Referral fees among real estate licensees (brokers and agents) are standard practice. The scenario for a referral goes something like this: real estate licensee “A” knows a prospective client in need of service but “A” can’t provide the service because of distance, lack of time, language barrier, etc. So “A” tells licensee “B” who is able to provide the service to the client about the opportunity and asks “B” for a referral fee if money is paid by the client as a result of the service provided. Now imagine this: Licensee “A” knows the client, is in the perfect position to provide the service and is hired by the client to list the client’s home for sale. The client is relocating and his/her company uses the services of a relocation company. The relocation company tells the client that in order to receive “all the benefits” offered, the broker/agent who is listing the home must either be a “certified broker” or sign a contract with the relocation company and, under the terms of this contract, the relocation company receives as much as 35 percent of the commission as a “referral fee.”
What’s wrong with that? The relocation company is asking for a referral fee “after the fact.” The relocation company did not introduce the client to the agent and the agent did not need the relocation company in order to list the home, market it and bring the deal to a close.
Why is this happening? Because some real estate agents find this an acceptable practice. Because some big-name real estate companies that are “preferred partners” in this scheme are owned by the relocation companies and their agents have little choice (it’s all in the family.)
More to the point, an article in realtytimes.com described the “relocation of commissions” this way: …relocation companies are committing acts of extortion. In addition, they are violating a number of laws including unjust enrichment, restraint of trade, duress and possibly tortuous interference.”
Unfortunately, the long arms of the relocation companies are also trying to reach into the pockets of the real estate agent who is representing the buying client. I recently helped a client who was relocating to the area to find their first home. My client was being hired by the world’s largest technology company (who may that be?) and relocated with the help of the world’s largest relocation company from another state where they were renting an apartment. The new hire (my client) was told that their real estate agent should sign a contract involving a substantial referral fee because the hiring had created the opportunity for me to make money. Thankfully, my client did not see the logic of this, and suffered no harm by me ignoring the request for signing a contract.
Extortion IS the correct term for this behavior. If I should pay a “fee” because someone was hired to work and live here then why not demand the same of the local dry cleaner, grocery store, health club, nursery, etc.?
Don’t get me wrong. Relocation companies perform valuable services for the employees of many companies. I know from first-hand experience. Let’s return to the ways things used to be: the relocation companies should get paid by the corporations that hire them.
© 2006, Gerhard N. Ade
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