Structuring an exclusivity arrangement with a buyer without crossing into acting as their agent

Question

A common arrangement in reverse wholesaling is a repeat buyer, taking a steady volume of deals a month, wanting a wholesaler sourcing exclusively for them in a defined territory in exchange for first look on everything and a flat standing fee regardless of spread. Two problems are worth thinking through before signing. First, a flat fee caps the upside on any deal that would have carried a much larger spread, and there is no way to know in advance which deals those are, so the fee needs to be priced against the average expected spread across the whole territory, not against the best deals. Second, sourcing exclusively for one buyer under an ongoing arrangement raises the question of whether that starts to look like acting as the buyer's agent rather than assigning contracts on one's own account. Taking title position or an assignable equitable interest via a real purchase contract, rather than simply shopping properties on the buyer's behalf, is generally what keeps the arrangement on the wholesaling side of that line, but the exact line depends on state law and is worth confirming with a real estate attorney. The exclusivity language itself is the part worth having reviewed line by line, since that is usually where an otherwise sound arrangement gets pulled toward agency work.

Rena Expert · Accepted Answer

The flat fee and the licensing question are separate problems and the second one is the expensive one, so take it first. Whether an arrangement crosses into brokerage depends on your state's statute and on how a regulator there reads it, and that's a question for a real estate attorney licensed where you're operating, not a forum. The general mechanism that keeps assignment on the right side of the line is that you hold an equitable interest in the property through your own signed purchase contract and you're selling that interest. If you're being paid to find and negotiate property for someone else without ever contracting to buy it yourself, the analysis changes, and several states treat that differently again. Exclusivity plus a standing fee starts reading like compensation for a service rather than profit on a contract, and that's exactly the framing you don't want in writing. Get the agreement drafted so the fee is consideration for assignment of a specific contract, one per deal.

On the economics: a $6,000 flat is only bad if your spread distribution is wide. Two a month is 24 deals a year, which at $6,000 is real. Your $18,000 deals exist, but so do the ones where you'd have fought to get $4,000 and eaten a cancelled due diligence period. Pull your last twenty comparable sourcing attempts and look at the actual distribution before you argue for a percentage.

What you haven't raised is concentration. One buyer at two a month is your entire business, and if their capital source pauses or they change markets, you have no other relationships and no list. Negotiate exclusivity with a term limit, six months, and a minimum purchase count that voids it if they don't perform. Otherwise you've given up your other buyers for a promise.

omar_haddad · Answer

The flat fee will hurt you in a different place than you think. If they pay $6,000 regardless, you have zero incentive to fight for the last $10,000 off the seller, and eventually they'll notice their acquisitions are getting worse and blame you. A percentage of spread keeps you both pointed the same direction.

wendy_park48 · Answer

@tylerbrooks9 check whether their proposed agreement has an assignment clause that survives, and check who is paying the double closing costs if title will not insure a straight assignment in that state. Some of these drafts hand the wholesaler a flat fee and then bury $1,800 of closing cost on their side without saying so. Also look for a tail provision, meaning if a property gets introduced and bought six months later direct from the seller, does the fee still get paid. That is the clause that goes missing.

Structuring an exclusivity arrangement with a buyer without crossing into acting as their agent

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