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Is Asking for a Referral Fee in Your Client's Best Interest?

By
Real Estate Agent with Keller Williams Capital Properties DC AB15253

I just read a posting concerning the dealings that an Active Rainer's family members were having with a realtor in another state, who had listed a property but was not marketing it. Several people suggested that the ActiveRainer should get involved, find a new realtor for the family member and collect a 25% referral fee.

I started to wonder whether collecting that 25% referral fee is really in the best interests of that family member or any client in that situation.  In this market, where listings can linger, even when priced correctly, and listing agents have to spend real money to market them, is the listing agent going to be happy to turn over 25% of the commission? Are the client's interests really served by the referring agent pocketing the referral fee and taking the marketing dollars or the incentive away from the listing agent?

I use several companies for leads which charge me a referral fee and I don't mind paying them, because I realize that that is their business, and my referral fee is going to them as a cost of my getting that lead.  On the other hand, a buyer client I had been working with wrote one offer with me that didn't go through, and with the second offer asked me to give her realtor mother a 25% referral fee because her mother hadn't sold any houses recently. (The realtor mother hadn't referred her daughter to me either!)  I admit I agreed to give the referral because I recognize the bind that the daughter was in, and that she would  either go elsewhere from now on, or at least not feel kindly to me for refusing to help her mother out, However, now I don't feel warm and fuzzy about my client, and will be glad when we get to settlement and they are out of my car.  I suspect that i would have felt better about the whole thing if the mother had asked for the referral to give to the daughter to help with closing costs, or something like that.

The point of my ramblings tonight are that I believe that in many instances if we really care about the client, we will just find the best agent we can, wish all parties well, and get out of the way. You can't always have the whole pie all the time.

 

Comments (13)

Vickie Nagy
Coldwell Banker Residential Real Estate - Palm Springs, CA
Vickie Jean the Palm Springs Condo Queen

I am happy to pay a referral fee on any salable listing. I see value in referrals. The outgoing referral agent can screen for experience and personality fit.

May 14, 2009 04:57 PM
Elizabeth Benefield
Montana Country Real Estate - Libby, MT

I think we all need to make a living. Sometimes it good for everyone to get paid.

May 14, 2009 04:58 PM
Elizabeth Bolton
RE/MAX Destiny Real Estate Cambridge, MA - Cambridge, MA
Cambridge MA Realtor

Hi Lise ~ I do a lot of referral business and I like paying agent-to-agent referrals - though I hate paying relo or lead generators so try to avoid those outlets. 

That being said I've never collected a referral for referring a family member. And to collect one retroactively is gross.

Liz

May 14, 2009 05:14 PM
Michele Woodward
The Wells Team at Keller Williams Augusta Partners - Evans, GA

Was your broker okay with that.  Some times you have to let them go.  It sounds like they were just asking you to give their mom free money even though she obviously had not be working.  Even in the worst of times a realtor usually has a least one closing a month or every other.  Realtors have to work for clients.  No work No pay.  I just can't believe that some people are so bold and inconsiderate.  You do work hard for your money and should not have to give it away just because a client wants to benefit themselves or their family members.

May 14, 2009 05:34 PM
Ryan Shaughnessy
PREA Signature Realty - www.preasignaturerealty.com - Saint Louis, MO
Broker/Attorney - Your Lafayette Square Real Estate Partner

I am happy to pay referral fees when it is a true referral.  There is no difference in service - marketing, showings, etc. 

May 14, 2009 06:24 PM
Tony & Darcy Cannon
Aubrey and Associates Realty - Layton, UT
The C Team

I believe that referrals are an important part of our business, when they are real referrals.  I have a problems with agents that gather nothing more than a name and phone number and call you wanting a 25% referral fee for having taken a phone message and passed it along.

May 14, 2009 07:28 PM
Vanna Siackhasone
Real Estate Brokers of Alaska 907-720-4663 - Anchorage, AK
Anchorage Real Estate 907-720-4663

I enjoy getting and passing along referrals. I don't mind paying a 25% referral fee and my service is no different.  I think it's great that agents can work together in this way.

May 14, 2009 09:20 PM
Ken Montville
RE/MAX United Real Estate - College Park, MD
The MD Suburbs of DC

Certainly, it is the choice of the individual Realtor whether to ask for a referral fee or not.  I've had a Realtor in another State ask for a referral fee to represent a family member and then ask me to apply the fee to the family member's net proceeds (i.e., lower my commission by the amount of the referral fee).  I was glad to do it.

We Realtors are in the enviable position of being able to accept referral fees from our colleagues and I'm happy to provide one for business I wouldn't normally obtain. Referral companies provide nice, chilly referrals.  Other Realtors provide nice warm and, sometimes hot, referrals who have trust and rapport.

I've also offered referrals without expectation of a fee. Sometimes an Internet lead comes in and I haven't had that much interaction with the client.

May 16, 2009 01:24 AM
Andrew Haslett
Van Warren Home Inspections, NAHI CRI - Fort Knox, KY
Heartland of Kentuckynulls, Best Home Inspector

Referral fees! How can I get in on the action. I'm a good capitalist!

Jun 02, 2009 04:56 PM
Darrin Friedman
Berkshire Hathaway HomeServices The Preferred Realty - Allegheny, PA

When someone has earned the right for the referral I'm all game, but when it's just a kickback it drives me nuts.  You have a very good point.

Jun 05, 2009 03:32 AM
Dr. Stacey-Ann Baugh
Century 21 New Millennium - Upper Marlboro, MD
A doctor who makes house calls.

I am happy to pay a referral fee when its a true referral but I would have been upset to pay the client's mom when mom didn't have anything to do with it.  

Jun 14, 2009 12:24 PM
Patricia Kennedy
RLAH@Properties - Washington, DC
Home in the Capital

Lise, I think it depends on the price point of the listing or sale.  I've referred family members buying or selling inexpensive homes and passed on the referral fee.  But if it was a big house, you bet I'd ask.

Jun 19, 2009 01:28 AM
Bill Travis
Captain Bill Realty, LLC - Gilbert, AZ
Broker/Owner

Looks like this is an old post that was reblogged but worth being put back out there.

The daughter is just asking for a gift of a 25% discount from the agent (after the fact) and using her mothers license and referral fee as an excuse.

It's a personal call which way to go, and each agent faced with this will have to make their own decision and hope it's the right one in this case.

Jun 27, 2010 02:24 AM