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The Psychological Factors of Real Estate Referrals

by | Persuasion and Conversion, Strategies

Psychological Factors of Real Estate Referrals

So, why do people refer someone or something to others in the first place (including sellers and buyers)?

It’s part of human psychology.

This “something” is the social connection (source).

What happens in this dynamic of social connection explains a lot about referring.

This includes real estate referrals.

Referrals in the Stone Age

Imagine for a second that you were in the stone age.

So you’re about to cook a nice meal (you’ve already discovered fire, of course) for your friends and family in a nice cave.

This cave has great curb appeal, of course.

Suddenly you realize, “Crap, I need one more mammoth leg to complete the meal!”

So you tell one of your friends that Fred in the neighboring town still may have one leg left over.

You refer this friend to Fred to get the mammoth leg.

“You should be back by sunset because this guy is trustworthy,” you tell him.

This friend never returned, and Fred from the neighboring town was never seen again.

What happened to you after that incident?

You now try to survive in the wilderness because you’ve become an outcast.

And why were you turned into one?

Because referring to Fred puts one tribe member in danger, and thus the whole tribe.

So, referring a product, service, or someone to a friend always involves a risk.

And this has been part of human psychology since the Stone Age.

Before referring, the person will more or less wonder the following:

  • Will they ignore me?

  • Will they reject me?

  • Or will they recognize and reward me?

How to Reduce the Referral Risk

This source mentions one of the most important factors for a working non-reward or “organic” referral system. It’s the quality of a product.

And I would also add the quality of service real estate professionals can offer.

A study from the Association of Consumer Research confirms and complements this.

It studied word-of-mouth dynamics.

This study found that positive word-of-mouth mostly happened in four categories:

  • Product performance

  • Response to product or purchase problems

  • Price/value perceptions

  • Employee behavior

Positive word-of-mouth (referrals without rewards) happened in these categories when:

  • A product performed superiorly and/or had unique features or benefits.

  • Problems with products were resolved without friction (e.g., product exchanges, refunds, repairs, etc.).

  • The product was considered low-priced and/or a “good buy.”

  • Employees were perceived as helpful, friendly, and responsive.

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

Tobias Schnellbacher
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