The sourcing fee is bigger than my closing costs. Still nothing bought.

Deal two I paid again. Not because I hadn't learned anything, I had, but the marketing spend to generate my own leads was running $2,800 a month and I closed nothing for eleven weeks. The fee is cheaper than the pipeline until you're doing volume. Your break-even is somewhere around three or four deals a year in my experience.

5% of purchase is the number to argue with, not the $7,000. Ask what the fee is on a $90k house. If it's still $7,000 then he's pricing his labor, which is honest. If it scales with price he's pricing like an agent and you should ask why.

Some vocabulary first, since the thread is mixing two different arrangements.

A wholesaler working on their own account puts a property under contract with the seller and then assigns that contract to a buyer for a fee, called the assignment fee. The buyer's cost is baked into the price and the wholesaler's counterparty is the seller.

Wholesaling as a service is the other direction. You hire the operator, you tell them what you want to buy, and they source and negotiate on your behalf for a fee you agree to in advance. That fee can be flat, per deal, or a retainer. The reason the distinction matters to you: in the second arrangement the operator is working for you, so you can ask for things like written underwriting on each property presented, and a fee earned only when a purchase actually records in your name.

Two cautions. First, what an unlicensed person may legally do when finding and marketing property for a paying buyer varies by state, and several states have tightened these rules recently, so confirm the current position where you're buying with a real estate attorney or the state licensing body before you sign anything. Second, ask in writing whether the operator is being paid by anyone else on the same transaction. Disclosure requirements for that also vary by state.

On the money question itself, whether a $7,000 fee is worth it to you depends on what your own time and delay cost you, and that's your call to make with your numbers.

Land side, so my deal clock is measured in seasons, and I've still paid a finder twice. What I wouldn't pay for is somebody handing me an on-market listing with a fee stapled to it. Ask him what percentage of what he brings you is off-market.

Eight months, zero offers. That's the actual line in your post. The fee is a way of buying your way out of a habit and it doesn't fix the habit.

One practical thing. Talk to your lender about that fee before you sign anything, in writing, because how a third party service fee is treated on the settlement statement isn't uniform and I've seen it turn into a cash-to-close surprise a week out. Doesn't mean it's a problem, it means you want the answer early.

@orchard is half right and half unfair. I did my own sourcing for the first year and the thing I learned was mostly how to be rejected by tired sellers at 8am. Useful, sure. Also the fee I paid on my third deal saved me about five months. Both true.

@tally what's your actual constraint, time or money? If you've got a job and 6 hours a week, you're not building a pipeline, so pay the fee and stop pretending. If you've got 25 hours and $3k, spend it on your own leads.

Rural markets there's barely anyone offering this, so the question doesn't come up. The one guy who does charges $4,500 flat and brings maybe four houses a year that anybody would want. I've bought one of them.

Out of area is the case where I think it's obvious. If you can't drive the street you're paying somebody to be your eyes and $7,000 is cheap for that. In your own metro it's a lot harder to justify.

I'm 3,000 records into a list and I'll tell you the unpleasant part: the list isn't the work, the follow up is. Six touches over four months before anyone talks to you. If you don't want to do that for a year, don't kid yourself that you'll learn to source.

Coming from construction, I'd rather pay somebody to find it and put my own money into knowing what the repairs cost. That's the skill I can actually check. I can't check whether a sourcer's comps are honest, but I can check a bid.

Something here isn't adding up for me. If he finds the house and negotiates the price, who is he negotiating for? He gets paid either way once I close, so what stops him from just getting a yes at whatever the seller wants?

@juniper nothing does, structurally, unless the fee is tied to something. That's the honest hole in the model. You manage it by underwriting every deal yourself and being willing to say no eleven times, which most people won't do after they've been waiting three months for a house.

Small portfolio here. I paid on deals one and two and stopped on three, and the reason wasn't cost. It was that both sourced houses were fine and neither one was in the two neighborhoods I actually wanted, because he had inventory pressure and I had patience I wasn't using. That mismatch never shows up in the price you agree on.

$4,200 in closing costs on a $150k purchase seems low to me depending on your state's transfer tax and whether you're paying title. Worth rechecking that side of the sheet too.

Four deals in and finding my ceiling, and the fee now lands like this for me: I pay it on anything outside a 40 minute drive and I source everything inside that myself. The fee isn't a beginner tax, it's a geography tax.

@tally the thing I'd actually push on is the $7,000 being flat regardless of the deal. Ask him what happens if the first house he brings you falls apart in inspection and the second one closes. Is that one fee or two? I got that wrong once and it cost me an extra $5,500.

Your post reads like a mirror of my own situation, six months of research and zero deals. I'm voting learn to source first and I fully accept that's the answer of somebody who hasn't bought anything either.