Referral Fees

Posted by: Eric Blackwell on July 16th, 2008

One of the things that I find fascinating in the real estate business are referral fees. I hear REALTORS upset about them and always trying to lower them. I know, with the financial pressures of today’s market, this may sound weird, but I LIKE THEM.

Before you throw something at the screen, let me explain.

In today’s buyer’s market, EVERY buyer side that you have is a result of someone or something. It is the result of a marketing channel that you have invested in. Maybe it is your internet presence. Maybe it is HomeGain. Maybe it was the time you spent on a press release that attracted a buyer or investor. Maybe it was a radio ad.

Whatever it was, you invested in it in one way or the other. I find it amusing that REALTORS often do not pay THEMSELVES a REFERRAL FEE and use it to build up their market presence.

Even if you invested time instead of money into your lead that turned into a buyer, the only way to get more time is to eventually use some of that money to buy back the time either in that market channel or in another one that you deem will generate more ROI.

How do I know this works? Our brokerage did it.

When we first started down the path to getting search engine dominance in our market all we had was my time. Granted my time was actually my broker’s money invested in me. What did we do? We paid ourselves a referral fee from each closing (not counting buyers who were interested in our agents’ listings) and carefully reinvested the proceeds in developing and promoting the site.

Four years later…we are very satisfied with the results…and we continue to reinvest.

By doing that we are now at the point where we have a web presence that feeds us thousands of leads each year. It is EXTREMELY difficult when times are tight to do this. I will grant you that.

But my observations are that those who invest and re-invest and truly pay themselves a referral fee soon find themselves with more and more business.

So the next time you find yourself with a home buyer whom you met via a church group, or a club, or a referral from a past client, or maybe an ad, web presence, etc….pay YOURSELF a referral fee and invest in YOURSELF and your future.

If you are able to convert MORE than you expected off of traffic from HomeGain, or Google…why not double down? With the internet’s bevy of tools to guide us, the decisions, while not easy, are more informed than ever.

Eric Blackwell is the Director of Technology for RE/MAX Properties East in Louisville, Kentucky.

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2 Comments on “Referral Fees”


I get where you’re coming from, my brokerage did the same thing

Ken in Elgin Illinois

Invest in what works and cut what doesn’t. Simple business plan that will make you highly profitable.

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