Referral Fee Etiquette

7 Replies

Hey guys, quick question. I am on a buyers list for a wholesaler who regularly sends me deals through email, and I have never bought from him before. He sent me a higher cost deal, 550k but the ARV is around 1 mil., this is above my head currently but I did have a friend who was looking for a property similar to this one so I passed it along. She is very interested in it, and might close on it and wanted to give me a finders fee, which I wasn't really looking for, but will gladly take. Next, the wholesaler asked me what type of referral fee I want from him, for bringing them together. My question is I am not sure if I should take a fee from one or both, or what is customary in this situation as I really don't have any equitable interest, and just brought them together as a way of helping out. If I do decide to take the fee(s), I am not sure how much would be appropriate to ask for (from the wholesaler only, not going to ask for anything from my friend, whatever they give is fine if anything)? Any help is appreciated, thanks!

I would say your standard referral percentage is fine,  thank you!

Justin ask your friend what they think is fair??

The number might be better than you had in mind. Example quietly you think 6,000. The friend tells you 10k is fair without knowing you were happy with 6k. Instead of acting super excited and saying thanks. You lower your tone on the phone and pause and say well I was hoping for more but I think that might be a fair price.

If you are too excited they might chop you down some more. You want them to believe they won the better part of the negotiation. I don't care what people think they won as long as I meet my objective.

The friend is likely asking you to see if your number will be lower than what they were willing to offer............. : ) 

Accepting a referral fee from either is most likely illegal.  Check with your state RE commission, but most only allow referrals to license holders.   Be very careful how you proceed.

@Justin Baker  

Take a referral fee from both if you can.  I'm sure the wholesaler is making plenty of money on the deal and your buyer as well.  The two would have never met without you.  You provided a service and should be compensated for it.

Thanks for the responses everyone, I appreciate the input!

10% of what the seller is making is a fair amount.  If the seller is making 10k, I am sure that 1000 is not too much for him to give up to get the property sold.  This is what I usually ask for as a referral fee if I can put two people together. I would rather be on the contract as a buyer and/or seller, but sometimes it is easier to just put two people together and let them negotiate with each other.  People dont want to see two or three assignments at closing.  They feel that there is too much markup and they are over paying for the property.  Also, I am really not going to do much work for that 10%.  

Now if the two people do another deal together, I would ask that they let me know and get another 10% for the next deal also.

I just want to say way to go for brining the people together!  :)  Good one! 

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