There is also a whole business model around real estate referrals.

The main focus is to earn a referral fee from a closed real estate transaction.

Let’s say a licensed real estate professional or agent specializes in generating buyer leads.

The main aim is to refer them to other real estate agents.

That would be a referral agent.

What’s the benefit for potential buyers working with referral agents?

Provided the referral agent does a good job, they can be trusted to connect them with the best real estate agents for their needs.

There are even whole businesses that have specialized in this business model.

What’s the benefit for buyer or seller agents?

They can get leads they don’t have to pay for upfront and only when the transaction concludes.

In this context, you may also want to read my article, “(Free) Real Estate Leads Paid at Closing – Top 9 Providers.“

In this article, you will find providers that use referrals as their primary business model.

By the way, during my research for this article, I found an additional real estate referral provider called referrals.io.

And yes, real estate agents usually get referral fees when they refer a client to another realtor.

But this is only provided they later close a transaction with them.

Paying referral fees is a common practice.

Referral fees range from 20% to 35% of the gross commission of a particular transaction.

This is according to several sources, such as this, this, and also my own experience.

But it doesn’t mean it always has to be in this range.

It also depends on the market and what the referral agent and the listing or buyer agent negotiate.

 

How Do Referral Agents Get Clients in the First Place?

Referral agents need to be pretty good at real estate marketing or lead generation.

Depending on their focus, they will mainly generate buyer or seller leads.

They can invest more time in generating leads. Why?

They are less involved in the typical operational processes of buyer and listing agents, for instance:

Overall, they are less on the road and have less paperwork to deal with.

So, working with a referral agent is a bit like outsourcing your real estate lead generation.

But it’s not only cold lead generation that gets the referral agent new clients and leads. It’s also a network of real estate agents.

In the beginning, this network is nonexistent or very small.

So, a referral agent starts with lead generation to show other agents the value they can provide.

Little by little, the referral agent can then add the agents who work with them to their network.

New leads can also come from this network, and the referral agent takes on the role of a matchmaker.

I know one or two things about referral agents because I was in this business and sometimes cut out of commissions.

So one important thing for a referral agent is sorting out the bad apples right from the beginning.

And that’s easier said than done.


This article has been reviewed by our editorial team. It has been approved for publication in accordance with our editorial policy.


Tobias Schnellbacher