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Realtor Referral: How Do Referral Agents Work and Get Paid?

Just about anyone could tell you what a real estate agent does, but not many are aware of the referral agent’s role, or why they even need one in the first place. This guide takes away the mystery surrounding the referral agent and how it affects the pay of the buyer’s or seller’s agent.
Just about anyone could tell you what a real estate agent does, but not many are aware of the referral agent’s role, or why they even need one in the first place. This guide takes away the mystery surrounding the referral agent and how it affects the pay of the buyer’s or seller’s agent.

Asking for referrals in real estate is a big part of the process. Buyers and sellers want to work with someone reputable, so they’ll usually enlist the help of family, friends, or online reviews to find an agent.

Realtor referral agents work similarly, providing referrals to real estate agents who then handle the transaction.

But many agents have a hard time wrapping their head around this concept. Why would another agent send business your way? Do you have to pay them for the referral if you close the deal?

This guide covers the basics on the role of the referral agent and how the process works.

What is a Realtor Referral Agent?

Simply put, a realtor referral agent is a real estate agent or brokerage that refers a client to another agent or brokerage, who then works with the client for the duration of the transaction.

When the deal closes, the referral agent receives a portion of the commission. Referral agents must be part of a brokerage to serve as a referral agent and receive their commission.

Why Would Another Real Estate Agent Refer a Client to Me?

This scenario is more common and beneficial than you might think.

Buyers who are looking in markets outside of their local area will want to work with a reputable real estate agent, but might not know where to turn. Instead, they might enlist the help of a referral agent to direct them to the right agent.

Another common scenario is when a buyer or seller has a family member who is a real estate agent but doesn’t want to work with them due to conflicts of interest. The family member may act as a referring agent and receive a small commission in the process.

In some cases, a real estate agent who is part-time, semi-retired, or has a full client load may send referrals to other agents because they can’t give them the attention they deserve.

Referral agents can offer a win/win/win solution to other agents and their clients. The client benefits by working with an agent that is best suited to handle their needs. The real estate agent wins by getting a quality client and the resulting commission. And the referral agent enjoys earning a commission, too.

How do Referral Agents Get Paid?

Referral agents get paid the same way traditional real estate agents get paid — when the transaction is finalized. Simply referring someone to another agent doesn’t guarantee they will get anything in return. For example, if the agent doesn’t provide good service or otherwise can’t help the buyers or sellers, the referring agent won’t get paid.

The actual referral fee can vary and is arranged between the referring agent and the main agent. Typically, the going rate is about 25% of the agent’s earned commission, but could be higher or lower.

Using the national median home value of $226,000 as an example, the total real estate agent commission would be $13,560. Split between the buyer’s agent and seller’s agent, each agent would walk away with $6,780.

Most brokerages operate on a commission split, which can vary. Let’s say you have a commission split of 80/20, where you keep 80% of your commission and give 20% to the brokerage. This would leave you with $5,424. Now, you must pay out 25% of this to your referral agent, or $1,356, which would leave you with $4,068.

If your commission split is less generous, such as a 60/40 plan, you’d only be left with $3,051 after paying your brokerage and referral agent.

Why Would I Need to Work with a Referral Agent?

There are many benefits to working with a referral agent, despite having to pay much of your commission. For some agents, they aren’t getting enough leads or business from other sources. When agents refer clients to other agents, the leads are usually high quality and ready to do business.

It’s also an easy way to tap into clientele outside of your local market. For example, someone living several states away and is looking for a vacation home in your area may be referred to you by another agent in your professional network.

Skip the Referral Agent Fee with Clever!

Getting referrals is a great way to keep your pipeline full, but it comes at a heavy price. Plus, not only do you have to pay a referral fee, but you’re also sharing your commission with your brokerage. At the end of the transaction, you have little to show for the work you put in.

If you want the benefits of a referral agent without the costs, working with Clever is an excellent alternative. Clever sends our Partner Agents qualified clients ready to buy or sell at no cost to you. In return, you get a flat fee commission that goes into your pocket — no finder’s fee or brokerage fee required.

Reach out to Clever today to learn more about our model and start getting referrals the smart way!

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Ben Mizes

Ben Mizes is the co-founder and CEO of Clever Real Estate, the free online service that connects you with top agents to save thousands on commission. He's an active real estate investor with 22 units in St. Louis and a licensed agent in Missouri. Ben enjoys writing about real estate, investing, personal finance, and financial freedom. He's a serial entrepreneur, having run several successful startups before Clever Real Estate. Ben's writing has been featured in Yahoo Finance, Realtor News, CNBC, and BiggerPockets.

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