Does a seller-finder in a wholesale referral group need to know how to sell a contract themselves

Question

A common structure in small wholesale referral groups splits roles: one member finds sellers and puts houses under contract, another member with buyer relationships handles the assignment and closing. Take a member who has put three houses under contract in a few months, all routed to the buyer-side member, two of which closed, producing a modest total payout, without that member ever seeing a closing statement or knowing what either property actually sold for to the end buyer. There are two reasonable ways to view that arrangement. One view is that specialization is the entire point of a network, a seller-finder should focus on finding sellers and let the buyer-side person run that part of the transaction, and auditing every deal defeats the purpose of dividing the labor. The other view is that the seller-finder has handed over the only part of the transaction where the actual profit is visible, and without an independent read on what those contracts were worth to the end buyer, there is no way to know whether the split received was fair. The practical middle ground is that a seller-finder does not need to run the buyer side personally to be paid fairly, but asking to see the closing statement or the assignment fee on deals already closed is a reasonable request within any well-run referral group, not an audit that wastes anyone's time. A group unwilling to share that basic information after a deal has already closed is worth watching more closely than one that shares it freely.

karen_whitfield · Answer

Land taught me this one. I spent two years handing parcels to people who knew buyers and taking whatever they said the fee was, and it worked fine until one of them stopped being fine. The specialization argument is real, your brother in law genuinely cannot do both jobs well in month four. But specialization and blindness are separate things. He can specialize in acquisitions and still ask for the settlement statement on every deal he sourced, and if the group treats that as an insult, that tells him something about the group. Also worth knowing that roughly a dozen states don't publish sale prices at all, so depending on where he is, the closing statement may be the only look he ever gets.

ryanmck27 · Answer

I'm working through licensing right now and the disclosure question keeps coming up in the material, which makes me read your post differently. The person assigning that contract has a set of duties depending on the state and on whether anyone in the chain is licensed, and that varies enough that he should ask a real estate attorney in his state rather than the group chat. What strikes me though is that he signed assignment paperwork he can't describe. Not knowing the fee is one problem. Not knowing what he signed is a bigger one and it's fixable in an afternoon.

stephen_ok9 · Answer

Orchard's split is the one I'd use. Specialize on the work, don't specialize on the information.

I look at capital deployments and the pattern is identical everywhere. The person who controls the settlement statement controls the relationship. $3,200 across three contracts with two closing is around $1,600 per closed deal, and I have no idea if that's low because neither does he, which is exactly the point. If the other member is taking $8,000 on a deal your brother in law sourced and paying out $1,600, that's a 20% referral rate and there are groups that do that openly. If it's a 50 split on a $3,200 fee, that's a completely different deal. Same money to him, totally different arrangement, and he can't distinguish them.

marcus_hale41 · Answer

Meridian did the arithmetic I was going to do, so I'll go at the other end. The thing that would stop me cold is the deal that didn't close. Three contracts, two closed. Why did the third one die. If it died because the buyer person couldn't move it in time, your brother in law spent weeks of seller work and earnest money exposure on a contract that failed on someone else's side of the wall, and he'll never learn from it because he wasn't in the room. That's the real cost of the blind arrangement. Not the fee he might be underpaid, the pattern recognition he isn't building. I'd want to see the marketing history on the dead one more than the closing statement on the live ones.

gregpowell66 · Answer

Construction has a version of this. A framing sub can go years without ever seeing what the GC billed the owner. It is fine income, and it also means he has no idea when he is cheap. What usually breaks it is one job where he finds out by accident and can never unsee it. Your brother in law is going to have that moment eventually, everyone does, and the question is whether he has it in month four when he can renegotiate or in year three when he has built his whole business on the arrangement. Push him to ask now while asking is still a normal question. Groups that share statements exist. He should find out whether his does before he has twelve contracts of history with people who would rather he did not ask.

Does a seller-finder in a wholesale referral group need to know how to sell a contract themselves

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