BUYING AGENTS & PROPERTY FINDERS - ADVICE FROM LETTINGFOCUS.COM
LettingFocus.com expert David Lawrenson explains how buying agents & property finders can help property buyers. Ask us for more advice
As we lead ever busier lives, time spent looking for properties can be in short supply. And lack of time curses us all - even portfolio landlords - who from time to time find themselves tied up in the general hassle and day to day management that a large property investment portfolio brings.
Of course, today we have the internet which allows us to easily browse properties for sale or rental and get a feel of what’s on offer - all from the comfort of our own home.
The net undoubtedly saves a lot of the “foot slog” - but finding and buying the right types of property still takes up a lot of time.
PROPERTY SEARCH COMPANIES
And so there are now lots of companies who offer to search the market and find suitable properties for us in return for a fee. And in many cases they will also refurbish the properties, find tenants and manage them too.
But how do we know if these “buying agents” or "property sourcers and finders" are any good?
Firstly, it seems obvious but is worth saying at the outset - that buying agents, in whatever form they take, act for the purchaser.
This is a key difference to the estate agent or auctioneer who acts for the seller - or at least that’s what they should be doing. (I say “should be doing” because there are a small minority of agents who all too easily will give a lot of useful information away to the buyer, especially about the sellers’ circumstances)
Buying agents did not really appear in the UK until the mid 1980s and even then they were confined to finding properties for mainly very well off clients who did not want the hassle (or in the case of celebrities the unwanted publicity) of having to look themselves.
Usually they were small operations but in the 1990s the ranks of some of the larger (and generally more up market agencies) joined in too again mostly to find properties for the wealthy for their own occupation rather than as an investment proposition.
However, by the mid and late 1990s buying agents were doing more and more work for investment buyers and for some well off tenants too.
For the investment buyer, the buying agent sometimes offers a comprehensive package services including not just finding the property but also refurbishing it, furnishing, letting, management and arranging finance too.
BUYING AGENTS ARE UNREGULATED
Firstly you should know that the house search market is unregulated.
We have already seen the collapse of five major property investment companies which specialised in finding all manner of properties - from new builds (Inside Track) to "distressed" properties, where the owner is supossedly selling cheap (or "below market value") to meet debts or other obligations.
So one of the key rules is to ask questions about the area you are buying in.
Go and see the areas for yourself and give the buying agent a tight brief -this road, not that road, this postal area, not that one.
Unless you are rich enough to risk losing a lot of money, you must get involved a bit you cannot afford to be too “hands off”.
Ask what aspects of the buying agents’ activities they outsource because if they subcontract say the letting and management they (and ultimately you) will have less control.
Usually you are better off using a specialist agent to find tenants and maybe another one to manage tenants.
This is because there are different skills involved in finding a property to those involved in finding properties and furnishing them. Even more very different skills again are required for letting and management.
Buying Agent or a Property Sourcer should use their skill to locate and help you buy at a good (i.e. below market) price and you may want to structure the deal you have with them to incentivise this.
Ask about their degree of local knowledge in terms of capital values and rental income and get at least three references. If they are unwilling to give them, then go to someone else.
CHECK THE FIRM OUT
Charging structures vary a great deal.
Some will work on a free initial service with fees only payable on exchange of contracts or completion.
Others will charge a basic retainer or registration fee typically this will about £1,500 in London, though this can be much higher or lower depending on how up or down market you are going.
The fees for a full service buying agent will typically be 1.5% to 2% plus VAT of the purchase price. Some companies will deduct the retainer fee from this, some will not.
Then there are other fees which depend on what you want doing and whether the property requires it.
In addition, watch out for whether they will try to charge you for setting up the mortgage finance.
Some companies will do the whole thing for you finding to letting and will roll up the whole fee you pay to cover all the work.
Of course, how much they do for you (and how much you are going to have to pay) will depend on how passive or active you want to be.
BUY TO LET
In the buy to let spehere there are a huge number of "property finder" firms peddling poor advice and hugely overpriced mentoring services.
Many claim to source properties for purchase that are supposedly "below market value" but often aren't in reality.
Typically these firms promise that the investor can achieve "financial freedom" in a short period of time through property investment.
They prey on people's greed and lack of knowledge about buy to let and property as an investment. Don't become one of their victims.
Never pay them large sums up front to find properties for you or build a portfolio. Many of them have gone bust taking investors cash with them. You have been warned.
Ask us for independent advice.
ABOUT DAVID LAWRENSON AND LETTINGFOCUS
If you need reliable sensible advice on buying agents or property finders please ask me. I’m David Lawrenson from property investment mentors Lettingfocus.com.
We work in a consultancy role with organisations helping them with their products and services for the private rented sector. But we also offer a limited amount of unbiased consultancy advice for landlords too.
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