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Mac, Home Buyer in Rapid City, SD

Can a realtor continue to expect referral fees from another realtor, even beyond the initial transaction?

Asked by Mac, Rapid City, SD Sun Jun 3, 2012

Realtor A refers a client to Realtor B. The home closes and Realtor A gets a referral fee. But now Realtor A expects additional referral fees whenever there is a future transaction between Realtor B and the same client. Ethical? Legal?

Help the community by answering this question:


Legal is what it states in the referral agreement.

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!
Web Reference:
2 votes Thank Flag Link Fri Jun 8, 2012
I often refer to agents and we work on trust, ethics, and integrity. Often if it is a small transaction a referral fee is good enough. if multiple deals come from one client or a listing, it is often a nice gesture to keep referral fees coming to the person who sent it to you and you are more likely to be referred many more. Each case is independent and referrals can be from .25-.50, it depends on who is negotiating, updating, and packaging! Good luck!
2 votes Thank Flag Link Mon Jun 4, 2012
That's something that should be discussed at the time of referral.

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.
2 votes Thank Flag Link Sun Jun 3, 2012
Alan May, Real Estate Pro in Evanston, IL
When it comes to referrals, it depends on what was negotiated up front. However, most agents would not expect to receive benefit from the ongoing relationship once they have given the referral. Anything past the intitial transaction would seem obvious to me that it is becasue of the rapport established between the agent and client and whether or not the referring agent is able to assist the client in future transactions. The most common reason for referrals is that the client is too far away from the referring agent to assist them.
1 vote Thank Flag Link Sat Jun 9, 2012
It's good business practice to be generous.

Realtor B will be other Realtors' favorite person to give referrals to once it's known Realtor B has a reputation for being generous with referral fees.
1 vote Thank Flag Link Fri Jun 8, 2012
Flag Sat Jun 9, 2012
It depends on what your inital referral agreement stated. Very often the agreement lets you know if it is a referral for a buyer or seller. If both are checked, look for a time clause. Sometimes the agreements state one year or 18 months. Most often, there is no time clause so the expectation would be no residual referrals.
1 vote Thank Flag Link Fri Jun 8, 2012
The agreement only applies to the original transaction. Royalty doesn't work in real estate :)
1 vote Thank Flag Link Thu Jun 7, 2012
Its whatever you agreed to initially. However you structured the agreement is what will dictate the terms.

Good luck!
1 vote Thank Flag Link Wed Jun 6, 2012
They can "expect" all they want but reality comes down to what were the terms of the original referral agreement!
1 vote Thank Flag Link Tue Jun 5, 2012
When another agent refers a client to you, that client came to you BECAUSE of the referral, and you should HAPPILY (agreement or not), pay a referral fee to that agent.

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.
1 vote Thank Flag Link Tue Jun 5, 2012
Many interesting angles on this one question. Perhaps those of you who have created "referral agreements" to resolve the issue could post some here for the community to share.
1 vote Thank Flag Link Mon Jun 4, 2012
Mac, it depends upon the referral agreement between brokers. If it was not clarified before, best to address concerns now and put things in writing.


Lynn Brock
Brock Realty
1 vote Thank Flag Link Sun Jun 3, 2012
Yes I am aware of at least one "referral source" that will require an additional referral fee if the buyer or seller engage in a subsequent buy or sell transaction within 180 days "after".

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!
1 vote Thank Flag Link Sun Jun 3, 2012
It would clearly depend on what the referral contract stated. Did it state forever or did it state for the one transaction. Most residentiual referals are one time deals while most commercial ones are forever. My advice is read the contract that was signed by all parties.
Web Reference:
1 vote Thank Flag Link Sun Jun 3, 2012

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.

