How to Use Referral Fees for Lead Generation

Learn why real estate agents happily pay a referral fee.

A lead reaches out to another agent, then the agent contacts you because they do not work in your area or work solely as a referral agent. They’re willing to pass on the client to you for a fee.

Why would you pay another agent 25% or more to get a new client?

• Without the referral, you would earn zero dollars. With the referral, you get an extra commission — even if it is smaller.
• It’s another form of ‘ad’ spend. Without leads, you can’t close on transactions, and with no deals, you make no money.
• You can build a long-term relationship with the client. Then you’ll get a chance to represent their family, friends, and colleagues.
• It’s a two-way street. When a client of yours wants to buy or sell property in another region, state, or country, it’s your opportunity to earn an agent referral fee.

Real estate professionals share their experiences with real estate referral fees, including how it helps advance their careers.

Finding clients is the #1 most difficult and time consuming part of an agent’s job and if you can outsource that for a 25% cut, it’s a no-brainer. Referral fees have easily the highest ROI (return on investment) of any type of marketing spend and agents should be thrilled to pay them. Imagine if you had an unlimited pool of referrals, all available for a 25% referral fee. You could stop doing anything but working with clients and closing transactions. Yes, your commission per transaction would go down 25% but the increase in the number of transactions would more than make up for it. You could also eliminate all other forms of advertising and marketing, saving you money elsewhere too.

James McGrath, Yoreevo, LLC

I’m not sure why any agent would ever turn down a referral. Sure, you don’t get as much money but it’s usually a client coming in from it of town that you would not have the opportunity to meet. Even though you don’t cash in big on this transaction, you’ll likely have them as a client to sell that house and buy another in the future. If you accept a referral, the other agent is depending on you to provide great service to their client. Their business reputation is still on the line and it’s your job to take great care of their people.

Tomas Satas, Windy City HomeBuyer

It helps me to increase my network and brings more business opportunities. Moreover, if the client is a first-time homebuyer, the lifetime value will be high. I would be prepared to pay more than average fees for such referrals.

Mitchell G. David, BeachLifeOceanCity.com

A percentage of a commission is always more than zero. I believe that taking in a referral is worth it for the experience and the fact that with that one new client will now turn into many, many more referrals for you.

Megan Gallagher, DEN Property Group

Referrals are probably the second best type of lead other than your own network. Referrals are much better than internet leads in terms of probability of closing with buyers or sellers. A cost per lead when advertising can cost hundreds to thousands of dollars. There is no guarantee that a lead will close from advertising but a referral is only paid out to the referrer if the buyer or seller closes.

Ed Frowley, We Buy Houses Western Mass

There are times when another agent has the skill set and expertise that you do not have, so I have referred that client to the person who can help them better than I can. I am so grateful to have agents that I have built a relationship. I feel good knowing that I provided the best service to the person.

Kristy Painter, Exp Realty

I like to always say that a percentage of any business, even if miniscule, is better than no business at all. Another positive reason to work referral leads is that when you provide the client amazing service, who are they going to think of when they need to buy or sell in the future?

Donnie McGriff, Echo Properties, LLC

If you’re getting a referral and have to pay a referral fee, then it’s completely worth it, because you’re establishing that you are a good agent in that area and more referrals will come your way. This is great Bread and Butter money!

Patricia Love, Sterling Johnston Real Estate

It’s better to take on a referral even if you have to pay a large referral fee because if the client enjoys working with you, they are likely to recommend you to their friends and family. Word of mouth is how most real estate agents grow their business so even if you only make a small profit on the referral transaction, it is likely that particular client will spread the word about you which will lead to additional transactions in the future.

Tyler Forte, Felix Homes

I gleefully offer and pay a 25% referral fee to agents inside and outside of the company. When you consider the prospecting efforts (translate: time) spent on cultivating a new client, this is a low price to pay for qualified business.

Aaron Weiner, Weiner Property

Are you ready to become a referral agent? Check out Park My License℠. You can pause your real estate career while still earning commissions.

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