Where do bulk LEGO sellers on eBay get their bricks?
Garage-sales, estate-sales, second-hand stores, flea-markets and graigslists are the most common way to source out used LEGO. This is especially true in neighborhoods where there is a LEGO store nearby so a lot of kids have them, or where LEGO is popular in the community in general (suburbs and middle-class neighborhoods are especially great places to scout).

As far as how much they pay for it, it just depends on the deal, but of course the less is better. These buyers often make an offer on an entire lot to get the best deal, and they are very familiar with what sells the best and for how much.

They wash them, clean them, then cherry-pick the minifigs and expensive parts out they will sell separately on eBay or BrickLink and dump the rest on eBay as mixed lots. It is not easy work by any means, but it can be a lucrative business.