Referral Fee

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Referral Fees in Real Estate – What Are These For?

In the real estate business, a referral fee is charged by an agent to another when they referred a client to them. These fees are commonly for sales agents or mortgage agents who refer clients moving to another state or town and usually, this is a percentage of the final commission earned by the agent who got the referral. Giving out referral fees are common in the real estate industry because a realtor is usually okay with giving out a portion of their commission to the one who referred the client to them because they do not have to spend on promotions and marketing. On the other hand, this is also a form of making sure that a client moving out of state or area, will still be kept as a customer of a real estate franchise, because chances are the agent in the new area will be coming from the same company. It is a win-win situation for agents and companies as well.

What is a Referral Fee Contract and Why You Would Need One

Before you start calling some friends or relatives to tell them about “this great company”, make sure that you will be paid first. Ensure that you will get money in exchange for the clients you will refer, and in order to do this, a contract should be made. Never assume that you can earn a referral fee just because the agent or broker says so. Sign a contract, make your partner sign a contract and bring it to an attorney to have it notarized. Without this, they may deny that there is ever an agreement between the two of you.

Real Estate Referral Fee – Can They Be Given to Anyone?

A common question asked by people interested in getting a referral fee for referring someone to a real estate company is whether it is legal for them to accept it. Well, this is not a legal advice, but most sites advise that without a license, it might not be legal to accept fees from a real estate sale. But as it is with US laws, they vary from state-to-state, so you really have to consult a lawyer and study statutes in order to be sure. There are people though who are, more often than not, not allowed to receive referral fees. These are lawyers and sometimes, home developers. Again, it is best to check with a legal adviser.

What Constitutes a Referral Fee Agreement

Unless you are getting your referral fee from Amazon, you absolutely need to have a referral fee agreement. But what are written in those agreements? Well, the first thing that you can find in a referral fee agreement are the names of the persons involved. Meaning the person who will refer and the person who will receive the referral. Then, the amount or percentage that the referrer will receive as well as when it will be received. Another statement more commonly found in these agreements are the no-win, no-fee clause, which means that if there’s no business or client brought to the agent, then there will be no fees charged.

Important Note on Real Estate Referral Fee Agreement

An agreement should contain all statements in accordance to RESPA law and should be signed and notarized by a lawyer. Without these requirements, the agreement may not be binding.

Find a Referral Fee Agreement Template

If you do not know how to draft a referral fee agreement, don’t worry, you can still create one by using templates. There are lots of sites with sample templates. Just adjust according to your specific details and of course write down the correct information in the template you will choose. An example of a referral fee template can be found in this website: It is fairly easy to look for other sites offering templates, just type “referral fee templates” in your search engine and you’re good to go.

Referral Fees as Business Strategy

Giving out referral fee is a great business strategy, however, it entails lots of legal work. You cannot take the legality of it for granted as there are serious repercussions if you violate the law.

Before receiving a referral fee, make sure that you research about it really well, and consult someone who’s an expert in the field.

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