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real estate referral fee

Real Estate Referral Fee: How Much? Art Of Negotiation.

Referral fee offers a great source of income for sending referral agents and provides ability to boost income of referral receiving agents. However, not all referrals & referral fees are created equal. It is important to understand how fees work and negotiate to get win-win deal for both sides.

What is Agent to Agent Referral?

Real estate client referral lead, sent by licensed real estate referral agent, to another receiving agent is called “agent-to-agent” referral.

What is Real Estate Referral Fee?

Fee paid by referral receiving agent to licensed real estate referral agent, also known as sending agent, is called referral fee. Typically, in real estate transactions, fee is paid after receiving agent services the client, helps with buying, selling, renting the home and sale transaction is closed.

Common Referral Fee Questions?

  • As an agent sending the referral, how much Referral fee you should ask for outbound leads.
  • Should sending agent ask same referral fee for all types of leads?
  • Referral fees for agent referrals is a polarizing discussion. Many agents wonder is it worth paying high referral fees like 30, 40, 50% for incoming referrals.
  • How much is typical referral fee.
  • Is it prudent to try negotiating with sending agent without hurting the partner agent relationship.
  • Can we pay referral fee to unlicensed individual.
  • Does broker need to sign referral form or can just the agent sign?
  • How do we know receiving agent and referral client are in sale transaction and owe referral fee.

How much is the typical Agent Referral Fee?

Most agents start with 25% as a referral fee. However, this is totally negotiable. It can vary from 5% to 70% depending on the quality of referral and other parameters involved.

How much referral fee is considered ideal ?

There are multiple factors involved in figuring ideal referral fee. Understand how this real estate agent referral lead adds value to your business.

Most agents start with 25% of gross office commission, brokerage receives from successful sale closing as referral fee. However, this fee is negotiable.

Some of factors influence referral quality and fees are:

  • Supply and demand of referrals
  • Market type, buyers market, sellers market
  • Referral lead quality, pre-qualified referral, pre-approved referral
  • Willingness of referral agent to do warm introduction to referred agent with a three way phone conversation including the referral client.

Art of Negotiation. How to negotiate fee with referral agent?

Just like most of real estate business transactions; agent-to-agent referral fee is negotiable.

Understand all the factors involved and use alternate options, supply and demand as leverage in negotiating.

Same applies for both sending and receiving agents. Negotiate to find a fair win-win solution for all parties involved.

Some factors to use as a leverage in negotiating:

  • Say it’s a hot sellers market. Having a seller referral lead is way more valuable than a buyer lead.
  • Having a buyer lead who is looking for higher end market is more valuable than lower end.
  • Pre-qualified, pre-approved buyer, a second time buyer who understands the process makes it easier for receiving agent and more valuable.
  • Quick buyers, ready to put strong offer to get into home before schools open, looking to buy new construction home could be more valuable for receiving agents.
  • Investor buyer looking for rental property could be a valuable lead if receiving agent can up-sell and offer additional services like property management.
  • Last but not least is warm 3-way introductions. If sending agent knows the client well and can do a warm 3-way introduction to receiving agent through phone or text or even email is more valuable.

Using solution like Referrals.io makes it transparent and easier for both agents to negotiate the referral offer terms.

How to handle buyer rebates, credits and referral fees

It is not end of world if there is buyer credit, rebate involved in referral transaction. Just make sure to do due diligence and understand the client needs, expectations.

If closing costs credit is required to make the deal happen; negotiate upfront with sending agent regarding referral fee.

You could change the fee agreeable to fixed dollar fee or percentage of gross commission minus buyer rebate.

Agent referral fee agreement form

Whatever you negotiate and agree; make sure terms are written down and signed by both sending and receiving agents. Sign the referral fee agreement first before sharing the client contact information with the receiving agent.

In a prominent industry survey; agents mentioned miscommunications as number one of source of failures to close referral leads successfully.

Have written agreement and avoid miscommunication issues.

Successfully closing agent referrals and exchanging fee

Work to avoid lost referrals using tool kit built specifically for referral agents. It is built by agents for agents to increase the success of referrals for both outbound and inbound referral agents. It’s a complete solution and handles everything to do with agent-to-agent referrals.

Do good due diligence, negotiate well with other agent, write down the terms, sign the referral fee agreement, exchange regular status update communications, provide great service for referred client to close the house buying, selling, renting sale successfully.

Sending the referral fee back to sending agent as soon as possible after sale closed helps with improving the reputation and receiving more inbound referrals from the happy referring agent.

Also, check out our guide to Real Estate Referrals

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