If you’re still acclimating to the real estate industry, you may wonder how referral agents make a living. The answer is referral fees. In this article, we’ll discuss what real estate referral fees are, how they work for real estate agents, and what you should consider before making arrangements with a particular agency.

67 Strategies to Get More Referrals

What Is a Referral Fee?

A referral fee is the amount real estate professionals agree to pay for a referral agent’s services. Typically, agent-to-agent referral fees are 25% of the gross commission, but you may end up paying a higher percentage if you choose lead services from a company. Real estate lead service companies will charge up to 10% more than a referral agent.

As you likely already noted, you can have a referral agreement with another real estate agent. That’s because anyone currently working in or retired from real estate can be a referral agent. They just need a good reputation and requisite knowledge of lead generation and referral marketing in real estate.

Factors That Contribute to Referral Fees

The percentage you will pay for a referral agent’s services isn’t a randomly generated number. Multiple factors go into determining the total charge, and you’ll want to consider them as you calculate a budget. Factors contributing to a real estate referral fee typically include:

  • How much work the referral agent has to do: Time is money. Therefore, an agent will likely charge more if they have to do more work. The less you rely on them, the lower your fee will probably be.
  • The referral agent’s level of involvement in each deal: Some real estate deals simply require less work. However, they may require your referral agent to be more involved throughout the process. If that’s the case, they will likely charge more for their services.
  • Your willingness and skill in negotiating: Referral fees are negotiable. You could get lower rates if you have excellent negotiation skills and are willing to haggle with a prospective referral agent.
67 Strategies to Get More Referrals

What Do Real Estate Referral Agents Do?

Two Real Estate Agents Shaking hands

If you’re planning to pay someone to help with your real estate business, you should have an in-depth understanding of their function. Referral agents leverage several key strategies, including the following:

  • Increasing brand awareness: Referral agents help market your brand by connecting you with potential clients. They can share your contact info and lead customers directly to you without you ever having to leave your desk. This raises your visibility and makes it easier for buyers searching for homes in your area to find you.
  • Retaining current clients:  Working in real estate can be highly rewarding but also challenging. You could do 20 things right, but your clients might leave and never return if one thing goes wrong. However, customers are likelier to remain loyal if someone vouched for an agent via a referral.
  • Helping you get more clients: One of the primary functions of a referral agent involves expanding your client base. Real estate referral agents have a wealth of knowledge and years of experience building valuable relationships that they can pass along to you. Over time, these relationships could turn into tangible leads.

What Are the Benefits of Paying a Referral Agent?

Why should you consider paying a real estate referral fee in exchange for particular services? Working with an experienced referral agent has many benefits you can’t always tap into when working solo. These benefits include:

  • Effortless lead generation: Generating leads to achieve your business goals can take time and effort. Real estate professionals often spend a fortune improving their visibility, reaching the right audience with the right message, and prompting them to act. With a referral agent, you can sit back and let them bring the clients to you. 
  • High-quality clientele: When you’re desperate to make money, you might not be too picky about the clients you assist. However, this can damage your reputation and hurt your chances of long-term success in the industry. A referral agent will vet a client beforehand and ensure only high-quality customers contact you.
  • Increased productivity: You might work well alone, but think of how much more you could accomplish in a team setting. Referral agents can help motivate you to stay positive and increase productivity throughout the workweek. 

Things To Consider Before Choosing a Referring Agent

Not every real estate referral agent is equal. Some are more qualified than others, and some will charge more for services you could get at a lower price. When choosing a referral agent, consider the following questions:

  • How successful has this person been?
  • How long have they been in the industry?
  • Do they have a real estate license and other credentials?
  • How does this referrer treat their clients and other agents?

Lastly, you’ll want to learn about the real estate referral fees they will charge. Bear in mind that cheaper isn’t always better. Some agents may charge more but provide higher-quality services.

Finding the right referral partner can be the difference between success and wasting time, energy, and money. You’ll want to choose someone who holds all the proper credentials, has a glowing track record, and shares your business objectives.

What Does a Typical Referral Contract Include?

Two Real Estate Agents holding a real estate referral contract

A referral contract is a legally binding agreement between you and the referral agent. It lays out the arrangement’s terms and conditions, what you can expect from the purchased services, and other vital information. Every referral contract should include the following:

  • Contact information for the referring source
  • Name, number, address, etc., for the referred client
  • How long the agreement will last
  • Summary of the referral fee
  • Your and the referral agent’s signature

Get Started Today

Real estate referral fees are necessary if you want a referral agent to help you grow your agency and attain your goals. At Become a Local Leader®, we can help you learn how to use a neighborhood guide for more referrals and boost your business with free digital resources. Subscribe to our newsletter to get started today!