What is a real estate referral company?
General Referral is a real estate referral company. Like other real estate referral companies, we primarily deal with referring property buyers and sellers to full-service real estate agents. Where it gets confusing, is that these companies are often categorized by different names, including: real estate “referral-only brokerages”, “referral groups”, “referral networks”, “referral agencies”, “relocation companies”, “license parking brokerages“ and “license holding companies”. Even though, primarily, we hold NJ referral agent licenses and place referrals, General Referral gets labeled with all of these names.
Real estate referral companies play an important role in the real estate ecosystem by offering significant benefits to buyers, sellers and agents alike.
While the business model of a real estate referral company is typically focused on earning a sales commission based on a referral fee negotiated with the Realtor who ultimately represents the buyer or seller, the term is often used to describe various business models. This article attempts to clarify the most common types of referral companies.
Real Estate License Holding Companies
A “license holding” real estate brokerage provides real estate agents with a cost effective alternative to holding a real estate license as a full-service agent. This allows less active agents working in another job or nearing retirement to earn commission without the commitment and expense of keeping their real estate license at a full-service real estate brokerage. This results in dramatic cost savings for the agent when compared with average annual costs near $2,000 for keeping a license with a full-service broker. That’s before you spend a dollar on marketing yourself.
There are two main categories of real estate license holding companies: captured and independent.
A captured license holding company is closely related to a larger full-service brokerage and often limits referrals fees and where those referral clients can be sent. An independent license holding company, like General Referral, is not affiliated with a single full-service real estate brokerage and operates free of those restrictions.
Real Estate Referral Networks
While some “referral networks” also hold licenses, their main focus is on match-making clients with real estate agents. Companies in this space include HomeLight, ReferralExchange and UpNest.
The value for the client is that these referral networks check the background of the real estate agents receiving referrals in their network, ensuring their professional qualifications. Ultimately, this reduces the client’s stress and anxiety associated with selling or buying a home. For the agents receiving the client, the referral fee is worth paying because it takes replaces the marketing budget they would have used to acquire the new client.
Real Estate Relocation Companies
A real estate relocation company provides a vertically integrated service to help relocate employees. Usually in a corporate context, but also includes clients from government and private institutions. Relocation companies handle everything from the sale of the employee’s home, the physical move and the purchase of a new home, to providing cultural concierge services for clients moving abroad.
While the business models vary across each category of referral company, the common theme is helping buyers, sellers and real estate agents alike.
At General Referral, we say that joining a referral company is the simplest way to earn commission with your real estate license, but there’s actually a whole lot more to get excited about when considering joining a referral only real estate brokerage.