Referrals are yet another part of the real estate industry that is unique to every situation. An agent to agent referral is when a licensed agent refers a client to an agent other themselves. But why would an agent give their business away? Plenty of reasons: it's not their specialty, they are "too busy", they're going to be out of town. However, it's not all out of the kindness of their hearts. Referrals can come at a hefty price - a negotiated upon referral fee. When done correctly agent-to-agent referrals can be a win-win, so it's important to know more information.
Why Refer?
We know, who in their right mind gives their business away? But before you roll your eyes or close the window - referrals are something an agent should know about. Not to mention that an agent could be the one who gets the referral.
Some reasons an agent might refer a client to another agent are:
- the agent is going out of town
- the agent is conducting business or knows of business in a state that is a "turf state" - only licensed agents in that state can work there
- the agent has "too much" business for their preferred work/life balance
- the agent is taking a break or going on some type of leave
- the client wants an agent who works in specific niche
- the client simply isn't a good fit for the agent
If you can't make the full commission off of a deal but know someone who can - you can still earn some cash from receiving a referral fee. This makes the situation a win for everyone because you build rapport with other agents and still make some income.
Show Me the Money: Referral Fees
Referral fees typically are 25% of the total commission on one side of the transaction. This isn't an opportunity to miss. 25% of an any large sum of money is still a large chunk of change. But, what are some best practices when it comes to referral fees?
- Negotiate - depending on the sale price of the property, and what all agents stand to make from the transaction, there's room for negotiation.
- Make sure everything is in the contract.
- Have clear communication about expectations
- Once you refer - wash your hands of the transaction
This last tip is the most important when it comes to best practices. Once an agent refers the deal to another - they don't get to micromanage it or even really keep tabs.
Referrals really are the way to go if an agent can't get the job done themselves. If the deal closes - great - the referring agent earns a percentage. If not, a relationship was strengthened between agents and that's a win too.
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