Real Estate Referrals: The 411

by Sundaybell on January 15, 2014

What exactly is a real estate referral anyway? Good question! Here are a few more questions you might be asking yourself as well: What does a real estate referral cost? How does a real estate referral work? What should you expect from a real estate referral?

There are a few different types of real estate referrals. Let’s start with the most common real estate referrals including:

  1. A referral from a friend, family member or past client
  2. A referral from another real estate agent
  3. A referral from a website or business that specifically provides real estate referrals

Now, let’s dive into the different questions posted above with regards to each of the different types of real estate referrals.

#1. A referral from a friend, family member or past client

This type of referral is probably the most satisfying of them all. It really means that whoever provided the referral felt that you did either a fantastic job working with them, or someone they know, and they feel confident in providing you with a new contact that might be in need of your specific real estate services. In this scenario, there really is no “hard” cost, although a small token of appreciation is always nice. In addition, this is also a good indication that your marketing efforts are paying off, and that your service offering is in line with the expectations of the person that referred you. By marketing efforts we mean the post-cards, newsletters and other communication vehicles you are using in order to stay top-of-mind with previous customers and colleagues while you are working with clients and providing them with the level of service they expect from you.

When you do receive a referral from a friend, family member or previous client, you might get a name or number that you can call, or perhaps you’ll even be contacted by the prospective client as they have chosen to get in touch with you on their own. Either way, it’s always great to start a relationship based on a previous relationship as it already contains an element of trust and respect. And, it’s important to find out exactly how the referral filtered through, so that you can share thanks and also model the process for future marketing activity.

#2. A referral from another real estate agent

Agent-to-agent referrals are not uncommon, although it’s possible that you haven’t had one in the past. So, in case there is an opportunity, it’s good to know what to expect and how the process works.

If another real estate agent contacts you via email, phone or even through your website, they likely have a client that they are working with that for whatever reason, they can’t fully service. It could be because of relocation, a specific requirement that they are not comfortable with, or maybe even a certain type of home that their client is looking for. After all, not every real estate agent is an expert in every real estate transaction or specific customer and may not be able to service the real estate client appropriately depending on the particular circumstances.

In this scenario the referring real estate agent will likely offer you with contact information for their client (once permission is granted by their client) in order for you to contact them. To do so, they will also likely email or fax you a formal referral form that includes their contact information, the information pertaining to their client, as well as the parameters for the referral including the type of property, whether it’s a buy, sell or both and what the agreed upon referral fee will be.

So what is the referral fee?

Usually the referral fee is discussed in advance of the form going through so everyone is on the same page once the form is signed. The referral fee is documented so that there is no question where the commission goes and how it is split up amongst all the parties involved. This means the agent responsible for the referral, the agent that is doing the work, broker fees etc. It’s also not uncommon for real estate referral fees to be in the neighborhood of 25% or higher and this is up to the real estate agents to decide when they are negotiating the terms of the referral.

#3. A referral from a website or a business

There are a few different types of real estate referrals in this scenario. For example, you could purchase a list of real estate referrals from a “lead generating” company or maybe even be part of a network that provides referrals at no cost up front and a percentage upon closing. Let’s look at them a bit closer so that you can know what to expect.

Buying leads
If you decide to do so, there are a number of lead generating companies out there that sell lists of prospective clients. Typically, these lists contain names, numbers and even possibly email addresses of
prospective clients. They might also include some information with regards to intent to buy, sell etc. It all really depends on the company that is selling the lists.

From an expectation perspective, you can expect to have to follow up with each prospect individually to see if they are actually in the market and what their timeline might be. There is no guarantee that names would be accurate or data for that matter, but it is a good way to prospect and ensure that your outgoing marketing efforts remain active. From a cost perspective, this could cost you anywhere from $50/month to thousands/month all depending on what package you decide is right for you and your business.

Other businesses and websites that provide leads
There are also other scenarios out there that offer lead generating tactics. Some of which include advertising on top real estate related sites and creating profiles at either a cost or for free on websites that
work to match you up with clients. Some of these will include “push” tactics that will have prospective buyers and sellers see your profiles so that they can decide to contact you on their own, or “pull” tactics that will allow you to review anonymous client matches to see if they are of interest to you.

“Push tactic”: In these scenarios, there could be a cost attached to creating a profile or advertising on a site from a “push” tactic perspective. What’s important to remember is that if you are paying to have your profile shown it doesn’t necessarily mean that it will result in immediate business. If you are looking to get your name out there, advertising yourself on top-rated real estate sites may be a good awareness tactic.

“Pull tactic”: As for the other sites that offer free profiles and can match you up with clients as they come in, these are a great place to get your feet wet with no up-front costs. You can usually see the clients profile and determine for yourself if the prospective client is within your wheelhouse (so to speak). If they are, there are referral fees that can be paid upon closing or flat fees if that makes more sense for your business. The important thing to remember here is that these companies won’t usually promise large lists of prospects as they focus more on quality vs. quantity and all prospective clients are pre-qualified to ensure your aren’t wasting your time.

Any way you slice it, real estate referrals are key driving to real estate success. Without them, the costs of marketing your business could be astronomical. Hopefully this article helped shed some light on the different types of real estate referrals that are out there and what you can expect from each as you grow your business.

Article and insights provided by Sundaybell.

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