Regarding real estate referral commissions paid to out of state agents
Hi. I read your article and it contains good information.
I’m starting a company that refers buyers and sellers to real estate agents in all 50 States. Do you think it’s legal in every state for a commission to be paid to an out of state agent and broker who’s only licensed in Arizona and California?
Please reply by email.
Hi Dan – Thank you for your question. We unfortunately do not reply through email, but I hope I can help you answer your question here. Real estate referral fees are commonly paid across state lines, as long as both parties are licensed to operate in the states they are practicing in. So, for your example, if a real estate broker is licensed in Arizona, they can refer individuals to licensed agents/brokers in other states and expect to be paid a referral fee for doing so, as long as the broker being referred to is also licensed to operate in their state, and they both sign an agreement form including the amount, duration, and other details of the referral. We recommend that you always sign a referral agreement rather than trust in a verbal one. While we haven’t come across states that do not honor this practice, it’s always prudent to check with particular state regulations.
To be clear, real estate “referral fees” are commonly paid across state lines, but entire commissions are not. Real estate agents/brokers must be licensed to practice in the states they operate in to conduct real estate transactions in that state, which is why the practice of referral fees (and referrals to other agents/brokers) is such a common one. When clients move out of state, for example, you simply can no longer help them if you are not licensed to practice in that state, so you find the best person you possibly can to help them get their needs met, and often collect a fee for doing so. Real estate agents/brokers can only conduct real estate transactions in the states where they are licensed. So glad that our article on real estate commissions was helpful, and best of luck!