A Property Investor’s: Guide to Sourcer Fees

For property investors, working with a professional property sourcer can unlock access to excellent deals that aren’t available on the open market. However, understanding the associated sourcing fees is crucial to protecting your capital and ensuring a smooth transaction. This guide explains the common fee structures used by deal sourcers and packagers, highlighting the importance of working with compliant, credible professionals.

A key principle to remember is to avoid sending large sums of money to a property sourcer or deal packager upfront without a clear, written agreement. Whilst some initial payments can be standard practice, you must understand the terms to protect your investment.

Never, ever send large sums of money to a property sourcer upfront

As above,we cannot emphasise this point enough. We come across investors almost every week who have sent a sourcer sometimes thousands of pounds upfront under the ‘promise’ of a ‘great deal’.

Unfortunately in a number of cases the deal never comes about – is promised to be deducted from another deal which never happens – or the sourcer has run to the hills as they are not compliant or operating legally – they are just after your cash.

So please, do not send ANY money to an Sourcer upfront.

If you have – or someone you know – unfortunately ended up in a similar position to above please review our ‘Making a Complaint’ step-by-step guide. Otherwise please go to our investor complaints page and complete (making sure you have all of the information required).

Understanding Sourcing Fee Structures

When you engage a deal packager, their fees must be clearly detailed in your agreement. This includes the amount, payment schedule, and terms of the payment. There are three main types of upfront fees you may encounter.

1. Non-refundable

This is a fee that you will not get back under any circumstances once paid. It is often requested to cover the sourcer’s initial time and research. While legitimate, investors should be cautious with high non-refundable fees, as you risk losing this money if the deal does not proceed for any reason.

Not refundable at any stage under any circumstances – You hand over, you don’t get back!

2. Refundable

A refundable fee can be returned to you, but usually under specific conditions outlined in your agreement. For example, you may receive a refund if the seller withdraws from the sale, but not if you change your mind.

Crucially, professional property sourcers must hold refundable fees in a dedicated, insured client or escrow account. This keeps your funds separate from their day-to-day business finances and provides vital protection. Always ask for proof of this.

3. Deductible Fees

A deductible fee is an upfront payment that is later subtracted from the final sourcing fee upon completion.

For instance, if the total sourcing fee is £3,000 and you paid a £500 deductible fee, you would only pay the remaining £2,500 when the property purchase is finalised. This is a common and fair approach..

Of course it is acceptable to ask for some fees upfront, where you have to be careful is how much you hand over, under what circumstance, if any, it would be refunded and if relevant where will it be held, is it safe.

Sourcing agents, when fully compliant and professional have a lot of upfront work and fees to pay, before your final sourcing fee is in their possession and so a moderate upfront fee is fine. Just make sure you are clear on which approach the Sourcer is using, so you know what you are agreeing to.

Working with Compliant Property Sourcers

The safest way to invest is by working with compliant deal sourcers and packagers. A professional will be transparent about their fees and registered with a government approved redress scheme – either The Property Ombudsman (TPO) or the Property Redress Scheme (PRS). They should also have Professional Indemnity insurance and be registered with the Information Commissioner’s Office (ICO).

There are other critical components investors need to check before working with an agent, such as contracts, policies, in-house complaints, and more. We have provided a Free Checklist for investors to download and reference – simply register your details below to access.

Before committing, ask the sourcing agent for evidence of their compliance. Working with a NAPSA-approved member provides an extra layer of confidence, as we verify that our members meet these essential standards.

Client Sourcing Fee Guide

Please note these are just examples of what sourcing fees could be – each sourcing agent has their own way of charging and may be different to the figures below.

Fees vary based on the agent, location, and deal complexity. However, here are some typical examples to give you an idea:

• Buy-to-Let (BTL) – single property: Around £3,000 – £5,000 per property.
• Buy-to-Let (BTL) – 2-3 properties: £2,500 per property
• Buy-to-Let (BTL) – 4+ properties: £2,000 per property

• HMO (House in Multiple Occupation): Often higher, from £5,000, due to the increased complexity.
• HMO (House in Multiple Occupation) – 2-3 properties: £4,000 per property
• HMO (House in Multiple Occupation) – 4+ properties: £3,000 per property

• HMO Conversion – single property: £3,000 per property
• HMO Conversion – 2-3 properties: £2,500 per property
• HMO Conversion – 4+ properties: £2,000 per property

• Commercial Development Sites: Usually charged as a percentage of the purchase price, commonly 2%, with a minimum fee applied (min fee £8,000)
• Residential Development Sites: Sourcing fee 2% of purpose price (min fee £8,000)
• Mixed Use Development Sites: Sourcing fee 2% of purpose price (min fee £8,000)

Lease Options: Usually around £1,000 per year of lease agreed (min £3,000 and max £6,000)

*Single Property – One property purchased at any given time

**Multiple properties – more than one property purchased at the same time (e.g. Multiple unconnected properties purchased at same time, portfolio or block of flats)

Want to Stay Updated?

We will continue to develop this guide as legislation or the process changes. If you’d like to stay updated on this and any other relevent investor information, including matching sourcers to you – please register by completing the form below – or by visiting our Investor page.