Often, the process of looking for a professional real estate agent to work with involves asking your friends and family for referrals. However, did you know that some people are paid to recommend certain agents to you? It may not be your close friends and family, but some people actually earn money by sending you in the direction of a particular agent, regardless of whether or not they have actually worked with them personally. This entire pay-you-to-refer-me process can seem quite confusing at first, but once you’ve made the connection, the middleman’s position becomes clear: they’re a referral agent.
How does a real estate referral agent work?
Now, it may seem like we’re one “recommended by” away from running right into an Inception-esque real estate concept, but the system of real estate agent referrals can actually be easy to understand as long as it’s explained properly. In order to better understand how real estate agent referrals work, let’s go over the entire concept bit by bit:
In essence, a real estate referral agent is a professional who is there to refer you to the right real estate agents for any of your needs. You can think of them as another agent in the industry, but they’re the AGENT’S agent. Typically, real estate referral agents actually have real estate licenses of their own. Many have affiliations with different types of real estate brokerages. However, in the case of a real estate referral agent, they don’t directly work with a client by listing or locating a property for them. Instead, they find clients the right agent for their real estate-related needs. And, buying a property without an agent can get confusing.
On finders fees
Real estate referral agents are referred to by most professionals in the industry as a “middleman.” This is due to the fact that they receive a finder’s fee from the exact agent they referred to a certain client. With regard to payment, finders fees can be calculated in two different ways:
- Percentage of an agent’s commission – This is the system that’s often used for deals that were closed successfully by a referred agent.
- A fixed-rate – This payment method is used when a deal doesn’t pull through, but referral fees are still owed.
Real estate referral agents typically don’t have any preference when it comes to the type of agent they work with. This is because referral agents work with both listing (or seller’s) agents and buyer’s agents. Often, the size of a real estate referral agent’s referral fees depends on a whole assortment of factors, but the range often lies between 10 to 50 percent of the total commission received by the referred agent and will continue to exist until the real estate industry makes a change.
The controversy that comes with the business
Due to the nature of their work, real estate referral agents are no strangers to controversy. While there is a set of legitimate reasons as to why the referral process exists, most traditional real estate agents tend to frown upon the choice of getting the services of a real estate referral agent in exchange for a sure deal. At the end of the day, though, most real estate agents who use real estate referral agents (our apologies for that mind-boggling phrase, by the way) argue that money is still money—and to a great extent, they’re right.