Referral fee from realtor?

Question

Hello, new(ish) investor here,

If I am working with a potential seller for a buy and hold property and cannot agree on a price, could I refer them to a real estate agent? If they close on the deal with the agent, could I collect a fee?? –assuming the seller does not already have an agent.

Do people do this? What is a typical fee you can charge? –is it legal/ethical?

Wayne Brooks · Answer

Agents Can pay for leads, on a per lead basis but it can Not be dependent upon a closing or generating a fee (i.e. $20 for every FSBO you tell me about, regardless of what transpires with them).  An agent can Not pay a fee based on if and only a closing/fee results.

John Thedford · Answer

An agent my hire an assistant. The agent is not paying for referrals they are paying for office work. There are many instances where an assistant may NOT do certain duties even though employed by an agent. The assistant cannot cross the line and do anything that is required to have a license. As far as paying someone not licensed, the only people that can be paid that are not licensed are principals to a specific transaction. So, an agent may rebate part of their commission to the buyer or seller. That is legal. As to the previous post about gifts etc, and the maximum tax deductible gift is $25 per person per year. I just got a deal referred to me...listed the property, and sold it within 2 weeks. It was over 300K. I would love to show my appreciation to my friend that referred me but cannot pay them without breaking the law.

Russell Brazil · Answer

In almost every state, and I do not know any exceptions, it is illegal for an agent to pay a referral fee to anyone who is not a licensed agent.

Steve Vaughan · Answer

Like @Wayne Brooks states, most likely not legal. I am trying to work with an ABR now where he will refer me his almosts. Buyer's that can't quite qualify but would be perfect tenant buyers for my lease option properties. Can't pay an agent per se (or a mortgage person, attorney, etc) but we are discussing our favorite places to shop where giftcards on the sidewalk may be found. It's a tricky thing, but with good reason. Can you imagine if we were all going around buying referrals, potentially tossing our judiciary responsibilities out the window?

Maybe tell your agent friend where you shop, or see if they can pull comps for you from time to time. Something of that nature. Good question @Joe Doman. I have referred many a seller to agents over the years. Last year I got baked goods at Christmas!

Maybe tell your agent friend where you shop, or see if they can pull comps for you from time to time. Something of that nature.  Good question @Joe Doman.  I have referred many a seller to agents over the years. Last year I got baked goods at Christmas!

Jordan Turcotte · Answer

You might be able to call it a marketing fee. Realtors pay for leads from Zillow and other lead sources. You could be considered a lead source and charge a fee for successful leads. Typical referral fee from realtor to realtor is 25%. You should know what it would sell for right?(ARV) What would be considered 25% of a typical 3% Realtor Commission? Example: Sale price 200k, Realtor gets $6000 you ask for a marketing fee of $1500. It just so happens to be the same amount of a referral fee.

Chris Martin · Answer

Legal in California. I'm not sure that counts as a state, though. That's the world's 8th largest economy.

Joe Doman · Answer

I hesitated to ask if this it was legal (glad I did… I figured it was regularly practiced).

It’s interesting though. As a real estate agent, I assume you can legally hire someone to market to clients. Say you hire someone to mail letter out to attract clients (maybe to distressed owners… similar to wholesaling). In essence, the agent is “paying for referrals” from his/her employee… Maybe it crosses the legal line when an investor has potential interest in a property.

Wayne Brooks · Answer

In most jurisdictions, not legal.

Referral fee from realtor?

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