Home Buying in 94301>Question Details

Deborah, Home Buyer in San Francisco, CA

Old agent requesting referral fee from new agent?

Asked by Deborah, San Francisco, CA Wed Jan 27, 2010

After about 2 months, we have decided to no longer work with our current agent. He is now asking that we suggest/request to our new agent (who is yet to be determined, but won't be an actual referral from him) gives him a 25% referral fee , stating that it’s common practice in the industry since he spent time working with us. He said that any respectable, experienced agent would understand this request – is this accurate?

Help the community by answering this question:

Answers

23
Deborah,

I'll simply add that the way the issue is presented, no but I am wondering if there is a communication matter between you and your current agent.

Let me break the question down and provide comments that way;
"
After about 2 months, we have decided to no longer work with our current agent.... gives him a 25% referral fee."

Referrals like this are a customary practice and 25% is normal. It is also reasonable that your agent ASK for this consideration for the time and costs.

The middle part of the sentence.

"He is now asking that we suggest/request to our new agent (who is yet to be determined, but won't be an actual referral from him)"

This is the part that NOT reasonable. If he wants a referral fee he can refer someone on his behalf from his company. This IS a reasonable request if you signed a certan form of buyers brokerage agreement. Since you would then be under contract to work with this buyer, the consideration would be to break the contract.

Your response to this should be this; "We will happily consider any agent you wish to refer to us and will interview them as one possibility of working together. Our next agent will have A, B and C qualities. We will be asking friends, family, or calling around to interview other agents. If after we do intervies, feel comfortable with your referral, your 25% referral fee is fine. We will not guarentee though, that will will work with your referral and we will not ask any other agent or borker to give you 25% ."

"He said that any respectable, experienced agent would understand this request – is this accurate?"

This sound odd. If you feel your old agent earned the 25% you can always ASK your new agent, but expect a "no" response. Who knows, some agents may pay it if you provided compelling reasons, insisted or were high enough in the price scale. It's your call though, it may cost you a good agent for the effort.
Web Reference: http://bob2sell.com
2 votes Thank Flag Link Wed Jan 27, 2010
Bob G, this is a GREAT answer:

"... Your response to this should be this; "We will happily consider any agent you wish to refer to us and will interview them as one possibility of working together. Our next agent will have A, B and C qualities. We will be asking friends, family, or calling around to interview other agents. If after we do interviews, feel comfortable with your referral, your 25% referral fee is fine. We will not guarantee though, that will will work with your referral and we will not ask any other agent or broker to give you 25% ."

Very fair, and very good advice for this buyer!
1 vote Thank Flag Link Fri Mar 12, 2010
I certainly can see why you want a new agent. No the new one does not have to give him a referral fee
1 vote Thank Flag Link Wed Jan 27, 2010
"Any?" Sure.

Some would, some wouldn't.

If I were the new agent, I'd like to have some idea what I was paying for - did they help you get further down the path toward homeownership? Were there really totally valueless?

It depends.
1 vote Thank Flag Link Wed Jan 27, 2010
Deborah,
The mere fact that you old agent made such a request justifies your decision to look for a more professional partner in your home search. There are plenty of us out here, so check out those who work in your area and see if their answers to other questions indicate a better grasp of the clients needs, rather than how to protect a commission.
Good luck,
Bill
0 votes Thank Flag Link Mon Mar 29, 2010
I blogged about this more than a year ago and will attach the link to that post. In a nutshell, though, referral fees are not a "I feel sorry for you" payment, normally. In general they reflect the fact that one agent or company has literally referred the business to another. Your current agent strikes me as groping for compensation when it wasn't earned. I'd let him or her go too.
0 votes Thank Flag Link Fri Mar 12, 2010
Deborah,
As everyone has said this is not common practice. Unless you have signed a buyer/broker agreement, which you did not, the agency relationship is more like going steady than being married. When you break up that is the end of it, no alimony is due. In addition your next steady should not have to pay alimony to you former steady. If you do not like an agent just move on, it is your choice.

