What is a Disposition Fee?
A disposition fee is the compensation paid to a person or company for selling (disposing of) a real estate deal on behalf of someone else. While a wholesale fee is earned by the wholesaler who both contracts and sells the deal, a disposition fee specifically compensates the party responsible for the selling side only. Disposition fees arise in co-wholesaling arrangements, disposition services, and joint ventures where the acquisition and disposition functions are handled by different people.
The distinction matters because wholesaling has two distinct phases: acquisition (finding and contracting deals) and disposition (finding buyers and closing sales). Some wholesalers are excellent at acquisition but struggle with disposition. Others have strong buyer lists and disposition skills but no deal flow. Disposition fees create a structure for these parties to collaborate.
Disposition fee structures
Co-wholesaling split
Two wholesalers split the deal: one brings the contract, the other brings the buyer. The total spread is split between them, typically 50/50 or with a negotiated disposition fee. For example, if the total spread is $20,000, the acquisition wholesaler might keep $10,000 and the disposition partner earns $10,000 as their disposition fee.
Flat-fee disposition service
A disposition company charges a flat fee (typically $3,000-$5,000) to sell a deal on behalf of the contract holder. The acquisition wholesaler keeps the remaining spread. This model works well when the spread is large enough to support both the flat fee and a reasonable profit for the contract holder.
Percentage-based
The disposition partner receives a percentage of the total spread or the final sale price. Common structures include 30-50% of the wholesale fee or a fixed percentage of the sale price above a minimum threshold.
Disposition fee vs wholesale fee
| Factor | Wholesale Fee | Disposition Fee |
|---|---|---|
| Who earns it? | The contract holder | The disposition partner |
| Who found the deal? | Same person who earns the fee | Someone else |
| Risk carried | Full deal risk (earnest money, option fee) | No capital at risk |
| Typical amount | $5,000-$25,000 | $2,000-$10,000 |
| Relationship to seller | Direct (contract party) | None (works for contract holder) |
When to use a disposition partner
- New to wholesaling: You contracted a deal but don't have a buyer list yet. A disposition partner with an established list can sell it.
- Out-of-area deal: You contracted a deal in a market where you don't have buyer relationships. A local disposition partner knows the buyers.
- Time pressure: The option period is expiring and you haven't found a buyer. A disposition partner with a deep list can save the deal.
- Scaling: You've outgrown your capacity to market every deal yourself. A disposition team or service handles the selling while you focus on acquisition.
Avoiding disposition fee pitfalls
The biggest risk in co-wholesaling arrangements is daisy chaining -- where the disposition "partner" doesn't actually have buyers and passes the deal to someone else, who passes it along again. Each link adds a fee and reduces the likelihood of closing. Only work with disposition partners who have verified buyer lists and a track record of closing deals.
Building your own buyer list is the long-term solution. Tools like Deal Run's investor search let you identify active buyers near any property from public records, reducing your dependence on disposition partners and keeping more of the spread for yourself.