Whose name belongs on the purchase contract when you are sourcing for a client

Shape A's control argument is real and deserves more weight than it usually gets. Take an operator whose client ghosts at day eleven of a fourteen day inspection window. In the version where the operator holds the contract, a replacement buyer typically surfaces within a few days and the deal closes for several thousand less than planned. In the version where the client holds the contract instead, the seller simply relists, the operator earns nothing, and the seller relationship is gone too, which is usually the more expensive loss.

This shows up clearly on the management side of these deals. Owners who bought through a sourcer who held the contract almost never understand what they actually paid. Six months later they're confused about why the closing statement doesn't match the number in their head. Clients who signed directly know exactly what the house cost and what the service cost, and they tend to stay easier to work with over the long term 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?

@nataliehsu, 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.

@tashaford30, 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.

@rena-expert made a useful distinction between pricing off the spread and pricing off labor, and that is the gap worth naming. An operator who quotes flat fees because clients understand them, then structures the deal like a wholesaler out of habit, ends up carrying risk that is not priced in anywhere. That mismatch is worth fixing before it becomes a pattern.

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?

@derekj19 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.

Shops that run B only, several sourcers deep, tend to handle the ghosting problem @carlos_nunez describes with a deposit rather than with contract control. The client wires $2,500 against the fee before any work starts. It's credited at closing and it's non refundable if they walk on a property that met the written buy box. That clears out most of the tire kickers within the first quarter it's in place, and the clients who refuse to pay it turn out, reliably, to be exactly the ones a sourcer 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, @angela_burke?

From the buyer's side of this, direct signature wins every time. When the sourcer holds the paper, the inspection period is effectively controlled by someone whose interest in the deal ends at the closing table. A common version on small multifamily: the client loses a week getting access to the boiler room because the seller will only talk to the contract holder and the sourcer is working three other files. Owning the contract means owning the calendar.

Small rural markets break shape B in a way nobody has said yet. Sellers in those counties want to deal with a person they have met. When the 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 about half of them will not do it. So the sourcer in that market ends up holding the paper because the handshake has to be theirs. That is a different problem from the ones the rest of this thread is solving.

@tashaford30, the fund side will push you toward B whether you like it or not. Capital allocators as a group want 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 review on every single deal. One flat invoice per closing is something a back office can process. An assignment fee is something someone has to explain.