Marcy Moyer
DRE 01191194
Web Reference: http://www.marcymoyer.com
0 votes Thank Flag Link Wed Jan 27, 2010
Deborah,

I think I understand why you no longer want to work with that agent. He should in NO way get a referral fee from the new agent- when you pick one. A referral fee would be in order if the old agent helped you pick a new agent- the actual referral. Since you have "fired" the old agent he should learn from the experience and move on.

If you have any issues down the road have the new agents broker talk to the old agents broker.
0 votes Thank Flag Link Wed Jan 27, 2010
Hi Deborah,
You pretty much got a consenous of opinion here the answer is NO. The way referral works usually is that an agent has a client he is unable to service usually because the client wants to purchase or sell a home in an area that the agent does not work. The AGENT not you finds and agent for YOU that works in that area, he then requests from the agent a referral fee and then gives him/her your contact info.
If you are looking for and find your own agent then this referral does not apply. Don't be fooled, it was VERY WISE of you to check this out.
I suggest that if you have not found an agent yet, check out the agents here on trulia that service your areas of interest. Then look over there profile and answers to questions and contact the ones you feel will give you the service and knowledge you have been looking for.
Feel free to contact me with any questions.
Regards,
Allyson
408-705-6578
allyson@homesbyallyson.com
DRE# 01397256
0 votes Thank Flag Link Wed Jan 27, 2010
No, it's not common practice - unless you're buying a home that he showed you.

It sounds as though it's merely a way for him to try to recoup his expenses while working with you, and to try to discredit any agent who might have the audacity to tell you "no", upfront. After all, any agent who won't agree to give him 25% of their paycheck, must not be respectable or experienced.

sorry... it sounds as though your decision to find another agent may have been a good one, as he's using lousy scare tactics to try to gain a percentage of your business that he's not really entitled to... unless of course you want him to have it.
0 votes Thank Flag Link Wed Jan 27, 2010
Alan May, Real Estate Pro in 60201
MVP'08
Contact
Hi Deborah, after reading your reply to the first few agent who responded, I would say NO!

It would be different if the agent you had been working with worked hard, and offered excellent service. ( If they had, you would probably still be with them) but you were changing agents because a good friend said they had someone you MUST work with. Then I would say yes.

Every situation is different, but to give someone 25% of another persons hard earned money is just plain wrong. Why should they be compensated for a lousy job done?

Our job discription is to work for you ( service) be honest (ethical) share our knowledge, and do what's best for you. We get paid for results.

How would you feel about giving a co-worker 25% of your pay?

Tap
Cashin Company
http://www.DavidTapper.com
http://www.TeamTapper.com
650-403-6252
0 votes Thank Flag Link Wed Jan 27, 2010
Andy:

Consider submitting a new question that has more details about your personal situation.
0 votes Thank Flag Link Wed Jan 27, 2010
Hi Deborah,
While I can understand the agent's frustration at losing a client, you seem to have made it clear that the reason for their loss is that you weren't happy with their service. In that case, I don't think you need to feel responsible for making sure that they're looked after - particularly as it seems that you don't feel that you were looked after.
I'd say that a referral fee is paid for giving a referrral, not for letting the client down.
There are some shady characters out there Deborah, but there are also some consummate professionals. As an agent, I only wish that all of my colleagues were excellent, for the good of the industry as a whole. Please accept my regrets that you've had to experience this, and my best wishes for a positive experience going forward.
0 votes Thank Flag Link Wed Jan 27, 2010
It really does depend on the circumstances. If the agent really worked hard for you, listened to what you wanted and your responses to properties he or she showed you and used that to fine tune the next showings, kept you informed about new listings, etc., they may well deserve a referral fee. If that was the case, I expect you would only want to change agents for a legitimate reason such as deciding to move to a different area. If that is the case and your original agent is not really familar with that area, it is in your best interest to go with an agent who is familiar with the new area. In that case the original agent might be able to refer you to good agent in that area and it would be quite appropriate to ask for a referral fee in that case.

