Real Estate Referral Fees — Rates, How they Work & Free Contract Template

Cody Cromwell
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The 4 Basic Steps to Referring your Real Estate Client

Historically, agents received compensation for introducing their clients to real estate brokerage companies or marketing firms. This was often referred to as cash back of closing costs, and the agent took a percentage of the commission paid to the realtor that placed the client. This was an effective way of generating income and building a referral business.

In today’s real estate market, agents refer clients primarily by word of mouth and pocket listings as opposed to taking a commission. This has been a controversial practice for agents, and the industry is looking for ways to incentivize agents to refer qualified buyers and sellers.

In order to do this, some agents are voluntarily assigning the agent professional liability insurance so there is a monetary obligation for the agent when a potential client is referred to the brokerage. The best agent referral programs are those where the client is awarded a higher commission and a percentage is paid to the agent that makes the referral.

As with any business, there is a risk involved with referring clients. There are four basic steps to referring your client to an agent/broker:

{1}. Verifying that the client meets the qualifications for an agency or brokerage.
{2}. Assessing the client’s interest in working with an agent/broker.
{3}. Verifying that the agency or brokerage is able to accept the referral and will offer a referral fee.

Step 1: Standardize Your Referral Contract

Each real estate brokerage charges their sales agents based on a standard agreement and terms and conditions which they refer to as the ‘Code’.

You can find the Code for your local brokerage, as well as your competing brokers, in every listing agreement packet and on the companies website.

Many real estate companies will charge a referral fee and/or a discount for referral.

You should aim to negotiate a better discount for the referral of your clients.

Nowadays with so many competing real estate brokerages, most of them sign up for a broker referral fee program.

Here are some areas that you can ask for your broker to accept discount from your referral fee:

There are different rates involved for various sales agents.

In some cases a sales agent may be able to negotiate a better referral discount, such as a different form of commission.

When you negotiate your fees from your brokerage, talk about commission rates and referral fees.

Being familiar with what a standard broker referral fee agreement looks like can help with negotiating discounts for your potential referrals.

Referral fees are commission.

Also, be sure to make your relationship with the person you are referring.

Think about how much your roommate would have to earn at the new place that you are referring and you both want to move into.

Step 2: Get Client Approval

Once you’ve received the contracts from your buyer and have read them carefully, the key to getting a successful transaction is to get your buyers to accept the agreement. It’s not easy to gain your buyer’s approval, but the experience you gain is invaluable for your career!

Before you approach your client, you’ll want to know a little more about them. Ask for basic information about them, including their name and contact information. An essential question to ask is about your client’s current home. It’ll help you determine their home’s current condition and how much they’ll spend on their new home – you can use these figures as a guideline for pricing your services. Make sure to ask them about their credit and whether they plan to finance their new home.

Step 3: Make the Referral

Now that you’re ready, make the call or send the email. You’ll understand why this part is so important because the process can only begin from here.

Referring a friend to an agent is a great way to earn money if you do it right and choose the right agent.

Once your referral gets accepted by an agent, you both share part of the financial reward the agent receives for referring the buyer to that agent.

Your referral becomes the property of the Real Estate Referral Services until the next step: the buyer signs a listing agreement with an agent.

Tickets and Referral Fees

Before getting referrals, agents must earn tickets. Tickets are awarded to agents based on how many referrals they send to the company each month. Because the tickets are in effect a form of currency it means your referral must be paid for before you can earn serious money. This is why it is important to choose the right agent so you can continue earning tickets. The better the agent, the more referrals he or she will be able to send your way.

To earn tickets, an agent must follow some simple guidelines. Tickets are earned when the agent manages to give his or her referrals to the Real Estate Referral Services.

There are two types of referrals you can make:

Step 4: Negotiate the Fee

Remember that the Referral Fee is not a typical commission. The most you would ever make from the Referral Fee is about 10%, so you do not want to lose this! But when you offer a buyer a better price on their home purchase, they will give you a better referral fee for finding that home for them.

Simply agree on what you will receive, and when the buyer finds their home, agree on a signing bonus for a moment of their time.

