What Is A Referral Fee?

The Referral Fee Is A Payment That A Real Estate Agent Receives For Providing A Client To Another Agent. Referral Fees Are Typically A Percentage Of The Final Commission For One Side Of The Transaction. 

What Is The Average Referral Fee?

The Industry Standard For Referral Fees Is 25% Of One Side Of The Final Commission. But Referral Fees Can Vary Widely. Sometimes Agents Offer Flat Dollar Amounts For Referrals. In Other Cases, Referral Rates Can Vary Based On How Large Or Small A Potential Referral Is. Typically, Agents On Both Sides Sign A Referral Agreement In Advance Of The Transaction Closing To Finalize The Fee Structure.

Why Do Agents Refer Clients?

There Are A Number Of Reasons An Agent Or Brokerage May Refer A Client And Opt For A Referral Fee:

• Not Licensed In The Client’s Target State: if A Real Estate Agent Has A Client Moving Out Of State But Does Not Have A License In The State The Client Is Moving To, They Will Often Refer That Client To Another Agent.
• Too Busy: if An Agent Is Very Busy With Their Current Clients They May Refer A New Client To An Agent They Trust. This Way They Can Still Provide Great Service To The Client And Receive Some Payment For The Relationship.
• Lack Expertise: if A Client Wants Help On A Segment Of The Market Where The Agent Doesn’t Have Expertise Or Connections, It May Be In The Best Interest Of All Parties To Refer The Client To Someone Who Does Have This Expertise.
• Focus On Marketing Only: some Websites And Marketing Portals Will Market Homes And Then Refer Any Client Leads To Agents In Exchange For A Referral Fee. This Means That The Referring Party Earns Less On Each Client But Doesn't Have To Handle Showings, Closings, And Other Operational Components.