If I put money behind one dispo operation, do I back the buyer list or the distribution software?

A month ago I didn't know what dispo meant, so let me say it back in plain words and someone can correct me. A wholesaler gets a house under contract and then needs to find an investor who'll take that contract off them before closing. Dispo is the selling half of that. Your two pitches are one person who knows sixty buyers personally and two people who own the pipes for reaching a lot of buyers at once. What I don't understand yet is where the money comes from. Does the dispo side get paid a slice of the difference between the contract price and what the buyer pays, or a flat fee, or does that vary by whoever wrote the agreement?

juniper, it varies by the agreement, and I've seen both shapes. A share of spread is common, flat fee per closing shows up too, and some marketplaces charge a subscription plus a cut at closing.

meridian, from the property management side I'll say the sixty-buyer person is describing something real and underrated. My best relationships are with about nine investor owners who trust me enough to say yes on a phone call. If I lost the software tomorrow I'd still have the nine. If I lost the nine I'd have a very clean CRM full of people who don't answer.

trellis, the nine-owner thing is exactly the trap I'm trying to build around. I'm putting together a service business and I've watched two people locally hit a ceiling because everything routed through them personally.

The question I'd ask meridian's first candidate is what happens on deal number four in a week. Sixty buyers you know by voice is a beautiful thing at three deals a month. At twelve it becomes sixty phone calls you don't have time for, and the deals sit. The system people can absorb volume they haven't earned yet. The relationship person can't absorb volume past her own calendar. So the answer partly depends on how many deals you're feeding either of them.

lantern's volume point reframes it for me, because I read the original post as a quality question and it might be a capacity question.

But I want to push on the buyer count in pitch two. Thousands of names segmented by price band sounds like it means something until you ask how many of those names have wired money. If the honest number is forty, then their distribution stack is very good machinery for reaching forty people, and you could reach forty people from a spreadsheet. meridian, did either of them show you closings by buyer rather than list size?

plumb asked the right thing. I'd want repeat closings specifically. One closing from a buyer is luck, three closings from the same buyer means somebody's calibrated on what that buyer actually wants and priced it so they came back.

What strikes me about the two pitches is neither one is really selling reach. They're both selling speed to a yes. Sixty people who answer is speed. Four channels in an afternoon is also speed, just with more shots taken to get there. I'd vote for the relationships but only if she can tell me her days from contract to assigned buyer over her last fifteen deals. Without that number the sixty is a story.

I do renovations, and I'm one of the buyers on lists like these. I get maybe thirty dispo emails a week and I delete twenty-eight of them without opening, and the two I open are from two people who have learned what I buy. Both of them call me before the blast goes out.

So the segmentation software matters less than you'd think from the buyer's chair. What actually got them in my open list was one of them sending me accurate rehab numbers instead of a fantasy ARV. Accuracy beat frequency. If pitch two's stack is mostly optimizing send volume, they're optimizing the part I don't respond to.

harrow, that's useful to hear from the receiving end, since I'm starting from zero and everything I've read treats the list size as the scoreboard.

meridian, I don't have reps either so I'll just ask what confused me in your post. If the first candidate's whole asset is in her head, how does anyone put money behind that at all? What are you actually buying, a share of her time? Because if she stops working the sixty buyers go with her, and I don't see what's left. The software people at least own something you could hand to a new hire.

ember, you're buying the current cash flow and betting she keeps showing up, which is how most small service businesses get valued whether anyone admits it or not.

I sell to buyers like this occasionally. Handed a tired eight unit to someone's buyer network last year rather than list it, and what closed the deal was one investor who already owned two similar buildings four blocks over. No software found him. The dispo guy knew he'd been trying to buy on that street for two years. That's the kind of thing that doesn't sit in a CRM field and it's why I'd weight the relationships. But lantern's capacity point is real and I don't have an answer to it.

What finally fixed this for me, after a long stretch in the service business, was refusing to treat it as either-or, which I know is the boring poll answer.

The transferable part of a relationship isn't the phone number. It's the written record of what that buyer bought, at what price, in what condition, and what they said no to and why. I made my team log the no's. After two years I could hand a new person a buyer file and they'd know within a page whether a deal fit. That is a system built out of relationships, and it survived me being out for six weeks with a broken wrist.

meridian, so my diligence question would be whether candidate one writes anything down about the sixty. Not whether she has a CRM. Whether the knowledge exists outside her memory in any form at all. If it does, you're buying an asset. If it doesn't, you're renting her attention and you should price it that way.

thatch, logging the no's is the first concrete thing in this thread I can copy directly, thank you.

One wrinkle nobody's raised. I'm working through licensing right now and part of what I keep running into is that whether marketing somebody else's contract to your buyer list requires a license depends on the state, and a few states have tightened specifically around wholesaling activity in the last couple of years. So an operation whose entire value is one person's informal network can look different under a stricter regime than one that runs documented, disclosed distribution. Anyone underwriting either of these should get a real answer from an attorney in that state rather than from me. It's not the main axis of meridian's question but it does bear on which model is durable.

halyard's point lands on my side of things too, since I'm still adding up what a first deal costs and the licensing question keeps changing the number depending on which state's rules I'm reading.

meridian, the thing I'd want from candidate two is their fee per closing versus their cost to run the stack. Four channels in an afternoon has a monthly bill attached. If they're spending real money on tooling and their closing count is thin, then the software isn't an asset, it's overhead they haven't grown into. The sixty-buyer woman has almost no fixed cost, which means she survives a slow quarter and they might not.

I'll ask the embarrassing one. What stops candidate one's sixty buyers from just going around her? If she's shown them all a house and they know the wholesaler's name from the contract, why do they keep paying through her instead of calling the source next time?

I assume the answer is that the wholesaler doesn't want sixty phone calls either and she's the filter both ways. But that would mean the asset isn't the buyer relationships alone, it's sitting between two groups who both find each other annoying to deal with directly. If that's right, then tally's fixed-cost point cuts even harder, because the middle position is cheap to hold and expensive to displace.

compass, that's roughly it, and the disintermediation happens anyway. I run a small team and we lost a good buyer exactly that way. He met a wholesaler through one of our deals, they got friendly, and now he sees that guy's contracts first and ours second. Nothing dishonest happened. It just leaks.

Which is the argument for the distribution side that I don't see anyone making. Volume of deals is what keeps you in the middle. If a buyer sees ten deals a month from you, he doesn't bother sourcing on his own, because you're already easier than he is. Ten a month is a distribution problem before it's a relationship problem. I voted for the system, and I say that having built my own business on relationships and hit the exact ceiling lantern described.

cobalt's leak story is the most convincing thing here and it flipped me late.

What I've taken from the whole thread, trying to figure out which side of this I belong on: the relationships produce the closings today and the system produces the closings next year, and meridian's real question is which of those he's paying for. Different prices. I'd underwrite the operator, because thatch's broken wrist and lantern's ceiling are both operator problems dressed up as asset problems. Someone who logs the no's ends up with both assets eventually. Someone who doesn't ends up with whichever one they started with and no more.