Good question.
1 vote Thank Flag Link Sun Jun 3, 2012
It all depends on your referral agreement and how its worded. I'd defer to your broker.
1 vote Thank Flag Link Sun Jun 3, 2012
i don't think this type situation can be considered one of ethics or legality. It is what is written in the referral agreement. That being said, I've never seen or been part of a referral agreement or arrangement whereby the referring agent seeks referral fees for future transactions. And, I would never be part of such an arrangement.
1 vote Thank Flag Link Sun Jun 3, 2012
This sounds like the kind of system you're looking for
0 votes Thank Flag Link Thu Jan 8, 2015
You always go with your agreement. Unlike most of the realtors here, I think realtor A entitle to collect referral fee up to a certain year. I personally think it should be a few years considering some transactions especially commercials takes way longer time than usual.

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.
0 votes Thank Flag Link Sat Jan 3, 2015
This is something that should be discussed up front at time of referral. What if an agent refers you a buyer who buys 3 investment homes immediately - would it be reasonable to give the referring agent a referral fee on all 3 homes? I think so! Different scenario...agent refers a buyer to you who buys a home and you pay the referral fee - the same buyer calls you 5 years later to list and sell the home. Is is reasonable to pay the original referring agent a referral fee? I don't think so! It's all about being fair.
0 votes Thank Flag Link Tue Mar 25, 2014
Hiya Mac,

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
(302)360-0300 (office)
(302)632-7407 (cell)

0 votes Thank Flag Link Sun Mar 23, 2014
So Tom what would your opinion be if you took a referral, the original deal fell through, and they continued to work with you on subsequent deals that fell through until you finally got a sale 9 months later? Do you think it's fair for the person who referred not to negotiate the initial referral fee down for all the work you put into it? Also, the client had the choice not to stay with the realtor, but chose the realtor over the referred realtor.
Flag Fri Jun 20, 2014
Read the details. I have a referral arrangement with one referring broker that specifically states I will pay a referral fee for all transactions with the referred entity for 24 months from date of referral.
0 votes Thank Flag Link Thu Dec 12, 2013
I think it's unrealistic for an agent to expect a referral fee from an agent on a client beyond the initial transaction.
0 votes Thank Flag Link Thu Dec 12, 2013
This is an excellent question and I can see how our answers could change depending on a few factors.

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
0 votes Thank Flag Link Thu Dec 12, 2013
It all depends on the agreement you made. If the agreement does not state the referral will continue you have a leg to stand on if trouble arises.
0 votes Thank Flag Link Sun Nov 17, 2013
Yes, this is perfectly legal as long as it is agreed upon. There is a lot of agents who place their license with a "referral company" and refer out their business while they are not selling full-time. Most of the time these prospects are personal friends or family members of the referral agent. If the referral agent does decide to sell full-time again, then they would expect to work with their clients again. The agent should be happy that the referral agent trusted them to work with their personal contacts. Go to for a referral company that pays back top dollar.
0 votes Thank Flag Link Fri Nov 15, 2013
If the referral has been written in the manner described above then yes, it is definitely legal. However, typically a referral is written in such a way that it is only for the initial transaction.
0 votes Thank Flag Link Sat Oct 5, 2013
Mac, The groundwork for this scenario is outlined in the referral "contract" or agreement signed by both agents and brokers at the initial time or prior to working with the client.

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".

Best regards,
Lynn Brock

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0 votes Thank Flag Link Sat Oct 5, 2013
I think that this would need to be a discussion between the two agents up front. In my opinion, the referring agent should only get paid on the first transaction.
0 votes Thank Flag Link Fri Oct 4, 2013
what if the referral was for selling and buying a new home of a client of agent A who was referred to agent B? the referral would be paid for only the sale of agent A's client? ( both these sales contracts happened closely in time)
0 votes Thank Flag Link Fri Oct 4, 2013
My opinion is the referral fee is due for the first transaction only, because the referral was made for that particular purchase or sale. After that, the relationship has been formed and repeat business is just that, repeat business from a now former client. That is, if nothing different is stated up front. When I was new to the business I once had another agent refer me a rental client stating that this was for a rental only and when they are ready to buy, he's handling the sale. That was clear and I respected it.
0 votes Thank Flag Link Sun Jun 24, 2012
In my opinion... the first transaction was procured because of the initial introduction... therefore a referral fee is reasonable. However, the following referral fees are procured by the experience the client had with the agent.

