Licensed CA RE broker: proper way to ask for a referral fee?

Question

Hi all, I've had my CA real estate broker's license for a few years now, but never actually used it (getting licensed was a backup plan C for my career path and I've kept it active under my own DBA business name). I've got a friend interested in selling her property and I want to refer her to a broker. Is it ethical/acceptable etiquette to ask for a referral fee of 25% of the broker's gross commission? If so, do I just email the broker and say something like "hey I'm a licensee, but can't help this client, can you help them for X% referral fee, and here's the CAR referral form to sign"?

Not going to lie, 25% of the broker's cut of the commission seems like a pretty big cut for simply saying "here's a client" and doing almost nothing else, so I feel like it would be considered rude or breaching etiquette somehow. By the same token, I know that since I do have my license, I can legally accept a referral fee, so if I can then why not?

The broker I want to refer my friend to is actually also currently helping me sell my own personal home, so I feel like that would also make things weird asking for a referral fee while still in the middle of the process.

Can you experienced real estate pros give me some advice on how to approach this? Thanks.

Minna Reid · Answer

25% is pretty standard, and no it does not sound excessive, unless the price point is very low or the sale is complex (short sale, liens, etc). Make sure you mention the fee right upfront though. I was recently blindsided by a request for ref, well into the transaction. Total turn off.

Caleb Brown · Answer

Our team loves referrals and 25% is standard. Search on Zillow a few top agents and send them messages. Whoever bites first gets it.

Andrew W. · Answer

Thanks so much everyone!

@Susie Wyshak and/or @Marian Huish can you clarify the requirement to be affiliated with a broker to receive the referral fee? My understanding is that here in California, a broker's license permits an individual to operate independently without having to hang their license/be affiliated with another brokerage firm.

Russell Brazil · Answer

An agent is always able to turn it down, or negotiate it. If you called me with this specific information, Id probably offer a lower referral fee based on the factors, and you could choose to accept it or not.

Marian Huish · Answer

Yes, that’s how it works @Andrew W.!  Assuming you are affiliated with a Broker, as @Susie Wyshak points out.  And since you’re asking this question here, I’m assuming you’re not. I would do so so as to receive at least some $$ benefit from having your license!

Susie Wyshak · Answer

The first question is if you are working under a broker. If not, a referral fee may not be possible using the standard CAR form. However perhaps there's a way to make it work.

That being said, it's a standard practice to get 25% in residential real estate for referrals.

Commercial agents may offer less if it's a casual referral vs. someone who you know deeply who trusts you and is all in.

Justin Moy · Answer

25% was normal when I was in the broker space about 8 years ago, and according to other responses seems reasonable. It should be seen as the cost to acquire a customer. Their options are to send thousands of dollars of mailers and follow up with leads and do presentations, or pay 25% to skip all of that, save their time, and save their money. Not to mention if it's a neighborhood the realtor farms or specializes in, there's value to them having their sign in the dirt as it's also marketing for them. Trust me any great broker is happy to pay 25% for a hot lead.

As far as asking, I'd just tell them your exact situation and that you researched them and you're confident they'd be a great fit. You charge 25% and ask if they're open to being introduced. Then send them the referral fee agreement and make the intro!

Robert Carmody · Answer

Since the agent is someone that you are already working with, give them a call or send an email with a little bit of insight on the services the client needs, where they are looking to buy or wanting to sell, and then just ask if this sounds like a customer that they'd like to work with, and on a referral basis with you. 25% is customary, so it shouldn't come as any surprise to them. Most of the time when an agent receives a referral from another agent, with a referral agreement attached, they are receiving a warm to hot lead that they most likely aren't competing with other agents for, and haven't spent a lot of time prospecting to find the lead, or money on marketing to bring the customer to them. Referrals from other agents often seem to be further into the process, or more committed to purchasing a new home, or need to sell the existing. So, there are some advantages in exchange for the 25% fee.

Licensed CA RE broker: proper way to ask for a referral fee?

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