Four months as somebody's end buyer, nothing bought, $2,325 gone

I want one boring rental and I thought paying for access to a network's deal flow would shortcut the search. Paid $1,500 for a six month buyer seat in a group of about a dozen small wholesalers.

Four months, 22 deals in my inbox.

19 of them were the same handful of contracts moving between members with fees stacked on top. I could tell because two arrived twice, once at $84,900 and eleven days later at $91,500, same photos. When I asked about the second one, I got told the first price "wasn't available anymore." The property hadn't changed hands. Somebody had just added a layer.

2 were priced off sales from a nicer neighborhood on the other side of a road that matters a lot locally. Not fraud, just people pulling comps by radius.

1 I actually liked. Got to inspection, $525. Paid a real estate attorney $300 to review the contract and the title commitment, and that's how I learned the seller's sister was a co-owner who had never signed anything. Deal dead. Group's answer was that the member "was working on getting her signature." As far as I know that never happened.

$2,325 and four months.

What I'd do differently, plainly. I would not pay a seat fee to be a buyer. A network needs buyers more than buyers need a network, and the ones charging me for the privilege were the ones with the weakest buyers, which is why the seat was for sale. And before I schedule an inspection I now ask for the original purchase contract and the title commitment or the closer's status, whichever exists. If neither exists, the deal isn't real yet.

4 replies

2mikeoconnell7SP2APRO6

Selling seats to buyers is a revenue line that exists because it's easier than closing deals. I've watched a couple of local groups drift that way. The dues start as a way to split skip trace and list costs, then somebody notices buyers will pay too, and now the group's income doesn't depend on any contract closing. Once that's true the deal quality has no consequences.

2renee_dubois Get yours

I'll push back on one piece. Fee stacking on its own doesn't bother me. If the third guy in the chain brings me a number that works on my rent and my rehab, I don't care how many people got paid on the way. I bought a four unit last year that had two assignments on it and it's fine.

What you actually hit was a contract nobody could deliver, because a co-owner hadn't signed. That's a different failure and it would have happened at any price. The $300 to the attorney is the best money in your post.

2tonyv88SO4CPRO6

On the management side I see the tenant version of this. An assignment came apart last spring because nobody had gotten an estoppel from the sitting tenants and two of the three leases turned out to be verbal at rents nobody could document. The buyer had underwritten the rent roll he was handed. If you're buying occupied, add the leases and an estoppel to your list alongside the contract and the title status.

1ryanmck27SC2C

Working through licensing right now and part of what I'm reading is about how contracts get advertised. Depending on the state, marketing a property you have under contract rather than marketing your contract position can bump into brokerage rules, and a few states have written specific rules for assignment disclosure in the last few years. Which of those applies to a group in your market is a question for an attorney licensed there. Worth knowing before you write anyone a check for a seat, because the group's compliance habits become your problem at the closing table.

Four months as somebody's end buyer, nothing bought, $2,325 gone

4 replies