Finders fee

8 Replies

A broker friend brought me a 4-unit property. Valued at about 175K, with the option of making cash offer of 120k they expect to be accepted. (Basicaly buying a 175 property at 120) They are asking for a 20k finders fee. Am I correct that that is extremely high? If I recall correctly, most wholesalers typically dont ask for more than 10k. No?

@Daniel Rubenstein I believe that it can vary, as I've seen some individuals who have indicated they have received up to 50k; however, I think they did have it under contract and did a double close so that it wasn't necessarily disclosed that they were making that amount.

But, there have been some individuals too, who've said they've made 20k or so. I do find though, in general, that most people seem to be in that 5-10k range.

thanks guys/gals...ya i think its too high for this deal. Ill have to counter and see how it goes.  Not worth it to me with such a high finders fee...more of the prinicipal of the matter-over 15% of purchase price is just not right

@Daniel Rubenstein I don't know if it's too much or not; however, if YOU feel it's too much for your deal, then ultimately that's all that matters. 

There have been some flippers who've written that they've gotten properties from wholesalers who made a lot of money off the deal, but at the end of the day, all they cared about was how much THEY made from the deal. They basically didn't begrudge the wholesaler, because to the end buyer, they were still able to make a significant amount of money off the deal to make it worth their while.

I hear you...i guess if its a good deal with the 20k i should go for it.  If not then its too much regardless

Absolutely. If the numbers work, then that should be the determination to move forward; if not, then you just move on. Ultimately, you have to do what's comfortable to you. 

Good luck!

@Daniel Rubenstein Curious, you said this was an"broker friend".  A licensed abent/broker?  How is his "fee" being paid, is this an assignment of a $120k contract, for a $20k fee, or paid some other way....and directly to him, or his RE agency?

he is a licensed broker.  I just got my RE license so I guess this fee is in lieu of any commission.  This is my first deal brought to me as a wholesale/or anythingf similar. As of now it looks like the property is not under contract.  After some research i found the property is owned by his brother who has defaulted on his loan. It was due to go to auction July 7th. This broker friend contacted bank to postpone auction and accept short sale. The bank agreed to postpone and short sale the property.  I am not sure though where he got the 120k number from 

Well then, at this point the $120k number is just a hope.  The reason I ask how the fee was structured, is because what's you're describing will be illegal for him from a licensing standpoint, and fraud for both of you from the short sale disclosure/arms length affidavit documents.