An Explanation of Referral Fees

An Explanation of Referral Fees

I’m always surprised that the general public does not know about referral fees. If they do know about it, they do not fully understand the concept.

I’ve closed several deals recently where referral fees were involved. Referrals in the U.S. have become very prevalent in our current market with all the post-pandemic moving happening.

In real estate, Realtors pay companies for leads. When you search online for a Realtor on Zillow, Trulia, Dave Ramsey, Homelight, and other sites, the agent is paying the site for the lead.

They can be paying around 30 to 35%.

The landscape of realtor business has changed dramatically!

Of the Gross Commission Income volume in the US so far this year:

  • Top 1% of the agents = 17% of the business
  • Top 25% of the agents= 73% of the business
  • Top 50% of the agents= 91% of the business

Know this: a consumer today has a 68% chance of working with an agent who has sold zero to two homes in the last 12 months.

“I have a vast network of agents all across the U.S. and Canada.”

When I have a client or friend buying or selling in a market out of my area where they have no Realtor, I refer that person to the best match that I know in that area for them. This referral system is used universally in the U.S. and Canada. The Realtor accepting the client pays a fee to the referring agent, a “referral fee”. A typical referral fee is 25%, but it can be any negotiated amount.

Referral fees can only be paid between two licensed agents or brokers, not to the public. My ability to find the right match for people comes from being in the business for 23 years at a high level, my vast network of agents across the U.S. and Canada via my 15 years of coaching in the Tom Ferry system, and from the elite group of agents at Compass.

How agent referrals work and why they protect homebuyers.

I have an amazing group of agents who work at the highest levels that I refer my clients to. I know Realtors who have developed this leg of their business to a high level. They go to trade events just to meet other Realtors that can send business to them or find agents in other areas to send business to.

Prior to being a Realtor, I lived in L.A. and Newport Beach. If I were to buy a home in either area now, I would use a local Realtor since there are many variables to consider, such as costs of closing, disclosures, and property issues that are unique to every area in the state. When agents bring their clients to the desert rather than refer them to the best agent here, they take on a lot of risks. If they do not know clubs, for example, they do not know what the pitfalls might be in a particular club or community. I’ve had Realtors try to show homes here all summer from L.A. who don’t even know what gate to enter because Google Maps sent them to a homeowner only gate.

If I have a client looking to move to L.A., I don’t drive them there because of my lack of specific knowledge of that area. Instead, I refer them to the top agent in that area that I feel would do the best job and be a good match for their personality and needs.

If you are looking for a Realtor anywhere in the U.S. or Canada, I can help! Next week, I’m attending a huge event in Dallas for Tom Ferry – there will be 4,000 agents at my fingertips. In the U.S., I have the entire Compass network. When you are looking for an agent, let’s find you one in the top 25% of the business done.

If you have any questions for me, don’t hesitate to reach out via phone or email. I look forward to hearing from you soon.



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