They typically provide details of what appear to be excellent deals but once the properties are surveyed for mortgage purposes the figures are far short of the original claim. They then refuse to refund the fees to disgruntled investors, according to Landlord Action, a company specialising in tenant eviction and troubleshooting throughout the UK.
Its debt recovery department has seen a surge in request to pursue rogue property sourcing and investment companies.
'As the market climate has changed some companies are struggling financially and are using investor's deposits to fund their business operations rather than holding funds on deposits to be returned if deals do not happen,' explained Paul Shamplina, Director of Landlord Action.
He is calling for these kinds of companies to be governed by a code of conduct and regulated by the Financial Services Authority to prevent real estate investors being ripped off.
Landlord Action has issued a number of legal proceedings against companies whose clients have complained that supposed below market deals were nothing more than 'an illusion'.
One private investor agreed a £3,000 deal that she thought fitted her investment criteria. The value of the property was supposed to be £100,000 with a monthly rental income of £1,541.
However, once the survey had been completed the valuation came in at £72,000 and the rental figure at just £375, a figure far off what had been originally claimed. Landlord Action was instructed and a claim for £4,816 including legal costs was proceeded with via the Small Claims Court.
This was ignored so, eventually, the court appointed sheriffs to place 'notice to remove' on three cars at the directors home address. With no payment still received they returned and seized one of the cars. The investor in question has now received payment in full.
'These rogue sourcing companies are often unwilling to release many details on the property so investors need to research themselves into the property values, rental prices and the level of demand in the area. As well as this I would highly recommend that investors research the sourcing company itself via its trading record and look at its auditing history,' said Shamplina.
'Also, although not guaranteed, listen to other investor's recommendations. There is a good chance the company is reputable if others have received a good level of service. My final advice when going through with a deal is to double check the terms and conditions and keep in regular contact with the company in question,' he added.
