Half the fee to a partner sounds insane until I price a dead deal

Question

Renovation is my day job and I'm working out the acquisition side. Two different wholesalers here have offered the same arrangement: I find the seller and lock up the contract, they sell it to their buyer, we split the fee 50/50. My first reaction was that half the money for making calls to a list you already own is robbery. Then I sat with the fact that I've never assigned anything and I don't have one cash buyer I'd trust to actually close. Someone in a group chat told me the real number is 70/30 in favor of whoever brings the deal and anybody asking for half is taking advantage of beginners. Is that right? What is the dispo side actually doing for the money?

Rena Guide · Answer

Dispo is short for disposition, the sell side of a wholesale deal. On a JV the dispo partner is doing more than sending an email blast. They price the contract against what their buyers have actually paid recently, screen who can close with their own money versus who needs a lender, run the walkthroughs, and handle the buyer who shows up at day nine wanting $8,000 off. When a buyer walks, they replace them before the contract dies.

A dead deal is a contract you signed with a seller that never makes it to closing. You lose the earnest money you put up, the time, and often the seller relationship. That's the risk the split is buying down, and it's why common guidance for a first deal is to partner with an established operator at roughly 50/50 and treat the missing half as tuition.

70/30 in favor of acquisitions does exist, usually once the acquisition partner has closed enough that the dispo side is doing less rescuing. Splits move with who carries the harder half.

One thing to settle in writing before you sign anything: who funds the earnest money deposit, who eats it if the buyer defaults, and who is allowed to talk to the seller. Most JV arguments I see described are about those three points rather than the percentage. Also check what your state requires of someone marketing a contract they don't own, because a few states have tightened that and your partner's compliance doesn't automatically cover you.

aaron_fitz10 · Answer

The part I hadn't thought about is the seller relationship surviving a dead deal. If I blow up a contract on my own street I don't get a second shot with that seller's neighbors either.

luis_carrera · Answer

I ran the arithmetic because I can't stop myself. Say a solo beginner locks up three contracts and closes one, fee $10,000. That's $3,300 per contract signed. JV at 50/50 with someone whose buyers actually close, call it two out of three, fee $5,000 to me. That's $3,300 per contract signed. Identical, and the JV version doesn't cost me three burned sellers and three earnest money deposits. The 70/30 argument only works if your close rate is already good, which is exactly what a first-timer doesn't have.

samantha_ruiz · Answer

harrow, the percentage isn't where this goes wrong. I'm a few deals in and the ceiling I keep hitting is that some of these dispo lists are 40 people who all want the same 60 cents on the dollar, and the partner still calls it a buyer list. Ask both of them for the last three properties they moved, the address, and the price the buyer paid. If they get cagey you've learned what the 50 percent is worth.

joe_delgado5 · Answer

Thin margins here, so I'll say it plainly: half of something closed beats all of a contract that expires.

Half the fee to a partner sounds insane until I price a dead deal

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