Real estate referral fees are a portion of the commission paid to a real estate broker in exchange for client referrals. Though subject to negotiation, a typical referral fee is 25% of the gross commission for a single side of a transaction.

Let’s review why referrals are sometimes necessary, how real estate referral fees work, how they may vary, and answer some of the most frequently asked questions about real estate referral fees.

What Is a Real Estate Referral?

A real estate referral is the act of getting a client into the hands of the person who is the most qualified to get them the real estate services they need. As much as real estate agents would love to be the go-to resource for all things real estate for all our clients all the time, there are times when our clients request things that we simply can’t deliver.

Most commonly, real estate referrals occur because a real estate agent is either unlicensed or unqualified to service their client in the purchase or sale of property in a particular geographic area or for a specific type of real estate.

Real Estate Referral Form

The only paperwork required for a real estate referral is a real estate referral agreement. This is a basic contract between the two brokers of the referring agents that covers how the commission will be split, the length of the referral, and other matters.

It’s typically the referring agent’s responsibility to supply the referral contract with the initially stated terms. If the receiving broker wants to negotiate these terms, they may do so.

Need a referral contract? Click below to get our free, customizable, and easy-to-use template. The National Association of Realtors also has an easy-to-use referral form you can find here.

Download Your Free Real Estate Referral Fee Contract Template

When to Make a Real Estate Referral

Let’s say you’re a real estate agent working in Maryland, and you have a client who wants to purchase a beach house in Delaware. Even though these states are right next to each other, Delaware is a turf state, and as a Maryland license holder, you’re unable to conduct business in Delaware.

However, you can refer this client to a real estate agent who is licensed in Delaware. In exchange for that referral, you (or more accurately, your broker) will receive a percentage of the commission.

[Related article: Real Estate License Reciprocity & Portability: A State-by-State Guide]

Another situation where a real estate referral fee may arise is when your client is seeking services that you’re licensed to provide, but perhaps you don’t have the knowledge or expertise to feel confident that you can adequately represent your client’s best interests.

Consider the following scenario: You’ve got a client who you’ve helped with residential real estate transactions in the past, but now they want to sell an industrially zoned building they own.

If you’ve never worked on a commercial transaction, you may not be qualified to give your client advice on pricing, negotiation, or closing conditions since the best practices of residential real estate may not apply to commercial or industrial real estate. So, a referral to an experienced commercial and industrial real estate agent would be the best option for your client.

Real Estate Referral Fees: Chris Answers Your Most Frequently Asked Questions

Real Estate Referral Fees: Money Matters

Now that you have a basic understanding of real estate referral fees, let’s dig into the financial nuts and bolts. Real estate referral fees present a pretty straightforward topic, but since there’s money involved, more knowledge is good knowledge, and we want you to be the smartest person in the room.

The Future of Real Estate Referrals

We’re confident that agent-to-agent referrals are going to remain a part of the real estate business. Businesses like ReferralExchange, OpCity, and Agent Harvest are going to continue to offer their services, but they won’t be alone.

Companies like Zillow, through programs like Zillow Flex, are getting into the referral business too, giving credence to a Tom Ferry prediction that by 2023, a full 50% of real estate transactions are going to have some form of a referral fee attached to them. Will that be the case? Only time will tell.

Bringing It All Together

Knowing how real estate referral fees work is a must for any real estate agent. Whether you’ve got clients who are movers and shakers, or you live in a desirable spot where people are moving or purchasing vacation property, you need to know about real estate referral fees. They can be a great source of income for you and the practice is vital to providing your clients with the best service possible.

Have any real estate referral fee questions we didn’t get to? Ask away in the comments!

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Jam packed with 61 proven real estate lead generation ideas for this year, this eBook comes from coaches and top producing agents from around the country.
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