Real Estate Referral Agreement

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Updated June 17, 2022

A real estate referral agreement is between two (2) agents where a client is recommended by an agent to use another agent that is better suited for their needs in return for a fee. This is common when a client is seeking to buy, sell, or lease property outside the jurisdiction of an agent.

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Table of Contents

What is a Real Estate Referral Agreement?

A real estate referral agreement is used when an agent has a client they would like to refer to another agent in exchange for a fee. This is most common when a client requests services outside of the agent’s jurisdiction or if they are requesting real estate services the agent does not offer.

Average Referral Fee

25% is the national average referral fee amount (Zillow).

Can a Real Estate Agent Pay Referral Fees to Non-Agents?

No. In most States, the practice of agents paying referral fees, or “finder’s fees”, is illegal unless the individual is a licensed real estate agent or attorney.

How Does a Real Estate Referral Work?

Referrals in the real estate community are so common usually offices will make exclusive deals with one another in certain jurisdictions. It is a great way for an agent to point a client in the right direction while at the same time collecting a fee if a transaction occurs.

Step 1 – Understand the Client’s Needs

The agent should meet with the client to discuss their goals and desires. If the agent feels that they are not able to be of service then as much information should be obtained in order to find the best real estate agent for their needs.

Step 2 – Contact Other Agents

Find an agent that best meets the client’s needs. Therefore, if an agent is accepting referred clients, the referral fee should be confirmed and all parties should be introduced to one another.

Step 3 – Create a Referral Agreement

Once the client and the recommended agent have been introduced a referral agreement should be signed. This will legally bind and confirm the referral fee, commonly 25%, and any other terms of the agreement.

After the referral agreement is signed, the client and the new agent will need to sign a listing agreement.

Step 4 – Collect the Referral Fee

A real estate referral fee is commonly paid immediately after the closing of the client’s property. The referral fee is equal to the percentage (%) of the net commission that was paid to the referred real estate agency. The referring agent should send a request for payment via the real estate commission invoice.

Reciprocal Agreement

Whenever an agent should send a client to another agent, he or she should request a reciprocal agreement. A reciprocal agreement requires both agents to refer clients to one another for specific situations.

For Example: Two (2) agents, one (1) that services San Francisco and one (1) that services Los Angeles, make a reciprocal agreement that if they should find a client in the other’s market area that they agree to refer to one another.