Due diligence
Property sourcing fees: what you pay, when, and what the law says
The short version: UK sourcers commonly charge £3,000 to £5,000 for a standard deal, often split into a deposit and a balance due on exchange or completion. By law the sourcer must give you the fee terms in writing before you agree, and money they take from you is held on trust. Never pay without a written agreement that says when you get money back.
How sourcing fees are usually structured
Most sourcers take part of the fee up front to hold the deal for you, then the rest when the purchase goes through. The up-front part is what investors most often lose, so it is the part to read most carefully. A fee that is only payable on completion carries the least risk for you. A fee paid in full before you have seen the evidence carries the most.
The fee is for finding the deal, negotiating it and passing you the evidence. It does not replace your own solicitor, survey or mortgage advice, and those costs come on top.
What the law requires
A sourcer who introduces buyers to property for a fee is doing estate agency work, so the Estate Agents Act 1979 applies.
- Fee terms first. Before you enter the agreement, the sourcer must tell you in writing when you will have to pay, how much or how it is calculated, and any other payments. If they do not, the agreement may not be enforceable against you without a court order (section 18).
- Your money is held on trust. Money a sourcer receives from you in the course of estate agency work is held on trust for you (section 13).
- Personal interests must be declared. If the sourcer has a personal interest in the property, they must tell you (section 21).
- Registration. They must be registered with HMRC for anti-money laundering supervision and belong to a redress scheme. Here is how to check both in ten minutes.
What a sourcing agreement should cover
Use this as a checklist when you read one. It is not a template, and it is not legal advice; ask your solicitor to look over anything you are unsure about.
| Clause | What to look for |
|---|---|
| Who you are dealing with | The business name, company number if it is a company, address, HMRC anti-money laundering registration and redress scheme. |
| The property | Enough to identify it, and what the sourcer has actually done: found it, negotiated it, or has a contract or option over it. |
| The fee in pounds | The amount, whether VAT is on top, and how it is worked out if it is a percentage. |
| When each part is payable | For example a deposit on signing and the balance on exchange or completion. Section 18 of the Estate Agents Act requires this in writing before you agree. |
| Any other payments | Anything that is not the fee itself, such as admin or search charges, and when they fall due. |
| Refunds | Exactly which events trigger a full or part refund, and how fast it is paid. |
| Where your money is held | Money taken in the course of estate agency work is held on trust for you under section 13 of the Act. Ask which account it sits in. |
| Personal interest | Whether the sourcer, or anyone connected to them, has an interest in the property or the seller. Section 21 of the Act requires them to tell you. |
| Complaints | How to complain, and the redress scheme you can go to if that fails. |
When you should get money back
Agree these before you pay. A professional sourcer will already have them in writing.
| What happens | What a fair agreement does |
|---|---|
| The seller pulls out or sells to someone else | Full refund of anything paid |
| Searches or the survey show something the sourcer did not disclose | Full refund of anything paid |
| The valuation comes in well below the figure the deal was sold on | Should be covered; agree the threshold in writing |
| Your mortgage is declined for reasons about you, not the property | Often partly retained; read the terms before you sign |
| You change your mind | Usually retained, in part or in full |
Red flags
- No written terms, or terms sent only after you have paid.
- A fee that is non-refundable whatever happens, including if the seller pulls out.
- Payment to a personal bank account, or a name that does not match the business.
- Pressure to pay today to "hold" a deal you have not seen evidence for.
- Promises of a fixed or guaranteed return, or an offer to pool your money with other investors. Pooled and fixed-return schemes are a different, regulated activity.
- No HMRC registration or redress scheme you can find.
How DealSold handles fees and deposits
On DealSold, reserving a deal places a refundable deposit with our regulated payment partner; DealSold never holds your money. The deposit is refunded if the deal falls through for a reason that is not yours, within the terms shown before you reserve, and counts towards the sourcing fee if you go ahead. Every sourcer's registrations are checked before they can list. Investors pay DealSold nothing. See how DealSold makes money.
Frequently asked questions
How much do property sourcers charge in the UK?
For standard residential deals, fees of £3,000 to £5,000 are commonly quoted, with more for larger or more complex deals. Some sourcers charge a percentage of the price instead. Either way, ask for the figure in pounds, including VAT, before you agree to anything.
Is a sourcing fee refundable?
Only if the agreement says so. A fair agreement refunds you if the deal falls through for reasons outside your control, such as the seller withdrawing. Check the refund events before you pay a deposit.
Do I have to sign a sourcing agreement?
You should never pay a fee without one. Under section 18 of the Estate Agents Act 1979, a sourcer must give you the fee terms in writing before you enter the agreement, and if they do not, they may not be able to enforce it.
Why does the sourcer want my ID and proof of funds?
Sourcers registered for anti-money laundering supervision must check who their clients are and, in some cases, where the money comes from. Being asked is a good sign. Being asked by someone who is not registered is not.
Is a sourcing fee tax deductible?
It is usually treated as part of the cost of buying the property rather than a running cost, which affects when you get relief. Check with a qualified tax adviser for your situation.
See the fee before you reserve
On DealSold the sourcer's fee is shown with the listing, and the deposit terms are shown before you reserve, from sourcers whose registrations we have checked.
Capital at risk. Property values and rents can go down as well as up.
How we made this guide
Written by the DealSold team from the Estate Agents Act 1979 on legislation.gov.uk and HMRC's anti-money laundering guidance, checked on the date shown. The fee range is what sourcers commonly quote, not a survey. General information, not legal or tax advice. Our editorial policy.