How much commission should a person get for connecting a distressed seller and buyer?

Question

How much, as a finders fee, should someone get for connecting a distressed seller and a cash buyer for an off market deal? Is there an amount set in stone? A percentage? A pat on the back and a "thank you?"

If the "connector" is a real estate agent do they get more as oppose to a non realtor? I have seen a referral fee for a wholesaler be $10K. I would like to hear some thoughts.

Thank you in advance!

Dave

Scott E. · Answer

If they were able to negotiate a great price on an MLS property, hats off to them.Again it just comes down to the numbers. I don't care if the property was on the MLS or off market. I don't care who the wholesaler is. I don't care how much money the wholesaler is making. I don't care about why the seller is selling. I only care about the number I can buy for, and whether or not the numbers make sense for me at that price.

Nathan Harden · Answer

This is well said, I think I let my pride get in the way when I hear a wholesaler ask for such a large finders fee.I just came across a wholesaler who was trying to assign a contract that was from the MLS with a hefty assignment fee. What do you think about a situation like this?

Eliott Elias · Answer

If all you did was connect them, you are considered a Bird Dog and the $1000 would be fair. If you put the property under contract for a good price and wholesaled it, a higher fee can be justified.

Bryan Scott · Answer

I hate to be the wet blanket in this message string, but licensed real estate agents and bird dog fees, from the standpoint of tying one to the other, is not consistent with Real Estate Commission rules and regs in most states. Why? Because licensed agents may ONLY be paid for brokerage services by their employing broker. If the broker doing the bird dog deal just happens to be an employing broker, there are other issues relating to full service vs limited service that must be observed as well. In Colorado for example, I am not able to do such a deal, because it would be considered "limited service." If the RE Commission found out I did such a deal, I could lose my license.It is also true in most states that anyone selling or transferring interest in a property, who does not own or have legal title to, may not act in the capacity of real estate broker, unless licensed to do so. So, any of these deals being done are done so at risk to the parties involved.As a long-time investor, I will tell you that the amount paid to a wholesaler or a bird dog, really doesn't matter so long as your deal pencils out and meets your own profit requirements (after rehab).

David Pulido · Answer

Awesome, great points. $20K on $820K property value is about 3% (ish). That sounds way better than the $1000 bird dog fee mentioned. In my humble opinion, I think the finder, of an off market deal, should be compensated accordingly. Presenting an off market deal to a buyer/investor is giving them prime access on a purchase. This becomes a one on one deal. Without the finder the buyer will not know of this deal. If the property gets listed on the market it can become a bidding war with multiple buyers and we know how that goes- great for seller but not for buyers. I just heard on a BP blog where finders fees can range from 3-35% which is great! Love to hear different views so keep it coming. Learning a lot from you! Does one need to be a licensed realtor to get this "finders fee." I'm an investor so really curious. Thanks folks! Respectfully,Dave

Dan H. · Answer

I think the birddog compensation should correspond to the level of deal found. The better the deal, the better the compensation the birddog should receive.I paid a birddog $20K on a $620K property that was likely worth $820K. It had a risk item and a safety issue that needed to be addressed. The seller wanted certain control on close date and most contingencies removed. It ended up being a very slow close because the seller wanted a slow close (opposite of many off market purchases).I think both the birddog and I were happy with the deal. That is key. You want to make sure the numbers work for you. the wholesaler wants to make a good return on their good find (and good RE deals are not easy to find so the birddog deserves to be well compensated for their efforts).Good luck

Ray Hage · Answer

A couple of years I bought my house from a wholesaler who made 25k on a 265k (price for me). I only found after but did I really care? Nope because I am very happy with my house even though I "overpaid" for it. That house was perfect for me because it was very easy to house-hack in multiple ways and makes more money than the mortgage. That wholesaler found me the deal and did well for themselves and so did I as the buyer. Win-win-win (wholesaler-seller-buyer)

Scott E. · Answer

The last deal I bought from a wholesaler, the wholesaler was paid a $100,000 "finders fee" for connecting me to the distressed seller. No that is not a typo.The deal before that one I also bought from a wholesaler. That one was paid a $5,000 "finders fee" for connecting us.I never care how much the wholesaler is making in the deal. As long as the seller is happy, and as long as the numbers still make sense for me as a buyer.

David Pulido · Answer

Awesome, guys - thank you so much! Thank you for taking your free time and answering my inquiry! Have a great weekend!Dave

Brad Jacobson · Answer

When I help a client buy something without an established "BAC" or buyer's agent commission, I try to be upfront with them and let them know I have a $5k or whatever fee for connecting them and then have it written into the offer. If you put the dominos in place for a $5-10m acquisition, I doubt the seller would have any gripe with throwing $10k your way.Good luck!