SOURCERS - A GUIDE FOR ESTATE AGENTS

The primary aim of my article this month was to bring a bit of enlightenment to Estate Agents about what it is Sourcers actually do, and how we do it, along with explaining our evaluating process; as well as a bit of a personal insight into why I myself decided to step into the Sourcing ring! 

Let’s begin...

The role of the Sourcer is an interesting one; we are legally compliant and classed as Estate Agents - yet we do not fit into the typical Estate Agent mould. Estate Agents are habitually associated with selling for their clients, and to achieve the best possible price for them. Most of the time this translates into selling a property for as much money as possible. In contrast to the commonly known role of the Estate Agent - Sourcers find and purchase opportunities for their clients. We are not focused on selling, although some strategies do bear this in mind as part of an overall end goal; it is our job to make sure that our clients spend their money wisely and that the purchase justifies the outlay, which also gives us an investigative element as well.

Aside from the above, a quick overview of our (mine in particular) process looks like this:

Make sure the client is in a position to buy

We check this by asking for proof of funds, as well as proof of ID and proof of Address. This is vital to our work and it ensures that we follow all the processes that we are legally bound to. It also means that once we place an offer on our clients behalf this paperwork is ready to go. On the last property I had an offer accepted on this paperwork was with the Agent 10 minutes after they requested it. 

Assess criteria

By assess criteria I mean we talk to the client and find out what type of property they are looking for, what amount of money they have to spend, their ideal purchase price, their ideal refurb level, location, strategy they are looking to pursue (eg buy to let, buy to sell etc), how they will finance it (cash, mortgage, bridging loan) and any secondary exit should the first fall over. 

Look for opportunities for clients

This is for Investors most commonly, although I do also look for residential clients, to which we apply the same methods except the end goal, as with residential clients the end goal is not to move again! We do this by scanning the selling portals on a daily basis, getting in touch with Estate Agents in the areas we are looking in on a daily basis, as well as keeping our ears to the ground in other ways, such as boots on the ground interacting with people and assessing anything that looks to be of interest. I used to joke that if I could have a job staring at properties that were for sale all day I’d be living my best life. Well, here I am, doing just that. Love it. 

View potential property

This is my favourite part of the job, without a doubt. Did you know that Sourcers have to be legally compliant in the same way Estate Agents are? That includes all of the insurances to allow us to effectively view a property. Side note; I wrote a blog on this subject (who’d have thought?!), which you can read here; Top Qualities in a Sourcer. We use this as an opportunity to make detailed notes, take photos relating to the notes which accurately build a picture of the current condition we are seeing. For now I shall leave it there, more to come on the actual viewing process later. 

Evaluate the potential property for criteria match

As well as viewing the property, another way we can evaluate for a criteria match is by talking to the Agent or Vendor should they be present. We talk about expectations so that we know what position they are in. It's a simple approach, but it really goes a long way. When we understand WHY they need to sell or WHY they need to achieve a certain price point we can apply this to our client’s set of circumstances and compare against what they told us. We then move on to “crunching the numbers” - but more on that a bit later on.

Present opportunity 

This is where our client gets an overview of what we have seen. It includes any pictures or videos we took, any notes we made, and the outcome of the numbers for their consideration. We then take feedback from our client - which in turn we feed back to you the Agent.

Make an offer 

Any offers we make are ALWAYS based on what the numbers tell us. We work it out based on which strategy a client is pursuing. This means that if the numbers don’t work for one client, they may work for another with a different strategy. We also take into account what the Vendor needs (which can be different from wants). Rest assured though - that when it comes to making that all important offer everything will always be fully explained to maintain honesty and transparency. It is very easy for Sourcers to make an offer without explaining themselves. I tend to put forward offers over an email - so that I can explain the decision making process.

Oversee the purchase

This is where relationships can really become solidified. When I am working on behalf of a client, I take charge of the communication with the Agents. I update them, they update me, if any issues arise all parties know about it quickly, and a way forward can be figured out with relative ease. I also know that if I have any questions or there are uncertainties then there is a clear path of communication open, which is important between any parties working alongside each other.