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.
0 votes Thank Flag Link Sun Jun 10, 2012
That's a sticky situation - if the second referal hasn't come in yet call your local board to see what guidance they may have for you. Each situation is unique and if it isn't in writing you may have to consider the relationship you now hold with Agent A and the future business that you WILL OR WON'T have due to your decision. Good Luck!
0 votes Thank Flag Link Sat Jun 9, 2012
It all depends on what was negotiated in the original referral agreement. More often than not it is a one time deal but it doesn't have to be if all parties have agreed otherwise.
0 votes Thank Flag Link Sat Jun 9, 2012
No I think that is unlikely.
0 votes Thank Flag Link Sat Jun 9, 2012
If Realtor B solicited referrals from Realtor A as part of a plan to generate income for both realtors, Realtor A may feel an ongoing arrangement is in effect. Without Realtor A providing all the contact info, it is likely the client would never have met Realtor B. Consider the ethics of circumventing Realtor A if this type of understanding is in place. Financially, Realtor B would never get another referral from Realtor A or his friends and co-workers.
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.
0 votes Thank Flag Link Fri Jun 8, 2012
Referral fees normally only apply to the inital transaction. Talk to your managing broker in your office for guidance. If you feel this is not working, contact the managing broker in the other agents office for help.
0 votes Thank Flag Link Fri Jun 8, 2012
Hello Mac,

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,

Irina Karan
Beachfront Realty, Inc.
0 votes Thank Flag Link Thu Jun 7, 2012
Anyone can expect anything they like, but with over 2o years of experience and many dozens of both in-coming and out-going referrals, I've never heard of a Realtor expecting a fee for anything other than the original transaction. When I send a referral to another Realtor for a client moving out of state, once they have found them a home and sent me my agreed upon fee, that client is now their client.

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.
0 votes Thank Flag Link Thu Jun 7, 2012
The initial referral is a contractual agreement between Realtor A's Brokerage Firm and Realtor B's brokerage firm for one specific transaction. Any subsequent transactions between Realtor B and the same client belong to Realtor B.
0 votes Thank Flag Link Wed Jun 6, 2012
One and Done.

best of luck
0 votes Thank Flag Link Wed Jun 6, 2012
We always offer referral fees for all transaction with that client up to one year from the date of referral. I think is fair and works really well for us. Agents are happy to refer business to us. :-) Paola

Paola Lombardi,
Great Homes Realty

Short Sale & Pre-Foreclosure Certified Specialist
Visit us at
0 votes Thank Flag Link Sun Jun 3, 2012
Unless otherwise specified, an agent making a referral should expect only one referral fee. If a referring agent is expecting multiple fees it should not come as a suprise to the other agent.....

0 votes Thank Flag Link Sun Jun 3, 2012
Hi Mac,

is this an investor? I would say unless specified it should be a one time referral.
0 votes Thank Flag Link Sun Jun 3, 2012
You get one referral fee unless it is agreed prior that each transaction will get referral fees.
0 votes Thank Flag Link Sun Jun 3, 2012
Ive seen this kind of thing in Florida and was frankly amazed. I agree with you. Thanks for the answer.
0 votes Thank Flag Link Sun Jun 3, 2012
Realtor A needs to go on about their business and get a nice spa pedicure with their referral fee. The referral was for the initial transaction. After that the care of that client is under Realtor B. Wine them and dine them......... you are not longer betrothed to Realtor A :)
(ethically and legally)
0 votes Thank Flag Link Sun Jun 3, 2012
Despite it being a good question,
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.
0 votes Thank Flag Link Sun Jun 3, 2012
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