Whose name goes on the purchase contract when you're sourcing for a client

Shape A's control argument is real and I'd weight it heavier than you did. I've had a client ghost me at day 11 of a 14 day inspection window twice. In the version where I held the contract I found another buyer in three days and made $4,000 less than planned. In the version where the client held it, the seller relisted and I made nothing and also lost the seller relationship, which was the expensive part.

I see the other end of this when I take over managing these places. Owners who bought through a sourcer where the sourcer held the contract almost never understand what they actually paid. Six months later they call me confused about why the closing statement doesn't match the number in their head. The clients who signed directly know exactly what the house cost and what the service cost, and they're much easier to keep as long term clients because nothing surfaces later.

Dumb question from someone still working out where they fit: in shape B, what stops the client from just calling the seller directly and cutting you out after you've handed over the address?

@plumb, the services agreement is what stops it, and it only stops it if it's written to. The usual mechanism is a protection clause that says any property introduced by the sourcer, identified in writing at the time of introduction, triggers the fee if the client or an affiliate closes on it within a stated window, commonly six to twelve months. That makes the fee owed on the closing rather than on the introduction, and it means your written introduction record is the thing that gets enforced. Whether that clause is enforceable as drafted turns on contract law and on whether the activity itself requires a license where the property sits, and both differ by state, so have an attorney licensed there review the form before you use it more than once.

@quill, the choice between your two shapes depends on one assumption more than any other: whether your fee is priced off the spread or off your labor. If the number you charge is a function of how far below market you contracted, shape A is the coherent structure, because you need the contract to capture the spread and you need to be able to place it elsewhere when the client walks. If the number is a function of hours, deals reviewed, and pipeline maintained, shape B is coherent, because your compensation isn't sensitive to the discount and holding equitable interest just puts your earnest money at risk for nothing.

Your four deals landing at roughly the same fee either way suggests you're currently pricing off labor while carrying shape A risk on half of them. That's the combination with the worst risk to reward. Pick which side your pricing sits on first, then the contract shape follows.

The point @rena-expert made about pricing off the spread versus off labor is the thing I'd been circling for months without naming. I've been quoting flat fees because clients understand them, then structuring like a wholesaler because that's how I learned. That's just carrying risk I'm not paid for.

Shape B sounds like what a buyer's agent does, minus the commission structure, at least to me, and I haven't done a deal yet. Is the actual difference just where the money comes from?

@beacon it overlaps enough that in some states it's the same activity legally and you need the license, and in others the line sits somewhere else. That's exactly why I'm getting licensed. It removes the question instead of making me argue it. The commission versus fee difference is real though. An agent is typically paid out of the transaction under a listing arrangement, and a sourcing service is billed to the client directly, which changes who the client thinks you work for.

We run B only, five sourcers, and the ghosting problem @quarry describes is handled with a deposit rather than with contract control. Client wires $2,500 against the fee before we start work. It's credited at closing and it's non refundable if they walk on a property that met the written buy box. Killed most of the tire kickers in the first quarter we used it. Two clients refused to pay it and both of them turned out to be exactly the ones we didn't want.

$2,500 up front from a stranger seems like a hard ask. How long did it take before you could charge that, @cobalt?

I've been on the buying side of this twice for small multifamily and I'd sign directly every time. When the sourcer held the paper, the inspection period was effectively controlled by someone whose interest in the deal ended at the closing table. I lost a week getting access to the boiler room because the seller wouldn't talk to me and the sourcer was working three other files. Owning the contract meant owning the calendar.

Small rural markets break shape B in a way nobody's said yet. Sellers out here want to deal with a person they've met. If my client is 900 miles away and has never set foot in the county, the seller signing with them directly means the seller signing with an abstraction, and half of them just won't. So I hold the paper because the handshake has to be mine. Different problem than the ones you all are solving.

@quill, the fund side will push you toward B whether you like it or not. Every capital allocator I've talked to wants the acquisition on the entity's own contract from the start, because the assignment step creates a chain of title question their counsel has to look at on every single deal. One flat invoice per closing is something the back office can process. An assignment fee is something someone has to explain.