Understanding Referral Fees

Amongst real estate investors (and most group of people) there’s a lot of confusion about how organized real estate works. Commissions are pretty straight forward, though they very by location and property type (i.e. commercial properties have a different commission because they require different efforts).

Referral fees are pretty simple and describing them makes me feel like a pimp. I’m going to explain how they work for me, which is generally how they work across North America.

I pay for business

When a great REALTOR® in Toronto has a client moving to Edmonton or looking for an investment property here, they introduce their client to me. I help them find a property they love, they buy it and I send them a cheque for at least 25% of my commission. Actually my brokerage sends the money to their brokerage so it’s all above board.

Ok, maybe I am a pimp

I love when people come to me asking for referrals. Yes, I do get paid eventually, but I enjoy the process of helping find the right agent for someone. Sometimes I already know someone (Calgary, Red Deer, Grande Prairie, Fort Mac, Vancouver, Toronto, Hamilton are all covered already) but sometimes I don’t. Then I get to earn my referral fee, if I ever get one, by doing the leg work to help them find the right agent.

When an old work friend called to say him and his wife were moving to a small town north of Barrie I was glad they asked. I had a great time calling around and getting to know some agents near them. I ended up suggesting a couple but found one that I thought would really click with my friend’s sense of humour. When I dropped him an email after their first trip up there to look around they’d already bought a house and had a great time. Home Run!

It’s the cheesiest line in real estate, but referrals are awesome. It’s also a part of the real estate economy that you should be aware of before you start calling around. Asking a great Realtor can help simplify your search and help you both out.

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1 comment

  • Referral agents are like coordinators. They connect realtors to prospect buyers. They are first to be aware of the client’s requirements and refer the best person that can offer the most relevant property for sale.

    The highest compliment a realtor can get is a referral.