances 

I would also do Due Diligence on; How long they've been in business, Directors of the company, Shareholders of the company, How many Companies have the directors owned/own/dissolved etc.

 

Maybe someone that's used a Property sourcing companies previously can chime in with some advice. Alternatively, you could call RMP Property (Which is one of the guy's that owns this forum's property sourcing company) and run it by them to see what they think. Rob B always says in the podcasts that they are happy to help even if you don't end up doing business with them.

 

Please excuse the fact that I've just rattled all of this off the top of my head in a messy post!

 

I hope it works out well for you, but all in all, they way you've presented the offer - I would run away from it.

 

All the best

 

James

 

 

 

Hi Everyone! 

 

Thanks for reading my first post to the forum. I am newbie investor and currently trying to source my first property deal. 

  • Mortgage Fees - to add or not to add to the loan? If there was a fee of £999 would you pay it upfront or add it to the loan? 
Buying from a deal sourcer
  • The fee - I have been sent a deal from a sourcing company. They require the sourcing fee (of £8740 with £1000 refunded on completion) to be paid upfront and it is non-refundable if the deal falls through from the vendor's end. It is only transferable to another deal from the same sourcing company. Has anybody come across this approach? From what I have read, most deal sourcers request their fee on completion of the deal. Its a very high spec 7 bed licensed HMO in Liverpool, newly renovated and fully tenanted until June 2016. Vendor is paying stamp duty as incentive - is this normal? Does this sound a bit fishy to the experienced investors out there or am I missing a trick?
  • Creditability - the deal has been sourced by Empire Property Group - does anyone have any experience working with this company? I could only find a couple of reviews online some bad/some good. The company that forwarded it on was Property Sourcing Made Easy. 
  • Reserving - as the property is in Liverpool and I am London based it is going to be quite difficult for me to view on short notice and the vendor is on holiday atm. Would you pay the reservation fee and sourcer fee for the deal without viewing it? 

These might all sound like big no no's or be the norm, unfortunately, I don't have the experience at this stage to know which is what! So would love to hear from this friendly and very knowledgeable community! 

 

Thanks so much, 

Sarah 

 

Link to post

Excellent reply from James. I'll probably repeat a lot of it, but my view...

 

Mortgage fees - it's a very expensive way of doing it adding to the loan, so that £999 is likely to cost you £2-3k by adding to the loan. If you have the cash, pay it up front. If you're that strapped for cash.... reconsider investing in property? :-) 

 

Sourcer fee - P155 off. No 7 bed HMO in Liverpool is worth enough to warrant an £8k sourcing fee. If it's student tenants, run a mile anyway, Liverpool is getting saturated. Professional lets need to be basically in the centre of town around places like Canning Street at the furthest out. 

Vendor paying stamp duty is usually to appeal to people who are strapped for cash. So not reducing the price means you can get a mortgage for the full asking price instead of having to find the cash to pay tax. It's not dodgy in itself, but it implies a degree of keenness to shift the property on. 

I would unleash a mouthful of tourettes on the sourcing company.... but I'm a bad human at times so maybe don't do that. 

 

Credibility - the deal they have proposed makes them not credible. Non refundable even if vendor pulls out? That's a joke. This property might not even be for sale, but once you've paid they can tell you it's no longer being sold and keep the cash. Do that to 4 people and you've just made more than the national average salary. 

 

Reserving - not viewing isn't a big deal, but make sure someone you know and trust views it for you. Could just be a local agent if you've got a bit of a relationship with them, or if you plan on getting them to rent it out for you. The whole "never buy something without seeing it" is sensible if property is your main job. If it's not you have to be able to scale and make it workable to your situation. Paying a surveyor to do a condition inspection would at least reassure you it exists and has been recently refurbished etc. You can ask the surveyor to check for specific things and they will pass comment on them. Probably cost you the same as a train ticket to Lime Street and back anyway. 

 

 

I would politely (see I'm being nice again now) tell them to go **** themselves (it didn't last long). 

 

 

I've used sourcers before and even the good ones pass along dogs every so often. Sometimes mistakenly, sometimes out of greed. It's fine, it's business. But you can't pass the responsibility for the deal being good to the sourcer, you have to do your own full due diligence. 

 

 

Hope that helped. :-) 

 

Damien

Damien Fogg
MRICS CeMAP CeFA

Email: damien@theepinvestor.com

Web: www.theEPinvestor.com

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