Real estate referrals hold a vital place in the industry, yet their nuances sometimes go unnoticed. In this guide, we’ll delve into the complexities surrounding real estate referrals, addressing common questions and shedding light on what constitutes a referral source in the world of real estate.
What is a real estate referral?
A real estate referral occurs when a licensed agent directs a potential buyer or seller to another licensed agent to oversee the transaction. This referred agent then takes on the role of the primary point of contact for the buyer or seller, and upon the successful completion of the transaction, the referring agent receives a fee.
The referring agent, acting in the best interests of their client, conducts interviews with potential agents out of state or in a different market and facilitates the referral process. This ensures that the referred agent aligns seamlessly with the client’s needs.
Who pays the referral fee?
The party responsible for covering the real estate referral fee is subject to negotiation. Historically, the seller pays for the closing costs, including the commissions for both the buyer’s and seller’s agents. The real estate brokerage office of the referred agent is responsible for disbursing the referral fee to the referring agent upon successful completion of the transaction.
How much does a real estate referral agent earn?
Referral fees can have a wide range and are typically subject to negotiation. In certain markets, agents who facilitate business referrals can earn commissions ranging from 25% to 30% of the referred agent’s gross commission upon the successful completion of a transaction.
Structuring a Real Estate Referral Agreement
Typically, real estate agents don’t need to be concerned about creating documents like a referral agreement. Their real estate brokerage usually has an internal boilerplate template contract that’s commonly used in their office.
Real estate referral agreements generally have thorough and precise details about the referring source (broker or agent), the recipient broker or agent and the client (buyer and/or seller).This ensures seamless communication and informed collaboration throughout the referral process. Next, clarifying how the fee will be calculated and disbursed upon the successful completion of the transaction. The terms and conditions of the agreement serve as the guiding framework for the entire referral process, establishing clear expectations, responsibilities, and timelines. Lastly, signatures from all parties involved including the real estate brokers signatures to solidify commitment to the agreed-upon terms.
Why use a referral agent?
By incorporating these crucial elements into a real estate referral agreement, both buyers and sellers can effectively engage with friends or family members who may be located out of state or in a different market. This agreement relieves the buyer or seller from the task of directly reaching out to agents and offices, empowering the designated agent to locate a real estate representative within the target market on your behalf as you continue your house-hunting journey.
