Ethical is what is fair and reasonable, in my opinion.
I would take that on a case by case basis. As Maggie Hawk stated, if it is a close friend, relative of the client I would consider it.
I heard of agent state that they would pay a referral fee up to 3 transactions for the one client. Now if that client is referred out by you, it would be different.
Also, even though a referral agreement is good for only one year, I make a note on the client file and in the event I represent them beyond the referral time line, I'd still honor the source of that client.
Have an amazing day!
Ethical? Sure, there's nothing unethical about it.
Legal? If the two of you agree to it, it's legal.
Personally, I feel that once the initial referral has been made, Realtor A is no longer entitled to an ongoing referral fee. After that first transaction, the client becomes Realtor B's client, and they either continue to use him, or change agents based on their interaction with Realtor B.
But it's easy to understand how agents might be confused, if the expectations aren't discussed upfront.
If the client comes BACK to you, they've come back to you because of YOUR services, and there is no 'additional' referral fee due, as the referral was for the client and "THE" one transaction.
This is the way I've always worked, and it makes sense.
Bottom line is make sure to read your referral agreement. Some are only for 1 year so with short sales you may not actually owe a referral fee!
As others have said, I believe that once the original transaction is over, the customer is now Realtor B's customer. However, that being said, I do see one instance where things might work differently.
If the customer Realtor A refers is a close family member, such as their child, or their parent, there may be some justification in Realtor A expecting additional referral fees from future business with that customer.
Lets say realtor A (You) referred a client to realtor B. The client bought $250K home. You made your referral fee, then 2 months later same client bought a commercial property with $10M with the same agent.
I really wonder if you still say I am only entitle to collect from first transaction NOT from the $10M one.
Generally speaking, a referral is good for the singular transaction for the person being referred, it is not intended for all future transactions. Here's the rationale. If I refer a buyer to you, I would expect a referral fee for the buyer's next purchase. I would never expect a referral fee for any subsequent purchases, and why? Because if that buyer returns to you for their future purchases, it is not because of the referral I made, it is because of the work you put into that person and the trust and loyalty you cultivated with that person. You became the 'procuring cause' for future deals. Referrals and the fees that may be associated are negotiated between referring broker and receiving broker.
I hope this helps,
Tom Schoenbeck, Associate Broker
Keller Williams Realty
Rehoboth Beach, DE
What if Realtor A qualifies the buyer and determines the buyer is looking for a $250k - $300k home. Realtor A is busy at the time so he refers the buyer to Realtor B.
Realtor B starts helping the buyer and he learns that the buyer wants to first buy a $25,000 condo for his mom. So Realtor B finds and sells the buyer the $25,000 condo.
Then Realtor B starts working on the $250k - $300k house.
The $25k condo would be the first transaction and the only one that some of you have said would earn the referral fee. But put yourself in Realtor A's shoes. Wouldn't you be pretty upset if you gave a $250k - $300k buyer to another agent only to have them sell a little $25k condo first?
This discussion makes me realize that a referral agreement can and should be more detailed. You need to cover the extent of the agreement. Are ALL transactions from the date of the referral until the end of time requiring a referral fee? Or should it be just the first transaction independent of the details of that transaction? Or how about the referral agreement is only for "X" number of days
If this concern has not been addressed then the agreement applies to the transaction for which it was written.
Intent or perception is theory, not tangible, in writing.
Go back to "Procuring Cause" any dispute will go to Arbitration. Ask yourself, does the agreement clarify who is who and what is what so that a 3rd party can easily interpret the outcome?
If you sign up with a referral company, this is clearly outlined in the agreement/contract. Take the time to review some of these contracts online (PDF). the referring agency require the agreement/contract signed and dated by all interested parties along with the provision of a W9 from the broker receiving the referral fee before entering into business.
If an agent refers you a client, that should be accompanied by a referral agreement. If things are not clear at the initial point of contact, advise your broker of the situation and have your broker contact and discuss this with the referring agent's broker.
Check the state laws regarding referral fees for each participating "broker".
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I may feel differently if it's an odd situation... One client has 10 lots to sell, and is referred to an agent for those transactions - then the referral fee may be owed on all 10 transactions.
If I were in Realtor B's position, I would continue to compensate Realtor A for the income stream provided by his referrals, because that may lead to a lot more future business and preserve a good professional reputation.
The referral agreement can be per person and per property.
Per person - has to have time frame specified (this is more for commercial real estate).
Per property - one time only (unless there was a different agreement).
Hope this helps,
Beachfront Realty, Inc.
Unless your referral agreement specifically stated that all transactions for evermore done with the referred client were subject to the agreement (and you actually signed such an absurd referral agreement, the referring broker is entitled to the initial transaction fee and nothing more.
Great Homes Realty
Short Sale & Pre-Foreclosure Certified Specialist
Visit us at facebook.com/GreatHomesRealty
(ethically and legally)
I think the answer is simple; NO.
A REFERRAL is for a particular situation, and the Realtor has no obligation to pay for life.
It the Client was close to the first Realtor, that Realtor should keep in touch if he wants future business from that Client. If not, then they have nothing to expect.