OUR RELATIONSHIP WITH ESTATE AGENTS

We value Agents highly, they can offer a great deal to us as Sourcers and we love working collaboratively in order to build long standing relationships. What I mean by this is knowledge; and more specifically intimate local knowledge which we may not have ourselves if we are just beginning to look into a certain area. Agents will also know what’s happening in the market, is it stable, is it rising, is it falling in a particular area, have properties generally achieved their market price? If not why not? They’ll also know what's about to come to market, so yes, we want to build good solid relationships to marry our two services together. In return we offer buyers, and in my case, I have residential buyers as well as Investors as I offer Sourcing services to both. 

Some Agents don’t like what we do - they feel we take away opportunities from the general populous, or maybe they’ve had their time wasted with Sourcers in the past; having been on the receiving end of grand promises for those promises to disappear as quickly as they were made. I’ve seen it happen. I've spoken to Sourcers who have confessed their ways to me and they have in return heard in no uncertain terms what I think of such an approach. I certainly speak on behalf of my close network of fellow Sourcers when I say this, but we are here to build trust. Without trust there can’t be any meaningful business relationships, and without meaningful relationships there is no credibility, with no credibility…. You see where I’m going with this! 

I totally understand the Agent that is wary and standoffish as soon as the sentence “I’m a Sourcer working on behalf of Investors/residential clients'' is uttered because honestly, it wouldn’t surprise me if a high percentage of the Estate Agents I have spoken to have had their time seriously wasted by so-called “Sourcers”. They weren’t the real deal….However, it's not very nice (or professional) for us to be cut off at the first contact once we have explained what we are doing. I’ve gone through this so many times where I actually haven’t been allowed to book a viewing, or I’ve even been told “oh that property has sold…'' and I can STILL see it sitting on the market 6 months later, with the board still up outside as well! This allows me to make a note of which Agents have been frosty, and never contact them again. Likewise I do the same thing with the so-called Sourcers I mentioned earlier..

We will be honest. If we didn’t want to be honest we’d have made something up like “I’m looking to invest” (Yep, I have been advised to do this in the past and heck no I have never done it…) which actually serves no one because as soon as the offer is accepted and proof of funds is requested the identity of the buyer becomes apparent. Sometimes I wonder if people take this into account when they’re listening to poor advice BUT that is for another time. The short of it is we want to be friends - but not in a stalkerish creepy way. You have properties - we have buyers; it is collaboration not competition.

OUR IDEAL PROPERTY (BASED ON MY EXPERIENCE)

When it comes to what we look for in a property, this will vary from Sourcer to Sourcer but for what I have been after most recently the below is a pretty accurate representation on the whole;

It is generally heavily dependent upon client criteria, and the strategy they are looking to adopt. Different properties will naturally be more suited to a certain type of strategy, generally for me it is buy to let.

“Turnkey” is usually not very attractive, because my clients are all looking to add value, which you can’t do if there is nothing to be done. I didn’t think it would actually be possible for a property to be “too good” but it's a thing. Personally for me and my own portfolio turnkey hasn’t been a bad place to begin, but you certainly don’t see much of a return on initial investment very quickly. Last time I calculated a turnkey opportunity, it would have taken 20 years to get the initial investment back, before turning a profit. What often gets lost in translation is that the properties in this sense are treated as a business. You wouldn’t buy a shop that would take 20 years to turn a profit.

So what condition generally does the property need to be in? Ideally it will be dated and need to have a reasonable level of refurbishment work done - but not structural for the most part, this is because in a lot of strategies once you start having to carry out structural works you get into the realms of losing money on a property deal. What I mean by this is the acquisition costs and also the refurbishment costs start to outstrip what the property will be worth in the end. A recent example of this would be a property I looked at at the back end of last year, it was on the market for £140,000 but needed at least £70,000 spending on it to bring it up to the same standard as other properties in the area. The end value would have been £180,000, and the end goal would have been to put it back to market after uplift so unfortunately it didn’t work and the purchase price would have needed to have been £100,000 maximum for it to be a possibility. This is where we start to see the emergence of low offers. It is solely numbers led. On this occasion I did not submit an offer on this property, as the circumstances around it didn’t permit, which I was able to understand because I knew exactly what position the Vendors were in.

