Topics Covered
What is a Real Estate Referral Agent
Why become a Real Estate Referral Agent?
Why use a Real Estate Referral Agent?
What does it cost to use a Real Estate Referral Agent?
What does it take to succeed as a Referral Agent?
How do I Become a Real Estate Referral Agent?
What is a Real Estate Referral Agent?
Rather than acting as a full service real estate agent for a client, a licensed real estate referral agent is someone who focuses on guiding clients to the best licensed salesperson to assist them as a buyer or seller in a real estate transaction. If the client successfully closes a transaction, the referral agent collects a part of the commission earned.
Real estate referral agent requirements and obligations vary by State. In all cases, activities of a real estate referral agent will be limited to ensure that an agency relationship is not created with the client. Here are two state examples:
New Jersey
License Type: Referral Agent (as of 2019, New Jersey has implemented a law that changes the name of this classification to Salesperson Licensed with a Real Estate Referral Company, SLWRERC).
Subject to activity restrictions based on Real Estate commission regulations and agreement with employing broker.
New York
License Type: Salesperson or Broker-Salesperson (no special classification)
Subject to activity restrictions based on agreement with employing broker.
N.B. Although some states have their own restrictions, real estate brokerages typically have a separate set of requirements in place that a referral agent must abide by. All real estate referral agents must place their license with a real estate broker and are subject to their oversight.
Why become a Real Estate Referral Agent?
Many agents ultimately choose to go the referral agent route. You are able to maintain your real estate license and the ability to earn commission, all without the pressure of minimum production requirements. This means you can earn extra income in your spare time, rather than making a full-time or even part-time commitment. Referral commission income can really add up.
On the risk spectrum, a real estate referral agent has less to be concerned about than a full service agent. While a full service agent will spend anywhere from 40 to 120 hours on a transaction/client, a real estate referral agent may spend only 5 hours on a transaction to follow up & ensure things go smoothly for his or her client. Further lowering the risk, a real estate referral agent has dramatically lower costs to do business versus a full service agent. They save thousands by eliminating: MLS dues, Realtor association dues and transaction marketing costs.
Why use a Real Estate Referral Agent?
From the client perspective, working with a referral agent is something like having your own personal human resources department. Someone who pre-screens full service real estate agents, to ensure those you spend time with are a good fit. Since it’s always a good idea to perform your own due diligence, a real estate referral agent can be a front line, helping to focus the limited time you have on the best prospects.
When a client has their first conversation with a real estate referral agent, the referral agent works to understand the clients needs, priorities and timeline. That information is then used to match the client with a professional full service agent to meet their needs.
From the full service agent perspective, lead generation is always a source of angst. By partnering with a real estate referral agent, full service agents not only generate more leads, but most importantly, they generate pre-screened, high quality leads.
What does it cost to use a Real Estate Referral Agent?
Similar to a full service agent, there is no out-of-pocket cost for a client to enjoy the benefits of working with a real estate referral agent. Real estate referral agents are paid a portion of the commission earned by the full service agent, but only as the result of a successful transaction closing. Sellers and buyers should understand that this commission is not in addition to the listing agreement commission rate, it’s deducted out of the commission earned by agent receiving the client referral.
For full service agents, expect to share a portion of the commission you earn. This varies by market and by the characteristics of the particular referral, but these fees usually range between 20 to 35%. That portion is based on the gross commission earned in the transaction where the referred client is participating as either buyer or seller. Since most referral agreements are in effect for an extended period of time, it’s not uncommon for a client to both buy and sell a home that would be subject to your referral fee.
What does it take to succeed as a Referral Agent?
Successful real estate referral agents have a few things in common, but perhaps the most important is that they have learned to overcome any fear or hesitancy associated with pitching what they offer. Connecting clients with qualified full service real estate agents is a high value service, so a good place to start might be to develop your own personal messaging and how you convey this to clients.
It’s not magic, like John Wayne said, feel the fear and saddle up anyway. As you progress in your real estate referral career each conversation will flow more naturally than the one before and with each conversation, you will learn to refine your message for each type of audience.
Another crucial factor in succeeding as a real estate referral agent is teamwork. Specifically, make it a habit to have consistent conversations and meetings with full service agents that work in your market. Each point of contact will help you get to know and understand the local real estate agent network, which in turn will allow you to provide better service to your clients. As your full service real estate agent network develops, you will eventually enter into referral commission agreements with the agents who best serve the client you bring.
The last thing I will point out is that follow up is key. You’ve successfully referred a client to a full service real estate agent. At this point, you should be receiving regular updates from the full service agent on their progress. It’s equally important to ensure the client is satisfied throughout the process. If, at any time, the client raises an issue or is unsatisfied with the service they are receiving, you need to make a decision. Is it time to raise the concern with the full service agent or to move forward by working to setup up introductions between the client alternative agents?
There is much more to be said about success as a referral agent. More posts to come…
How do I Become a Real Estate Referral Agent?
First, understand the state requirements and fees for obtaining your real estate license. In most states, the licensing process is identical for a full service agent, including a minimum number of classroom study hours, passing your state licensing exam and checking the box on character and age requirements. During this process, it’s an ideal time to begin researching your brokerage options. All licensees are required to hang their license under a licensed real estate brokerage.
The best way to research is to start online. Look for “New Jersey Real Estate Referral Company” (or whichever state you’re licensed in). In today’s market, the proximity of the real estate referral office won’t matter much. There aren’t many operations that can’t be completed online. While researching on the brokerages website, here are a few key questions to keep in mind:
What is my commission split with my broker?
Does the annual membership fee fit within my budget?
How can I pay my fees to the brokerage?
Can I submit referrals to my broker online?
Will I be able to choose which agent receives my referrals?
How will I get paid my referral commissions?
Finding a real estate referral company that takes the stress and paperwork out of maintaining your license and processing your referrals will be a substantial benefit. People have busy lives and joining a referral brokerage shouldn’t add lots of complication to your routine.
Referral agents have invested the time and money to understand the legal requirements and processes necessary to complete a real estate transaction, but choose to facilitate relationships for others, rather than stay directly involved.
At General Referral, we then combine the information gathered from the client with powerful technology and deep industry experience to match client with highly qualified professionals.
