The Ultimate Guide to Real Estate Referrals

A real estate referral is a term used to describe what happens when an agent is introduced to a potential new client through a mutual connection, whether that connection is a past client, fellow agent, or member of the community. It is also one of the cheapest and easiest ways to grow your business, making this strategy a great opportunity to make money with little effort.

Let’s take a more in-depth look at how different types of referrals can generate real estate leads:

Agent-to-Agent Referral

We, as agents, usually have a certain farm area that we service. This farm may include a specific neighborhood, city, town, or county. However, a client may want to move to an area outside of our farm or expertise. Agent-to-agent relationships are a great solution to this problem as they provide valued clients with a trusted and knowledgeable connection while also offering agents a way to generate income.

It is worth pointing out that the agent-to-agent referral process works differently than other referral programs. Under this scenario, the referring agent shares contact information and what services or outcome is expected in return for a fee. Therefore, agent referral relationships require a referral agreement between parties.

The referral agreement is a document that is sent to the receiving agent’s broker and/or office manager to sign. It must clearly state who the contact is and whether they are buying or selling. This document should also contain the financial arrangement, or referral fee, set up between both agents and explain how it is calculated. However, the standard rate for a referral fee is 25% of commission paid.

You can also calculate the referral fee using the following formula:

If you are looking to create more agent-to-agent referral connections, there are a number of services that can help you establish a reputation as the go-to expert in your area. For example, Parkbench allows you to create neighborhood sites, offers tools that help you connect to local businesses, and can help you manage past client testimonials, which can help increase a would-be partner’s confidence in your ability to serve their clients’ needs.

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Local Business-to-Real Estate Agent Referral

Local businesses are another great source for referrals as they can generate more than one lead. However, compensation in this model is made through the commission you eventually make on a future sale rather than through a passive referral fee. That said, it is always a good idea to build relationships with everything from restaurants and coffee shops to professional services like lawyers, doctors, dentists, and financial advisers.

When networking, make sure each of these businesses has your business cards. You never know when they might get asked if they know any good real estate agents in the area. The other reason this is such a good networking tip is that in addition to sending referrals, some of these businesses can also do a co-marketing campaign, where you can send marketing material to their clients in hope of future business. In short, you support them—they support you.

Relocation Company-to-Real Estate Agent Referral

When an employee needs to move from one location to another, their employer may have a relocation program. This creates an opportunity for an agent to be the real estate agent of choice the relocation company refers to when assisting with an employee’s move. However, it is worth noting that agents are often expected to pay a referral fee, which can be as high as 40% of the commission you earn, in return for these leads.

That said, companies or corporations that have a relocation department typically have a large number of employees. Even though 40% is a large percentage to pay the relocation company, you need to remember you are building a relationship for potential future income earning opportunities. In addition, it means you also are creating an opportunity to receive referrals for the employee’s friends and family who might also choose to relocate at a later time.

Client-to-Real Estate Agent Referral

When working with a client, our goal is to do such a good service that we will always be the real estate agent they think of and refer to. I always strive, by the closing of an escrow, for a seller or buyer to refer me to their friends, family, and associates. However, I don’t leave anything to chance. I always make it a point to say, “If you have anyone who has real estate needs, I would welcome the opportunity to assist them.”

However, it is worth noting that the referring client should always be thanked for this kindness. This is why it is a good idea to organize your contacts using a customer relationship manager (CRM) like LionDesk, as these tools provide a number of ways to manage notes, stay on top of lead sources, and can even help you with your thank-you letters or other email marketing campaigns. Learn more by visiting their website.

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8 Ways to Generate More Real Estate Referrals

You will always have growth when you step out of your comfort zone and expand your income-producing opportunities, and I have always had the belief, “If you don’t ask, you don’t get.” The easiest way to generate referrals is to ask for them. However, you are more likely to earn a positive response if you are mindful of the timing of your request and also provide a compelling reason your network should send more clients your way.

The following are great ways to increase the likelihood your network will generate referrals on your behalf:

Host Your Client’s Housewarming Party

After your client closes on their new home, they all want to show all of their friends and family the beautiful new home they purchased. They also want to show all of the changes they may have completed to the property. What a great time to plan a party when everyone is in a good mood and excited to share in this happy event. Guests will also see how you take care of and love your clients.

