Gave away half of 14k on the first deal and would do it again

Contract at 132k on a 1980s 3/2 in a subdivision where everything sells. Seller had moved for work and had a tenant who stopped paying. Assigned at 146k. Fee 14k, split 50/50 with an operator who's been doing this eleven years in my market. I got 7k.

Here's how it actually went. I found the lead on my own from a list of out of state owners. I called, he answered, we talked twice. When he said he'd take 132 I froze, because I had no contract, no title company and no idea what to send him.

So I called the operator I'd been pestering at meetups. He sent his purchase agreement, we signed a JV agreement the same night, and the contract went out in his entity with me cc'd on every email. He asked for the proof of funds letter, which I don't have, and my partner sent his in an hour.

The part that nearly broke it: the tenant. Buyer assumed the house would be delivered empty and it wasn't. Two of the three buyers who looked walked over that. My partner found one who buys occupied and knew the local eviction timeline. That's the whole reason there was a fee at all.

What I'd keep: signing the JV before the purchase contract went out, and being on every email so the seller knew both of us. What I'd change: I'd have asked about the tenant's paperwork on the first call instead of the fourth.

Answer

1wendy_park48CapitalPRO7

To answer compass, since it's the thing that decides whether the JV agreement means anything. Two mechanics exist. The settlement agent can disburse the assignment fee to two parties, showing each on the closing statement, or the party on the contract collects the whole fee and pays the other under the JV agreement. Whether a given closer will do the first depends on the state and on the individual title company's policy, so ask the closer, in writing, before the contract goes out.

If you're taking the second route, the JV agreement should say the amount or the percentage, say when payment is due (same day as funding, not thirty days), and say what happens if the fee changes at the table. bramble's deal was fine because the fee held. Watch what happens when a buyer knocks 6k off at the last minute and the fee shrinks. Whose share absorbs it should be written down beforehand.

One more line worth having: a copy of the final closing statement delivered to both parties. If you're relying on the other side to tell you what the fee was, you're relying on the other side to tell you what you're owed.

And for a first deal, the cc on every seller email did more for bramble than any clause. The seller knew two names. That's leverage no document gives you.

5 replies

1omar_haddadActivePRO11

The tenant is the classic one. Occupied is a different asset to most buyers and a lot of newer wholesalers price it like it's vacant.

Did you or your partner get eyes inside? On my renovation work I've had two properties this year where the wholesaler's repair number came from a walkthrough of the living room and a guess about everything behind a closed bedroom door. Sold anyway, then the buyer discovered the scope. Your deal worked because the price had room in it. At 132 on a 146 assignment there was 14k of room, which is a comfortable place to be wrong.

2mikeoconnell7SP2APRO6

What did the eleven year operator get out of this besides 7k? I ask because I'm building a service business and I'm trying to see which side of these arrangements has the repeatable part. He spent maybe six hours and used a buyer he already had.

2jessreyes12AU1APRO8

The embarrassing question, which I'll take: how did the 7k actually reach you? Was it on the closing statement with your name on it, or did he get 14k and then send you a check afterward?

I've heard both described as normal and I genuinely don't know which one I should be asking for on a first deal. If it's the check afterward, what stops it being 5k when it arrives.

2Rena Expert

The economics of what bramble did are worth stating plainly. A 50 percent split with an established operator on a first deal is the structure most industry guidance points newcomers toward, and the trade is explicit: half the fee for a materially higher chance the deal closes at all. Compare 7k received against 14k that never funds because the newcomer can't produce a proof of funds letter, doesn't know which title companies in the market handle assignments, and has no buyer who takes occupied property. The comparison only favors going solo if you have a reliable way to close the exit yourself.

Bramble's outcome rested on the buyer pool. His partner held a buyer who understood the local eviction process and priced accordingly. That single relationship is what converted a lead into a fee, and it's the piece a newcomer cannot manufacture in the 30 days a contract gives them.

On the split itself, 50/50 is a convention rather than a rule. Splits move with who brings the contract, who funds earnest money, and who carries the dispo risk. On a second or third deal with the same partner, an acquisition side that's proven it can source will often negotiate up.

One caution. The role a newcomer plays in seller negotiation can raise a licensing question, and the rules on that differ by state and have been changing in several of them. Confirm how your state treats it with an attorney licensed there before you build a repeatable process around it.