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September 27, 2011

Referrals and Taking Care of Business

by mark mclean

From time to time I get agents asking me how much of a referral they should be giving to another agents under a variety of circumstances. I decided it was time to make this the topic of yesterday’s morning meeting. There is no magic answer here as every situation is different, so I put to the group a few scenarios and asked them what they thought.

 You are an agent working with a client for the last year. You have shown them 25 houses. You decide that they are probably never going to buy so you decide to take the month of August off. You ask your desk neighbor to answer your calls. Sure enough, your only clients see a house on mls and call your desk mate who types a deal and gets the deal done.  Does the agent that you referred the buyer to deserve 25% for the quick no fuss deal, or 50% for getting the clients to paper, or maybe 75% because the deal got really complicated near the end and the agent worked for a solid week to make it happen.

How about this one; You have a hot new listing, but before the open house a family member gets sick and you have to leave town. You hand the listing off to someone in the office. They end up negotiating a deal with another agent. You have done all the pre-market stuff (pictures, brochures, floor plans, ads, etc). What is a good referral fee and would it be different if the agent double ended it because someone called through and what if they double ended it through a client that they met at the open house? Are you getting sick of ‘what ifs’ ? Here is something else to think about. How many generations do the referrals continue? Does the buyer have a house that needs to get sold? What if that agent picked up another buyer at that open house?

At our company, we recognized early that a referral policy had to be in place so we designed a very simple form called “Taking Care of Business”.  It is a no-nonsense guideline that agents can use with suggestions on what referral rates to consider given certain situations. The over-riding principle in any referral is; if you both agents agree to the terms of the referral and how deep it goes, and that agreement is in writing, there cannot be any dispute. Obviously we are trying to avoid a situation where a casual conversation leads to some sort of referred business and there is nothing in writing. Our policy manual clearly states that in those situations, the commission is split 50/50.
Finally, one last word. Referral rates should also be considered if you are dealing with a client buying or selling outside your normal scope of work. For instance, you work in the downtown condo market but you have a client who wants to buy a house in Windsor. Do you a. Drive out every week to show them places b. Call a local agent and refer it out or c. Work with a local agent on a 50/50 basis? To find the right answer, ask yourself if you are providing skilled and honest service to that client. If the answer is no then you must refer it to a local agent. This is also the case when you meet someone who wants to buy or sell a commercial property. Unless you know what you are doing, refer it to someone in the company who understands the intricacies of the commercial market. Your clients will appreciate your honesty and the property has a better chance of being sold.

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