Client Appreciation Events

I love celebrating my clients. I schedule several client appreciation events a year. I hold an annual picnic each summer whereby all of my clients, their friends, and their families are invited. The event is 2½ hours at a local park. It is usually on an evening where they have free music and I serve a picnic dinner. I also invite all of my vendors, such as lenders, inspectors, and home warranty companies, to name a few, so that they have an opportunity to advertise their services. A sweet treat is given to each guest thanking them for “my sweet success.”

Sponsor a School Event

Whether it is a sporting event, a play, or a carnival that is held at a local school, support it. A great way to support the event is to be a sponsor. When you sponsor a school event, you usually will be able to hang a banner with your contact information on it. You also will be a part of the printed materials that are handed out. This is a great way to do different forms of advertising.

Sponsor a Community Event

Local town events always need sponsors to underwrite the event. Banners, signs, and printed materials are always needed. Depending on the level of sponsorship, you may have an opportunity to have your name on all of these items. A higher-level sponsor may also have their name included on a T-shirt or other promotional items. This is a great way to keep your name in front of a potential referral.

Volunteer for a Community Event

Monetary donations are not always needed. Sometimes community events need manpower and a lending hand. Attending these events and getting involved can build personal relationships with other volunteers. It is always important to volunteer with a giving heart and true intentions. When volunteering for community events, I usually wear my company shirt, where my advertising is more subtle. I will usually wait until someone addresses me about real estate to talk about the local market. At these events, I never lead with real estate.

Host a First-time Homebuyer Workshop

At the local high school or community center, there is usually good space to host an informational seminar. Holding a workshop is a great opportunity to meet potential buyers. This is also a great forum to demonstrate your knowledge of the market and educate a future buyer. You can also help build relationships so that when starting the process with a new buyer, they are not strangers.

Host a Living Trust Seminar

Hosting a living trust seminar is a very sensitive subject. It is important to have a trust attorney deliver the information. Guests who attend this seminar will be comforted knowing that when an unfortunate circumstance occurs, they will have you by their side to guide them. This is also a great time to educate those attending on how to avoid a probate situation that could be quite costly.

Co-market With Your Preferred Lender

When you form a collaborative relationship with your preferred lender, it is a win-win situation for both of you. Each of you have your own marketing database. When you create a co-marketing piece together, it allows you to double the amount of contacts to reach out to. In our business, one of the most important pieces to the real estate process is qualifying to buy a home. Whether your buyer is pre-approved with your preferred lender, or a potential seller has a buyer who needs to be cross-qualified, you are leveraging an all-inclusive team to make sure a transaction goes smoothly.

Things to Keep in Mind When Asking for Referrals

The first thing we learn in Real Estate 101 is when working with a new client, we ask the following, “Are you working with a real estate agent?” Some clients will quickly answer no, while others may hesitate and you need to pick up on clues. If a prospective client says that they are not working with a real estate agent, but they reference certain properties they have seen, your spidey senses should go off. How did they see a property if they are not working with a real estate agent? I always lead with “I don’t want to step on anyone’s toes, are you working with a real estate agent?”

You must also be careful when asking for a referral. Whether you are asking a present client or local business, please be careful not to put desperation or money-driven intentions first. You should never solicit another agent’s client. Even though it may seem innocent or unintentional, when sending out any written material, please make sure that you have a statement, “If by chance you are working with another real estate agent, please discard.”

Bottom Line

My most favorite referral is the one that comes in the middle of an escrow. Either the buyer or seller will refer someone to me prior to closing their escrow. I have earned the commitment, loyalty, and trust of my present client, and they feel confident that even prior to close, I receive a call from a person they referred to me. I also love that when I attend community events, I have created a local presence for myself whereby I leave the event with several referral opportunities.

The passive income opportunity created through referrals can be endless. Again, this is money you are making with little or no involvement. The key to passive income is staying in touch with your clients and being top of mind. Remind your clients that no matter where they live or move to, you can refer them to a real estate agent who will take good care of them. You are only a call, a text, or an email away.