“Pro Bono” Real Estate Agency?
Not on Purpose
Normally, when Realtor A refers a client to Realtor B, “B” pays “A” a referral fee.
While Realtor B is going to be doing all the work, “A” has the client relationship — and can effectively decide which Realtor gets the gig.
Depending on the situation and size of the deal, the referral fee can be anywhere from 10% to 25% (or more!) of the commission.
So, what’s a reverse referral fee situation? (my term).
When the Buyer’s budget is sufficiently small* that the commission on the sale would barely pay for the Realtor’s gas — let alone their time and expertise.
Or, on the listing (sales) side, the home is worth so little — or so deeply underwater — that the Realtor’s time would be similarly ill-spent.
“Take This Client. Please . . .” (Apologies to Henny Youngman)
In such cases, Realtor A should really pay B to take on the client — not the other way around.
In practice, of course, that never happens.
Instead, experienced Realtors simply decline the work, which is why such Buyers and Sellers have a hard time securing quality representation (unfortunately).
Having been on the flip side of this coin when I was a new(er) agent, receiving such referrals, my practice now when I refer a small or especially time-consuming deal is . . . to simply ask the accepting Realtor to take good care of the client, and wish them luck! (vs. extracting charging a referral fee).
*A home listed for sale for $50k — and there are plenty out there — typically would offer $1,650 to the listing agent and their Broker, and $1,350 to the Buyer’s agent and their Broker.
Depending on the agent’s split with their Broker, the net commission on such a deal could easily be $1,000 or less.
For a couple months of work . . .
P.S.: What is the economic case for referral fees? (besides the fact that agents can and do collect them, that is).
Just this: part of the work that goes into getting a deal done is . . . first getting the deal (marketing, client interviews, etc.).
