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I'm Not Paying A Referral Fee!

By
Education & Training

There are a few sounds that universally irritate most of us - grating on a chalkboard, teeth sucking, constant dog barking and the like.  But as a real estate broker, I would like to through one more irritant in the mix, the sound of I'm not paying a referral fee! emphatically yelled from an agent (that's what my picture is supposed to represent lol) whose real estate business has not yet taken off.

 

Why, you ask, do I rate not being willing to pay a referral fee right up there with chalkboard shrills? 

 

For many agents, it is imperative that we market.  Typical business practices dictate that we allot anywhere from 20 - 30% for marketing expenses to generate and cultivate our book of business.  These expenses may be as simple as doing a monthly mailing and having an e-newsletter or as elaborate as having a billboard on I-75, paying for ads on Facebook or airing a commercial.  Marketing is an opportunity for us to reinvest in our business.

 

Gaining reasonably-priced referrals is a great marketing tool for an agent that may be beginning or in a rough patch because unlike other marketing tools that require an initial outlay of cash (regardless to if the tool actually produces closed transactions for you), referral fees typically are paid once or after you have been paid.  This means that if the referral client does not close a deal with you, you usually do not have to pay the associated referral fee.  There are not many marketing venues that give this type of guarantee.

 

I think it is important for offices to equip new agents with the knowledge that working with referrals (particularly when reasonably priced at the standard marketing expense rate of 20 - 30%) allows you to use a marketing tool that only requires payment if you actually profit, minimizing upfront fees.  Furthermore, as a new agent, this is a great way to gain experience.  Plus, the referral client may become your biggest cheerleader (free marketing!), which can help you organically build your real estate sales business.

 

Case in point: we had a rookie agent in our office take a referral from the office as one of her first clients and she had 30 transactions originate from that 1 referral because that client referred her to all of her friends and co-workers.  That agent never said, I'm not paying a referral fee! but she did eventually have to say, Thanks but I am now too busy to take on anymore referrals. That is the desired outcome!

 

Some may feel that they do not want to waste their time on a referral. That is a decision that must be made case-by-case based on pre-qualifying the client, the location, the potential experience gained, etc.  However, the point remains that there should be a paradigm shift about working with referrals if the clients are qualified and one is looking for more business. Paying a referral fee means we are simply reimbursing the marketing expense of obtaining that client to the agent that referred us in the first place.  That's fair!

 

Do you need help qualifying a potential referral client?  Visit www.AgentsAroundAtlanta.com and we will gladly help.  Happy selling!

Comments (6)

Wallace S. Gibson, CPM
Gibson Management Group, Ltd. - Charlottesville, VA
LandlordWhisperer

With the sales market regaining strength....contacting local property managers and offering THEM a referral fee if they refer their clients' properties to them is a GREAT way to gain listings

Jul 17, 2014 11:08 PM
Andrew Mooers | 207.532.6573
MOOERS REALTY - Houlton, ME
Northern Maine Real Estate-Aroostook County Broker

So often the referral call is someone we have been working with, shown properties and made the connection with videos, blogs, websites and over the phone, email server. So we ask to avoid the catch a piece of a pie slice at the tail end with no work some agents will try. Nope, we already have that lead, don't need more cooks in the kitchen that arrive late for the eat and greet. 

The agent four hours or four states away will try though unless a few questions asked. Give me the name and ta da. I can recite the address, phone contact, email, the works down to the names of their kids, the type of dog in the backseat of their tan SUV.

Jul 17, 2014 11:09 PM
Stacy Ann Stephens
Keller Williams Realty CT - 860-704-9070 - Wallingford, CT
Realtor, New Haven & Hartford CT Homes For Sale

Hi Lee, Thanks you for sharing, I am on the fence on this. If it is an agent that has worked with client and for whatever reason cannot complete, that I understand; but when it an out of state agent want fee for family member who is buying a house in my town, that's like noise to my ear.

Have a great weekend!

 

Have a great day

Jul 17, 2014 11:27 PM
Mike Kozlow
Mike Kozlow Real Estate - Lakewood Ranch, FL
Broker

Referrals lead to referrals. Pay for the first one and the rest are free.

I gladly pay for the opportunity to generate real dollars and hope that I am impressive enough to have that referrals tell all of their friends how good I am. 25% of one transaction is  a small price to pay for a new pipeline of business.

Jul 18, 2014 12:26 AM
Sandy Padula & Norm Padula, JD, GRI
HomeSmart Realty West & Florida Realty Investments - , CA
Presence, Persistence & Perseverance

Lee: Great blog and one that many new and old alike can benefit from following. I find that if you give some, the rewards exceed the outlay. Good luck!

Jul 18, 2014 12:34 AM
Lee Davenport
Sandy Springs, GA
Learn With Lee: Real Estate Coaching & Consulting

Great tip Wallace - we will add that to our arsenal!

 

Andrew, Mike and Norman - it is definitely good to develop relationships of reciprocity when possible.

 

Stacy, ha ha I understand your point!  I haven't charged a referral fee for family members but I know some agents that have and they did it because their family called them EVERY day about the transaction.  Family may have to be a case-by-case issue.

Jul 22, 2014 06:07 AM