Location wise it will be in a good rental area with high demand. We all know what these kinds of areas look like, so I won’t dive into a massive explanation on this one; so briefly it will be close to amenities, such as schools transport and commuter routes. Development of the wider area will be happening but may not have started yet, or even areas where development and improvement is already well underway. 

One of my properties is in such an area, when we purchased it there was a large high-rise block of flats nearby, which had been empty for some time. This naturally attracted a lot of the wrong sort of attention, and it was accurately reflected in the price of the property. We knew prior to purchase that it would be getting demolished, we just weren’t entirely sure when but this was enough to make us comfortable with the purchase. Since the demolition took place a number of years ago, more development around the immediate area has happened. A shopping centre has been opened, a new leisure centre has been built and not long before that the local Secondary School had also been re-built, as well as a local GP practice. Some new build houses have also been added in and around the estate, and I believe more development will be seen in the future, so things will only continue to get better, which means our initial investment will continue to see steady growth. 

THE VIEWING PROCESS

Any of you reading this may have noticed that a Sourcers viewing process is not the same as the usual residential viewing! At least it shouldn’t be IF the Sourcer is taking it seriously.. So what are we looking for? Big defects, anything that could become serious that might not be now, scope for improvement, state of electrics, boiler, roof line, brickwork, windows, plumbing, as well as the general condition of the walls, are there any cracks? If yes are they superficial? We also like to get inside loft spaces to check those out for any signs of water ingress, and also we like to check the cellar condition as well. It can be pretty telling to go down into a cellar and see that the ground floor relies on acrow props to hold it up. This isn’t an exhaustive list, but it should give you an idea of the level of depth we are using when we cast our eyes around. 

Our viewings naturally do take a little longer than the average residential buyer for all the reasons above, so we ask to take photos and videos in order to give us extra time to evaluate once we leave the viewing; and may be followed up by email with extra questions if the Agent attending the viewing either wasn’t 100% sure or didn’t know anything we ask (eg age of boiler and electrics what works has the current Vendor completed and when)

We will use this as an opportunity to talk about the general area; what’s happening, ceiling prices vs average prices, trends that may have been noticed and what that means in terms of TYPE of property that those things apply to; we may also follow up with emails and phone calls on this subject if time is short on the viewing. 

THE EVALUATING PROCESS

Once we’ve done the viewing and we are confident we have all the information we need, we’ll then move on to evaluating what we have seen. This is an opportunity for a deep dive into the facts and figures to see exactly what we’re working with, in order to come to a decision on whether to put an offer forwards. It's also a chance for our clients to see what we have been up to in order for them to put their thoughts and feelings forward.

How do we evaluate?

• We will look at notes we have taken and any pictures or videos to build a comprehensive picture of the condition of the property and what works need to be carried out, we then cost these and itemise them. 
• Compare current asking price to comparable SOLD properties (same size, condition etc for the last 12 months) Whilst asking prices are a strong indicator to us of expectations, for this part we tend to set that aside and concentrate on what comparable properties in the area have sold for, because expectations and reality can sometimes be quite different.
• Then compare that to what other properties are on the market for and take note of the difference, and then bring in the current asking price of the property we are interested in and compare the difference. We do look at the maximum value the property can achieve in perfect condition vs what it is on for now, using the above mentioned SOLD prices n the area in order to determine how close to the ceiling price it is being marketed for. It is worth noting down, that where I live for example the ceiling price could be considered to be £270,000. BUT there are different sizes of semi detached and terraced properties, and all kinds of different plots and positions so this does come into play, and it considerably narrows what we can use as comparable. Staying accurate means staying realistic.
• Finally “crunch” the numbers based on ceiling value less renovation costs (as well as all the other costs that WILL be involved, conveyancing, surveying, our fee) whilst taking into account what the Vendor NEEDS to achieve in order to be able to come to a workable solution to all parties. We also take into account here the end goal of our client as an individual.

