After working in the property-sourcing sector for over 7 years I know that many experienced and new sourcers are given advice that could potentially cost them large sums of money. This advice can come from many different places, including poor training, responses to questions in FB Groups as well as from well-meaning contacts or friends.
In this article, I want to cover a selection of those ‘Myth’s’ and put them to bed forever and watch my recent LIVE Q & A on Myth-busting
- You can use another compliant sourcing company to sell your deals through
- Most sourcing companies are NOT compliant
- The company that you work with, their registration and insurance will NOT cover you
- If the company you work with DOESN’T carry our suitable CDD on an investor, YOU could be jointly responsible
- YOU are at serious risk of being heavily fined for Non-Compliance
- You don’t need to register for Anti-Money Laundering supervision if you don’t handle money
- Whether YOU handle money or not, YOU MUST register for AML Supervision as an estate agency type business
- It makes no difference at all if you have a solicitor handle deposit’s or reservation fees for you
- Failure to register could lead to heavy fines
- Registering with the required bodies is all that you need for compliance
- Registering with all legally required bodies does NOT make your business compliant
- Once registered the compliance work really starts
- You can take a reservation fee and keep it in your business account
- If the reservation fee or deposit is in part or fully refundable, it must be held in a ‘Client Account’
- The Client Account must have appropriate Client Account Insurance in place
- You need a solicitor to represent you with your deal sales
- A sourcer does not need the services of a solicitor for a simple property sale deal. The seller and buyer will each require legal representation
- You can do a few deals first without being compliant
- You can do as many deals as you like but you run a risk of being found out and heavily fined
- A heavy fine may well close your sourcing business before you even get it off the ground
- For client due diligence ‘Face to Face’ contact is fine with Skype or similar remote communication
- A Face to Face meeting is just that and not via an electronic connection of any kind
- You can accept copies of ‘Identity’ documents via email, no need to have them certified
- If you don’t see the original document (face to face) then you can’t accept uncertified copies
- You don’t need to know about the Regulations and Legislations that govern the sourcing sector
- If you don’t have an understanding of all of the Legislation and Regulations that govern our sector how on earth can you run a legal, compliant and ethical sourcing business?
- You can secure a deal through an estate agent
- The estate agent has the deal secured usually via a Sole Agency Agreement
- It would be highly unlikely that the agent would allow you to secure the deal via an option agreement
- Even if you agree a purchase price through the estate agent, it would not stop another buyer from beating your offer and taking the deal
- Of course sourcers give ‘Investment’ advice
- Property sourcers must NEVER, EVER give investment advice
- Only FCA registered persons can give investment advice
- Property Sourcing or Deal Packaging is a ‘0’ cost or ‘Low’ entry cost sector
- Property sourcing is NOT a ‘0’ cost entry business
- Registrations and Insurance cost in the region of £1,200.00
- Then consider acquiring contracts, forms and agreements as well as policies, procedures and risk assessments.
It is important to remember that although there are lots of people who are usually more than willing to provide you with guidance and advice on any subject that you ask about.
Before you act on the information provided, perhaps it would be wise to carry out some research for yourself and ensure that any advice is actually accurate; as would the advisor pay your fines for you if they got it wrong; I doubt it!
If you are unsure or have any questions please get in touch and why not join my Facebook group Property Sourcing Compliance Support. I also have a book available to help guide you through all the regulations Property Sourcing Compliance.
Watch my recent Live Q & A on Myth-busting.