A first deal through a sourcing service, and why a two-page scope does most of the work
Here is what a first purchase through a sourcing service tends to look like when it goes right, with the numbers laid out. Picture a small duplex the buyer did not find himself. Someone else found it and negotiated it, and the buyer pays $6,500 at closing for the service. Most people are nervous about the arrangement for months beforehand, so the mechanics deserve a plain accounting. The paper first, because that is the part that matters. Ninety day non-exclusive sourcing agreement, no retainer, fee earned only on a recorded closing in the buyer's name. That last clause is the one worth fighting for. A sourcer will usually ask for "earned upon executed contract", and when the buyer says no and the sourcer takes the change without much argument, that tells you he closes deals. Numbers. Purchase $184,000. Two units, one occupied at $1,250 which is under market, one vacant that re-rents at $1,375. Fee $6,500 flat, showing up as a line on the settlement statement rather than a check written in a parking lot. Roof at the end of its life with a $4,000 credit, which everyone in the room knows is not a roof. Say the sourcer brings 14 addresses over about ten weeks. The buyer says no to 13 and writes one line on each saying why (price, layout, or in one case a flood zone he will not touch). Those written nos make deal 14 better because the sourcer stops sending two bedroom cottages. The part that nearly breaks it is deal 9, an estate sale where only one of three heirs has signed. The sourcer says get it under contract and "work the rest out later". The right move is to walk, and to say that if it comes up again the agreement ends. A good sourcer does not push. One more thing. Ask in writing whether the sourcer is collecting anything from the seller side too, and put the answer in the agreement. Whether that kind of disclosure is required, and whether what he does needs a license at all, depends on the state, and in the stricter ones an hour of attorney time to read the agreement before signing is money well spent.
