When You Get a Referral, and You Agree to Pay a Percentage... Is it Forever?

As with eveything else we do, it's negotiable.  It's always best to have a clear understanding (in writing) what the expectations are and then everyone feels like they are being treated fairly and it avoids any misuderstandings in the future.  I've personally never felt that a referral I made to another broker was perpetual.  Interesting conversation though...

Kathy - There's a form in Zipforms that will specify how long, how much, etc.  This makes it very easy, and I believe both sign it.

Beau - I don't think we can pay referral fees to other than licensed agents in CA?

It's difficult to say because it's an investor (more that one property). Ask the TC what they think and go from there.

It could go both ways. But whatever the decision it HAS to be in writing to cover all involved.

Wow, a lot of great responses. I think it really depends on what & if your company has a policy regarding this and if not what you and your TC agree too. I think the communication is the key here. We all want to be fair but I agree is there a point that this could stop or be reduced. good luck!

Here's to a great 2012!

I would say only the first deal Kathy.  Because where would end? Would the referring agent expect referral fees from any business that client referred to you?  How about 10 years down the line when they want to sell the home?  Personally, when I refer someone to another agent I only expect a referral fee on that transaction.  After that, they are the agent's client.  Good post and best of luck to you.

Kathy: thanks this one was good one. It's best to make an agreement upfront, and then work on a sliding scale. it's difficult when you want to be fair but I think that you would work it out.

This is a great post, since it's evident from the range of responses that there is no one-size-fits-all solution to this type of situation.  I would say that you need to think about it, and maybe discuss it with a business associate or mentor - someone with whom you feel you share the same values. You need to ask yourself in all honesty what would you expect to happen if the roles were reversed. It's a tough one, since it's difficult to step away from the situation mentally and emotionally in order to be truly objective. 

I'll take full advantage of your experience and have a policy in place to deal with this situation should it arise in the future.

Thanks for sharing,

Bill

You must do what is right! Simple test I would think, if said referral purchased and sold properties and you enjoyed the fruits of it, would you not feel obligated to give thanks back to the agent who sent the business your way. Would you not expect the same in return for your referrals?

I think your TC should receive a referral fee for each transaction that results from working with this investor (group) he referred to you.  The reason why is simply because it is very likely that this investor (or any of the other buyers from that group of investors that's forming an LLC) will refer more buyers/sellers to you in the future if you do a good job for them and they're happy with your services -- so that "one" referral from your TC will probably pay 'dividends' in the future... dividends that you won't be paying any referral fees for.  The bottom line is as you said... you wouldn't have this opportunity without that referral.  If your TC ends up being unhappy should you decide he should not receive a referral fee for each transaction, then he is less likely to give you any other referrals in the future and it may sour your relationship as well. 

I say -- discuss it with him and see if you can come up with a solution that you are both happy with.  Perhaps you can agree to reduced referral fees for each transaction after the first one -- 25% for the first, 20% for the second, 15% for the 3rd and 10% for each one thereafter... you get the gist... figure out a combination that you're both satisfied with.

I pay a referral fee to the licensed agent that referred me to a client on ALL of the properties they purchase.... or even sell.

I don't even ponder / question it.

One agent from Sacramento sent me one client that ended up short selling three properties when it was all said and done.... I paid her on all three even though the referral started for only one.

Needless to say... she's sent me several other referrals...

Same goes for an agent in Hawaii that sent me a referral for somebody who was looking to buy one property... he's on Number 5 and going. She's been paid on all of them...

My experience but referrals from other agents tend to send the best clients.. by far... so I'm more then happy to pay out.

@ Christine #78

Yes, we can pay referral fees to out of state agents…through their brokers, of course. You must be licensed in the state where the real property exists to sell real estate in any state. You can refer out to an agent in another state and receive a referral from that agent even though you are not licensed in the state in which the property is sold. Same with receiving a referral from an out of state agent.

Do unto others is my motto. I have a client I referred because I don't do PM But if they sell, and have a longstandign relationoship now, should I expect  referral? No, because I gave that client away and it would be my fault if I can't reel them back in for a sale, if they ever sell. But if it's a piplene, I'd pay it subject to a few criteria. If it was say, a cold lead and I had to work it then probably not. But will that agent that referred him/her be okay with that? Might there be more?

A good litmus test is - would you teach that in a real esate class? 

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In a Toyota Rav4 truck
O'er the aisles I go
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What fun it is to laugh and sing
A grocery song this morn'!

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Oh, jingle bells, jingle bells
Jingle all the way
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On a fab gas stove this morn'- hey!
Jingle bells, jingle bells
Jingle all the way
Oh, what fun it is to cook
On a fab gas stove this morn' -hey!

Merry Christmas!

I agree that referrals don't have expiration.

I worked in wholesale awhile  ago; when and if we had referral, we signed that it is 'for life', no expiration. If was a part of a referral agreement.

Great discussion and a topic that I'm struggling with lately too. 

I recently made a listing referral, the agent listed, expired, listed again, expired, and then listed again and sold it.  She refuses to pay the referral fee.  Our referral agreement does not have an expiration date. 

If I were on the receiving side of the referral, I would pay the referral fee. 

I'm thinking that my referral agreement form needs to specify an expiration date or that there is not an expiration date.

I value my reputation and ethics much more than disputing over a referral fee.  If I've received a referral, I will pay the referral fee regardless of any unusual circumstances or question marks left by the referral agreement. 

Some agents just bend the rules to fit themselves and don't concern themselves with ethics.  I will be much more cautious about who I give my referrals to in the future.

oops, taking my words back.....

I got into similar situation, but even worse.

The deal that I was introduced to, does not go through, but another property is having a lot of activity. We talked about first one, now the referring source found out about the second. It was out of the deal, but feels weird...