Four months of retainer to a sourcing service, zero closings, $6,900 gone

I move slowly on purpose, so paying someone to speed up the front end seemed like the one place spending money made sense. It didn't work and the reason is in the agreement I signed, which I read carefully and still got wrong.

The deal: $1,500 a month, minimum four months, in exchange for "active sourcing" inside a buy box we defined together. Small multifamily, two to four units, one metro, under $340k, needing cosmetic work only. The fee was fully earned on payment, no closing component, which I accepted because they argued a closing-contingent fee would push them to bring me anything that could close rather than what I asked for. That argument is actually reasonable. It's also the trap.

What I got in four months: nine properties presented. Seven were outside the box on price or unit count. Two were real. On the first I paid $450 for an inspection and it had knob and tube through two units, which I'd told them in writing was a hard no. On the second we were the backup offer and it never came to us. Total out: $6,000 retainer plus $900 in inspections and a trip.

Where it went wrong was step one, the agreement. There was no definition of what a presented property was, no standard for whether a presentation counted if it violated the box, and no remedy of any kind. So they satisfied the contract by sending emails. Four months of emails is a complete performance of what I signed.

What I'd do differently. Pay for outcomes with a small retainer credited against them, not a full retainer standing alone. Define a qualified presentation in the document, with the box restated inside the definition, and say that presentations failing the box don't count toward anything. And put a termination right at thirty days rather than a four month minimum, because I knew by week six.

Answer

2jordan_ellis2ActivePRO6

The buy box wasn't the failure. Fully earned on payment with no delivery standard was the failure, and everything after that is just the contract working as written.

Their argument about closing-contingent fees pushing them to bring junk is real, and the standard answer isn't a pure retainer. It's a retainer credited against a closing fee, so they carry some of the risk of never delivering and you carry some of the cost of their search labor. You said that yourself at the end, which means you found the answer, it just cost $6,900.

I'd add one thing to your list. A qualified presentation should require the underwriting attached, rent roll or rent comps and their price opinion, not a link. Seven of your nine were out of box because sending a link costs them nothing. Make each presentation cost them an hour of work and the volume of garbage drops on its own, without you having to argue about whether a 5 unit counts as small multifamily.

The knob and tube one is the part that would have ended it for me at week six too. That wasn't a near miss, that was them not reading their own box.

2 replies

2aliyah_bAU2APRO6

Half agree with @pike. The structure was bad, sure. But under $340k, two to four units, cosmetic only, one metro, is a narrow box, and I'd want to know how many properties in that metro actually fit it over those four months. If the real number is three, no fee structure in the world produces a closing and the service should have said so before taking the first $1,500.

The failure I'd name is that nobody counted the inventory before signing. I'd ask for a written estimate of how many properties matched the box in the previous twelve months, from their own data, before any money moves. If they can't produce it they aren't sourcing, they're forwarding.