Deposits In Property Deal Sourcing – Everything You Need To Know

Deposits in property deal sourcing…

How much are they? Are they refundable? And are they necessary in property deal sourcing?

All of these questions are answered in this post.

Let’s get to it.

What Is A Deposit In Property Deal Sourcing?

In property deal sourcing and deal packaging, deposits can be used to secure the services of a property deal sourcer or take properties off the market. 

These are not to be confused with deposits for the actual purchase of a property. 

Do All Property Sourcers Charge Deposits?

Not all property sourcers will charge deposits as it is up to each individual to decide what works for their business. 

It is not necessary that a deal sourcer charges a deposit as they can just rely on the completion of the deal to get their deal sourcing fees.

There’s also no law to say that you have to charge a deposit as a sourcing agent.

However, it is not uncommon because charging a deposit has many benefits for a deal sourcer.

One benefit is that the sourcer knows that a customer is serious and not just a tyre-kicker wasting your time. 

The other benefit is that it guarantees an income for the deal sourcer and prevents people from just saying no to every deal a sourcer brings to them. 

A deal sourcer might find the perfect deal but for some odd reason a potential client may pull out. 

How Much Are Deposits In Deal Sourcing?

The amount that a deal sourcer will charge for a deposit can vary just like how the total sourcing fees can vary.

Each sourcing agent will have their own sourcing agreements and terms so it’s important to make sure you’ve checked their specific terms before agreeing to anything. 

💡 A common amount is to charge £500 to £1000 as a deposit. Not a ridiculous amount, but also not negligible. 

While this may be a typical amount to charge, it can vary depending on the property sourcer and their terms. 

Are Deposits safe?

This depends on the sourcing agent and how compliant they are. If they are holding deposits which are refundable in any way, they should be held in a client account or escrow account to make sure that it is protected. 

💡 In the UK, the FSCS protects the first £85,000 in a client account.

If this is not the case and if the deposit is just being sent to the personal account of the property sourcing agent, then this should raise some eyebrows. 

Are Deposits Refundable?

This depends again on the property sourcer and will depend on their specific terms. 

It would be more common to see deposits as refundable if the sourcer did not find any suitable deals or if the deal fell through at no fault of the client. 

On the other hand, if the deal fell through due to specific issues on the client’s side then it’s less likely to be refundable. 

💡 The specific terms for deposits and refunds should always be in the sourcing agreements that a sourcing agent uses so if you are a client always be sure to double-check this.

Should Property Sourcers Be Charging Deposits?

Yes, property sourcers should be charging deposits.

It’s good for the sourcer and it’s good for the client. 

It’s good for the sourcer because it guarantees some income and lets you know someone is serious.

This means it’s good for the client too because if the sourcer thinks you’re a serious client they will treat you as such. 

The video below is a useful guide on deposits for property sourcing agents.