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Greg Brady, Real Estate Pro in Arlington, TX

Referral fees?

Asked by Greg Brady, Arlington, TX Wed Oct 12, 2011

When you give a referral, do you ask for a percentage of the gross commission or a percentage of that particular agents commission? For instance, if I'm giving a referral and asking for 25%, what is most common? From the gross commission or 25% of the commission of the person I am giving the referral to?

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The referral arrangement/agreement should be a percentage of the gross commission received by the brokerage. The referral amount is taken off the top and then the remaining amount is split according to the percentage amounts between the brokerage and the agent. Referral agreements should be signed by the broker of record of each respective brokerage.
1 vote Thank Flag Link Wed Oct 12, 2011
Hi Greg,

Let's say house is $100,000 and the buyer or seller agent side is 3% or $3000.
We normally take or give 25% of that or $750.
The broker then would split the remaining $2250 with the agent at their normal split.
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1 vote Thank Flag Link Wed Oct 12, 2011
Bruce Lynn, Real Estate Pro in Coppell, TX
MVP'08
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I would never presume to ask for anything but a % of the side I was sending. If I sent the seller as my refferal then I would only expect a % of the selling side of the business. Even of that REALTOR found their own buyer and got both sides they did that work themselves and I would deserve not one dime of the buyer side!
1 vote Thank Flag Link Wed Oct 12, 2011
Also, just think about it this way - you are referring business to that 1 agent, not the other. The other is agent is completely unrelated to your referral.
1 vote Thank Flag Link Wed Oct 12, 2011
Have your broker explain this to you HOWEVER typically is the gross commissions paid to the broker

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1 vote Thank Flag Link Wed Oct 12, 2011
It'd have to be 25% of the commission you're giving the referral to. 25% of the gross commission could well be that agent's entire commission to begin with--if the gross commission is split equally among the listing agent, listing agent's broker, buyer's agent, and buyer's agent's broker.

So if an agent in, say, Missouri sells a property and the gross commission is $4,000, each agent may end up with 25% of the gross, or $1,000. If you asked for 25% of the gross commission, you'd really be asking the agent who received your referral for 100% of his/her commission.

Hope that helps.
1 vote Thank Flag Link Wed Oct 12, 2011
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
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Thank you for your input.
0 votes Thank Flag Link Mon May 13, 2013
In Pennsylvania, When may a broker pay a referral fee or share a commission?
0 votes Thank Flag Link Mon May 13, 2013
John, I believe you are absolutely correct. When I read "Gross", I was thinking the entire commission charged to the seller. But what "Gross" meant in this case was the entire commission paid to the listing broker before the split with the agent. So the answer is I would ask for X% of the broker's gross commission before the split with the agent.

Thanks for all the answers.
0 votes Thank Flag Link Fri Oct 14, 2011
Greg - I think what your'e asking is whether or not the referral fee is based upon what the broker gets (gross commission) or what the agent gets after he/she splits with the broker. Here in California, agents can't legally commit to commission rates and referral fees, those must be approved by the broker. Ergo, referral fees are usually based on a percentage of gross commission and may be paid through escrow if that's what is written in the referral agreement. Will be interesting to read if a Texas broker says that's the way it works there, too.
0 votes Thank Flag Link Fri Oct 14, 2011
Refererral fees vary and are negotiable, depending on what you're refererring.

For example, if one were to refer a short sale, and it's under $100K, the receiving agent may not want to give a referral fee greater than 20% because of the amount of work involved. Heck, some agents may not want to give a referral fee at all!

Some agencies are part of a network of agencies and among them, they may charge 35% referral fee. They have their in-house referral and relocation specialist who do the searching for the best match for the referral.

There is no real standard --- but it does seem like the most often negotiated fee is 25% of the gross commission before the broker split with the agent.
0 votes Thank Flag Link Fri Oct 14, 2011
The 25% comes off the top of the GCI - gross commission income - of the side to which you referred it. For example, if I gave you a listing referral, when it sold 25% of the gross commission your company gets goes to the company where I hang me license and they pay me my split. You are paid from the 75% GCI your company gets, at your split. Similarly, if I gave you a buyer referral, when you close a deal with that buyer, 25% of that gross commission comes off the top and goes to my brokerage and they pay me my split. Of the remaining 75%, your company gets that and pays you. If the referral was the first case, a listing referral, and it was a direct deal, the buy side is not affected by the arrangement - your company and you keep it.
0 votes Thank Flag Link Wed Oct 12, 2011
Thanks for the confirmation, Don. I thought that had to be the way to go, but I ran across a couple of Referral Agreement Forms which mentioned a percentage of the gross commission and I wanted to be sure I was going the correct route. Thanks again!
0 votes Thank Flag Link Wed Oct 12, 2011
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