Recommended Wholesaler fee and referral fee
Hello all,
I am new to RE investing. What is the recommended formula or value for referral fees and wholesaler fees? Can anyone provide guidance on what are the normal parameters that you would expect to pay in this scenario? Or point to another reference that my help?
Thank you,
Most Popular Reply
If you're asking about a referral, or "bird dog" fee, most investors usually pay $500-$1000 for a lead that ends up closing. That's if you don't contract to buy on your own, but just pass along the info.
"Wholesaling" usually entails you actually entering into a P&A contract then assigning or "flipping" it, and most investors go for $4000-$10,000. Of course in smaller deals in can be less, and some is more... sometimes much more.
The amount of markup fluctuates much more than bird dog fees. However, even those can be a LOT more on high-end properties or commercial deals...
Nick
If you're asking about a referral, or "bird dog" fee, most investors usually pay $500-$1000 for a lead that ends up closing. That's if you don't contract to buy on your own, but just pass along the info.
"Wholesaling" usually entails you actually entering into a P&A contract then assigning or "flipping" it, and most investors go for $4000-$10,000. Of course in smaller deals in can be less, and some is more... sometimes much more.
The amount of markup fluctuates much more than bird dog fees. However, even those can be a LOT more on high-end properties or commercial deals...
Nick
Thanks for your feedback, Nick. i appreciate it. I am interested in the lower priced investment homes, so I feel that this gives me a great starting point for negotiations. Thanks for your help, this is a great resource!
Jeff
I'm an unlicensed Investor working under a business. If an unlicensed person brings me a buyer for my PA in a wholesale deal ,I can pay them a referral under their BIN or EIN.
However, If a licensed agent requests commission for a deal where there already is an agent assigned in contract, and we are unwilling to negotiate commission, how can I legally pay her a referral fee for bringing in a buyer?
A good rule of thumb for wholesale deals (not bird dog fees) is to charge 10%-15% of the spread (also called equity) in the deal.
When I say spread, that means actual spread taking into account rehab costs.
Example: Exit (ARV) price is $100k and rehab is $10k, your contracted price is $59k.
Your spread is $31k so the fee should range between $3000 and $4500.
Here is how it looks for your buyer assumming you charge $4500:
$63,500 acquisition + $10k rehab = All-in for $73,500 with exit of $100k so buyer is at 73.5% of value.
#4 Off Topic Contributor
- Investor
- Round Rock, TX
I have heard 15% of equity as a normal price elsewhere too. I agree with this as a general guideline.
Of course, everyone needs to keep in mind that this is a "general guideline" and not specific/accurate math. You can charge whatever the market will allow, if that is 20%, then get it, if only 8%, then take what the market allows for.
Maybe that's why I haven't got many deals lately - generally been paying 10% or less.
It's worth reading these posts, as sometimes your business practices don't meet with market standards and you suffer getting decent leads.
I feel like a cheapskate all of a sudden. Need to look at my marketing structure and make some changes. Back to the drawing board.
TTFN,
Greg
Great post. I'm new on the site and I've been having the same problems. I think wholesaling is a better route for me and my market, plust the amount of money you make is greater. Thanks everyone for the posts.
Here is a great start for you:
http://www.biggerpockets.com/forums/93/topics/58383-the-truth-about-wholesaling-
Thank you very much for that post Will. I read it top to bottom and all over again. It was very informative for a newbie like myself. I have a quick question, as a newbie, how would I separate myself from all the "fakes" out there? I've always believed in complete honesty and integrity and I never plan to cheat anyone out of any deal. Besides it will only hurt you in the long run anyway.
Does this 10-15% of spread wholesaler fee apply to commercial (for me multi-family) transactions as well. Also, how does the bird dog fee for commercial figure in? I would imagine it would be more than $500-$1,000 considering the work.
#4 Off Topic Contributor
- Investor
- Round Rock, TX
I doubt anyone is going to pay you 10+ points on a CRE deal Sandy. A standard Realtor size commission is a lot more likely.
If all you are doing is identifying a property then you will get a lot less than someone that adds more value like a broker would.
You can charge whatever you want .As long as the buyer is getting a great deal.Depends on your negotiating skills.If you do a double escrow no one will know what your spread was.
Hello, I am a new wholesaler in the VA Beach area. I reached out to a fsbo months ago telling stating that I work with cash buyers and if she was interested in selling please give me a call. (I did not have any buyer's i was just trying to putting myself out there.) This morning the owner messaged me saying they are looking to sell and that they will offer a 3% sellers agent commission. How do approach this situation so that I would get compensated?
I have met a realtor, but who should I go about doing business?