There are three steps in this process as long as contingencies are met. No fee agreement: This is where we all start. This is where you agree on what you will receive for referring a buyer to your Real Estate Broker. Determine the referral Agreement amount: Once you have the referral fee and the commission amount nailed down, determine the percentage of the commission you will earn for hitting certain performance levels. Determine what you need to do: Figure out exactly what performance levels you have to meet to collect your referral Fee. This gives you better targets to meet and allows you to make sure you are working hard every day.

For New Agents: Touch Base with Your Broker

This is the one place in your business where you can’t skimp. Remember, it is a standing deal with them. They will expect a fairly large percentage (meaning a few thousand dollars a year) of the commission you earn for the rest of your career. What is the fee? That will depend on your broker. The fees are often negotiable, but they must rely on one certain thing, which is the money you bring in. That is essential!

This is one sweet deal. Maybe even the most sweet deal you’ll ever make. Every time you see them, or the wholesaler, or the office manager, don’t forget to mention that this is a deal for eternity. When they say how forward-thinking you are, be proud … then be quiet. See if you can’t get yourself to buy a few hundred dollars…… every time.

If you have a good relationship with your broker, he or she may be able to fill you in on the referral fee. I know it helped me out a lot!

For old pros: Remember to be versatile. The sale of a million-dollar property will often be made up of lots of little things. You could be working an institutional sale, doing luxury homes, town houses, apartments, or even condos.

Real Estate Referral Fees with Out of State Agents

Commercial vs. Residential Real Estate Referral Fees

In real estate, referral fees are offered by Realtors that want to attract a higher number of sellers. Back in 1999, the National Association of Realtors (NAR) determined that there is a minimal charge that should be paid for a referral. However, the money is not exactly a referral fee when it is paid by a buyer’s agent to a person or company who is selling the property to a buyer. All a buyer’s agent gets is a commission from the property sale.

The referral should take the form of a harmless gift until the estate transfer has taken place or until settlement has taken place between the buyer and the seller. This will be a three-way transaction in which the estate involved will include the real estate and the gift involved in the real estate. On the other hand, a buyer’s agent is not allowed to buy any property or incur any other cost of any kind after acquiring the referral. Even if a real estate referral fee is paid by the buyer’s agent, it does not include any residential property where the job of a real estate broker can be traced in the middle of a transfer.

Relocation Companies & Real Estate Referral Fees

Where to Find Agents to Refer to

If you are looking to buy or sell real estate property, it’s very important that you pick a great agent. As a seller, you have to go through a lot of paperwork and expenses to sell your property. As a buyer, you can save a lot of money and travel from one agent to next.

The best part of the referral arrangement is that the agents share a certain percentage of the commission earned with their present clients. The percentage varies from agent to agent so choose wisely. The best part of the deal though is that none of the expenses are on the seller’s end – the agent takes care of it all. Thus, the best reward for the client is peace of mind.

The Referral Fee for Real Estate

A real estate deal between two parties is a business deal and thus its terms and conditions fall under the purview of business law. The agreement between the buyer and the agent typically includes a referral fee which is paid by the buyer to the agent in exchange for their services. The referral fee is typically a percentage based on the total amount agreed to be paid on the property. The referral fee is also known as the personal property fee.

So how is the Referral Fee Calculated?

Non-Agent Real Estate Referral Fees: Not Allowed

The Bottom Line

This Real Estate Referral Fee Agreement (“Agreement”) is made between you (“Lender”) and The Real Estate Referral Specialist, LLC, a Tennessee limited liability company (f/k/a The Real Estate Referral Specialist, LLC, a Florida Limited Liability Company; “Refferals”). Refferals is acting as a Real Estate Broker-Salesperson on behalf of Lender, an Illinois limited liability company owned by Lender (the “Broker”).

In this Agreement, Lender has authorized Refferals to represent Lender in the sale of the real estate listed herein to provide to Refferals and Refferals provides to Lender, and Lender hereby agrees to pay Refferals Real Estate Referral Fees as set forth herein. Lender represents and warrants to Refferals that all terms, conditions, and representations of Lender set forth herein are true and correct.

This Agreement is made in consideration of the personal services performed by Refferals for Lender in the real estate transaction referred to herein (the “Transact”) in all jurisdictions and countries in which the Transact is performed.