Does the dispo person's fee come out of the spread before or after the contract seller takes their number

The first structure is a floor model: the contract seller names a minimum and the dispo person captures upside, so the dispo person's incentive is to push the buyer's price as high as possible. The second is a senior-fee model: the dispo person gets paid before the contract seller sees anything, which means on a thin deal the contract seller absorbs all the compression. Neither is inherently wrong, but they allocate marketing risk opposite ways, and the party taking the first-dollar risk should be the one with the most control over where the buyer's price lands.

The sentence that matters most is the one that defines what "spread" means before either fee is calculated, because assignment fees calculated off list price, off the contract price, and off ARV are all called "the spread" in conversation and they are not the same number.

Which of the two structures are you being asked to sign, and do you have the written assignment agreement in front of you?

Which structure did you shake hands on before you found out they weren't describing the same deal?

The dangerous word in both those structures is "net" because the seller means their floor and the dispo person sometimes hears it as the full spread they're working from, and nobody figures that out until the wire hits. I ran into exactly this on a Broken Arrow deal, distressed single family, spread was about $18k total. Dispo guy had verbally agreed to "his piece" without either party putting direction of math in writing. He took $6k off the top, seller expected $12k, ended up with around $9,200 after a buyer credit got layered in at the last minute. Not fraud, genuinely two people who pictured different arithmetic when they shook hands.

The floor model, where the seller names their number and dispo works upside above it, at least aligns incentives because dispo has actual reason to push the buyer price instead of just moving fast to collect a flat fee. Flat fee favors speed and volume, not price, which is fine in deep markets but hurts in smaller or slower ones where you might have two or three qualified buyers and the delta between them is real. That said, the floor model has its own problem: if dispo can't clear the seller's floor plus anything worth keeping for themselves, deals stall and nobody gets paid. What's your typical spread in your market, because at $55k you can absorb a bad split conversation, but if you're regularly working $18k to $22k spreads the model you agree to up front is the whole ballgame.

The distinction you're drawing is real and it compounds on thin spreads in a way that catches people off guard. In your first example the contract seller has downside protection because their $15k is guaranteed before the dispo person sees a dollar above the spread floor, so the dispo person absorbs all the execution risk. In the second example the dispo person has downside protection because the $5k flat comes off the top regardless, which means a deal that closes at a tighter-than-expected spread compresses the contract seller's number first. Those are opposite risk allocations, and the party with protection in each structure is the one who proposed the language.

The part that changes the picture is what happens at the assignment table when the end buyer negotiates down. If the buyer asks for a $3k reduction at closing and the two parties never specified which fee absorbs concessions, the structure that looked clear on a handshake now has no answer. A written agreement that names the concession waterfall, meaning who gives back first and in what order, is worth more on a thin deal than the split itself.

Which structure proposed the language first in the deals you've seen, the contract seller or the dispo person?

@rosalind_pike

The risk neither arrangement addresses is what happens when the buyer negotiates the price down after the fee split is agreed. If a buyer comes in at the expected number and then cuts $8k during inspection for repairs, both parties instinctively want the other side to absorb the reduction, and the original handshake language almost never covers it. In the floor model, the dispo person argues their floor is still intact and the contract seller eats the cut. In the fixed-fee model, the contract seller argues the $5k comes off whatever the deal actually closes at, meaning it survives a lower number. That ambiguity costs one of them real money and the relationship usually does not survive the argument.

The document that should govern this is rarely written before the deal goes to a buyer, which is the actual problem. A one-page memo specifying the closed purchase price as the reference point, which party absorbs a buyer-side price reduction, and what happens if the deal falls entirely, converts a handshake into something a title company can follow without inventing its own interpretation.

Which of those two arrangements did your deal actually use, and was there anything in writing before the buyer was sourced?

The second structure is actually the one that bites the dispo person more than the contract seller, because a flat fee gets swallowed the moment buyer negotiations happen on the back end. I had a deal in Fentress County two years ago where I was taking a flat $4,500 off a $38k spread and the buyer came back three days before close wanting a $6k price adjustment for roof condition. The contract seller had already mentally cashed his net. That $6k came entirely out of my side because there was no mechanism in the agreement for shared exposure on a renegotiation. Walked away with $700 on six weeks of work.

The language that causes the actual problem is not "net" or "fee first." It's whether the agreement says anything at all about what happens when the buyer renegotiates after you've already disclosed the address. Once the address is out, your leverage to walk and remarket is basically gone, and whichever party holds the residual after the fixed number is set is the one absorbing 100% of any late-deal compression. So what did your agreement say about renegotiations, if anything?

The structure question matters less than what the written agreement says the spread actually is, because that number is not always agreed before the dispo person starts working the buyer. If the buyer comes in at $72k over asking instead of $70k, the two structures produce three different outcomes depending on whether the base spread is fixed at assignment or floated to final sale price, and most handshake deals never specify that. Before anything else, the checklist a careful operator runs is: confirm the spread ceiling in writing at the moment the contract is assigned, not at close; define whether "net to seller" means net of the dispo fee, net of closing costs, or net of both; put a floor and a ceiling on the dispo fee so a blowout buyer does not create a windfall dispute; specify who bears the cost if the buyer renegotiates after inspection; and calendar the assignment expiration date with a hard clause on what happens to the fee if the deal dies in that window. The arrangement where the contract seller names a net and the dispo person keeps everything above it sounds clean until the buyer's lender requires a price reduction, at which point the seller's net is still protected and the dispo person absorbs the entire haircut alone.

The flat-fee-off-the-top structure has the opposite problem on thin deals, which you named, but it also has a paperwork problem that the other arrangement avoids: a fixed fee paid to the dispo person before the seller's net is calculated can look like a finder's fee depending on how the state licenses real estate activity, and in some states that triggers a question about whether the dispo person needed a license for that transaction. That is a question for a licensed attorney in the specific state, not something to resolve by precedent from the last deal. What the written agreement needs to address in both structures is the recapture clause: if the deal closes below