What do I legally need before I can charge a sourcing fee?
Four things, and all of them before your first fee, not after. Membership of a government-approved property redress scheme, either The Property Ombudsman or the Property Redress Scheme, because you are carrying out estate agency work. Registration with the ICO as a data controller. Supervision for anti-money-laundering purposes, since estate agency business is a supervised sector under the Money Laundering Regulations 2017, which means HMRC registration and customer due diligence on your clients. And professional indemnity insurance, which the redress schemes require anyway. Trading without redress scheme membership carries a penalty of up to £5,000.
How much does compliance cost to set up?
Realistically £1,000–£1,500 in year one: redress scheme membership is usually £200–£400, ICO registration is £52 for most small organisations, HMRC anti-money-laundering supervision runs to a few hundred pounds including the fit-and-proper test where required, and professional indemnity insurance for a small sourcer typically starts around £300–£600. It is not a large amount of money, it is simply a barrier that most people who call themselves sourcers have not crossed.
What does a sourcing fee actually pay?
Typical UK sourcing fees run £2,000–£5,000 per deal for residential, with higher fees on HMOs, commercial and larger projects. The honest constraint is not the fee, it is repeatability: the difference between someone earning £10,000 a year and £80,000 a year is a buyer list that takes deals reliably, not a bigger fee per deal. Building that list takes months of genuine relationship work before the first deal, which is the part rarely mentioned when the strategy is sold.
Do I need to be an estate agent or have qualifications?
You do not need a specific qualification, but you are legally carrying out estate agency work, which is why the redress and anti-money-laundering obligations bite. Practically the useful knowledge is being able to genuinely appraise a deal, if you pass on properties that do not stack, your buyers stop answering, and a sourcer without buyers has no business.
Can I source deals for investors abroad?
Yes, and it is common, but the anti-money-laundering obligations get heavier rather than lighter. You need to verify identity and source of funds properly, apply enhanced due diligence for higher-risk jurisdictions and politically exposed persons, and keep the records. Taking a fee from an overseas buyer you have not properly checked is precisely the scenario the regulations exist to catch.
Is it legal to charge a fee before the deal completes?
Charging a reservation or sourcing fee is common, but it must be clearly disclosed in writing, the terms must be fair, and you must be transparent about what happens if the deal falls through. Non-refundable fees taken on deals that never complete are the single biggest source of complaints against sourcers, and a redress scheme decision against you is public. Model your terms on the assumption the deal fails, not on the assumption it completes.
How do I find buyers for the deals I source?
The methods that still work are unglamorous: property networking events with genuine follow-up, a simple email list you actually write to, LinkedIn for the higher-value investors, and referrals from accountants and brokers who serve property clients. What does not work is a social media post offering 'off-market deals, DM for details', investors with real money treat that as a signal of inexperience.
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