This process allows us to be able to calculate an offer, which sometimes does come in lower than the asking price if there is a considerable amount of work to be done and the property is marketed at close to ceiling price, but we always try to get as close to the Vendors expectations and needs as is possible; whilst taking into account the end goal for our client, which personalizes the offer we put forwards. Side note; most Sourcers will NEVER actively try to make sure it is a low ball offer. Unless they’re all about the BMV (below market value - cringe) but I won’t start down that route because we’ll be here forever. This approach doesn’t serve anyone, again - we are all about collaboration to find the best solution for all.

THE OFFER PROCESS

It is really important to stress at this point before I explain the offer process to know that every offer we make is led by what the numbers tell us. I have had some people telling me that by sourcing property for Investors - we take away houses for the general populous, and that Investors are actually deepening the housing crisis. I disagree with this on two main points; 1. Some Investors are purchasing in order to refurbish and put back to the market, or to create high quality rentals for families, as quality family rentals are seriously lacking in availability. Some of the states I’ve personally seen tenants living in is nothing short of revolting. 2. Any residential buyer will always be able to out bid us on our offers - as they are not led by the numbers and are led by long term commitment and feelings, so they will naturally pay more than an Investor. As I said above, we will never actively try to make sure we come in with a lowball offer. Whatever we put forwards will always be fully explained so that the thought process and reasoning behind it can be seen clearly, making it transparent and honest. 

We will relay our findings to the client and they have the final say on the offer price, which we will then pass onto you along with reasoning behind our offers. We accept that sometimes it can come as a shock, and if we are given reasons as to why the Vendor cannot accept (should that be the case) we will gladly hear any counter offers they wish to make, and look at our numbers again to see if it is workable. 

We might be able to come up with other creative suggestions to ensure the Vendor is happy and a deal can be done, if the situation is pliable, but this does heavily depend upon the VENDORS needs. If a Vendor needs to sell for a certain price in order to move on, then we will do our best to meet that, but unfortunately it can be the case where the Vendor's expectations and needs can exceed what we are able to offer. In these cases we accept that we are not the best purchasers for that particular property. 

ONGOING COMMUNICATION & COLLABORATION

Once a sale is agreed, we will keep in contact throughout, or check in from time (if our offers are rejected) if we see the property is still not selling. If any of our offers are rejected - and we cannot come to another solution which we will try to do depending on how far away from the Vendor's expectations our rejected offer was; we will always leave our best offer on the table. This ensures that the Vendor knows they have a backup option available. Solutions can only really be found through ongoing communication and collaboration, because if there is neither, then problems do not get solved.

We want the best outcome possible, and if we can’t be the ones to offer that solution we may be able to refer to someone else, or indeed a different client, as everyone's requirements are different, and one set of numbers does not fit all.

WHY DID I CHOOSE TO BE A SOURCER?

This is a question I’ve mostly been asked with disdain. Essentially I became a Sourcer because I wanted to help people. I help residential clients find their dream home, and I help Investors move closer to their ultimate goals. I am quite picky about who I choose to work with, if we don’t share common goals, morals and ethics it’s unlikely I’ll be on board. It is my vision that in working collaboratively with Estate Agents we can solve more problems and help more people. I do in the future want to expand my own portfolio in order to help families who may not be able to afford to step onto the property ladder, to ensure everyone gets good quality accommodation that they feel safe and secure in. 

As well as the above, I’m obsessed with property but I decided a 9-5 isn’t right for me personally. I like the freedom having my own business provides, no sacrificing time with the children and generally I’m available whenever they need me to be. Having a daughter with additional health needs did also play a part in my decision - she has regular hospital appointments and I didn’t want to forever be taking time off from work in order to take her, so now I get to set my own hours around the children and their needs. 

I do hope that this month's article has helped shed some light on the role of the Sourcer, and how seriously we take our work for the Estate Agents among you! Of course it goes without saying that not every single Sourcer will have taken it as seriously as I and my close network do, but the same can be said with anything. It can either be done well, and steadily with a high amount of transparency, or quickly and poorly thought out with big promises and no follow through, which may give the impression of transparency… but having said that the proof is in the pudding!

What are your thoughts on Sourcers and what experiences have you had with them in the past?