However, if you feel the original agents were not providing the level of service and/or communication you expect, you should be free to change to an agent of your choice. This is assuming you have not signed a buyer/broker agreement with the original agent or you are not already in contract. It is critically important to select an agent who will be professional and really go to bat for you.
0 votes Thank Flag Link Wed Jan 27, 2010
What is a Buyer Agreement? Is,nt it a part of the sumission of the offer?
What are the ways to get rid off from your old agent?
0 votes Thank Flag Link Wed Jan 27, 2010
Deborah,

No, it is not common practice for a new agent to pay a referral fee to a former agent who did not get the job done. In fact, when phrased as I just phrased it, it seems ludicrous that the agent made the suggestion.

I understand you first agent’s disappointment that no earnings will come in payment for the time spent trying to find a house that works for you. It looks like you do not think that the agent provided value for which payment is due. Perhaps that agent has learned that it takes more than was provided to you in order to satisfy a client. Does your agent know that you are disappointed in the service that you received? If so, why would that agent expect to be paid for unsatisfactory service? It does not seem that you owe that agent anything since you have no contractual agreement and do not intend to buy any of the properties introduced to you by that agent.

Make sure that your new agent is aware of what has transpired. The new agent may want to make sure there is no additional information that could change the situation as I understand it.
0 votes Thank Flag Link Wed Jan 27, 2010
Deborah,
He is wrong. I believe that 23 years in the business qualifies me as experienced, and I certainly consider myself respectable. For whatever reason your relationship with this agent is ended, and there is no common practice such as he describes.
The only claim he might concievably have would be if you had signed a specific "Buyer Broker" contract. In that case you would need to carefully read that contract before going further with your plans. You should have signed an " Agency Relationship Disclosure" provided by him as soon as you began working together but that does not bind you to him.
Good luck,
Bill
0 votes Thank Flag Link Wed Jan 27, 2010
Hi Deborah:
Your former agent oviously did not have you sign a "Buyer agreement. "
He would be protected if you started to work with another agent. If you did not sign a buyer agreement you are free to work with another agent. The new agent does not owe him a referral fee since your former agent did not refer the new agent (that you dont have yet).
Maybe there is a moral obligation, but legally you do not owe him anything.
Best wishes finding your new home!
Christel Pascucci
0 votes Thank Flag Link Wed Jan 27, 2010
Hi Deborah,

I understand where the agent is coming from; however, I would not agree it is common practice. I feel this should really be your decision based on the old Agent's time/effort/value that he/she provided to you. There must be some reason why you do not want to work with this Agent anymore. Is it a significant enough reason to not provide some compensation? Perhaps 25% may over-compensate for his/her time/effort/value provided. In this case, dictate a lower referral fee. No referral fee may also be warranted if you feel the old agent was truly unprofessional.

Best, Steve
0 votes Thank Flag Link Wed Jan 27, 2010
We were not happy with the time/attention they were giving us. We are not planning to buy any homes they showed us, and we didn't sign a buyer's agreement...
0 votes Thank Flag Link Wed Jan 27, 2010
Deborah.....if I meet a home-owner or a home-buyer who is no longer satisfied with their current agent, there are times I offer a referral fee if they use my services....but that depends upon the exact situation.

One example was a young couple who had been working with a family member and had come to realize that the agent just did not have the market knowledge or negotiation skills that are necessary to buy a house in this market.

Another example was a homeowner who had listed his home with his agent-neighbor and the agreement was about to expire but he did not want to relist with his agent-neighbor because of the service level he reached.

It is also very important that you tell your new agent about your prior agent....and any homes that he showed you or on which you made offers.....your prior agent may file a claim for procuring cause if you end up buying one of those homes.

Hope that helps.
0 votes Thank Flag Link Wed Jan 27, 2010
NO it is not! A buyer should be free to change agents if the agent is not a good fit, doesn't have the appropriate experience or knowledge of the area you desire, or does not work hard enough on your behalf. This does not include the situation where your current agent has already found you a home though. Your new agent should be able to explain "procuring cause" and whether there is any financial responsibility to the old agent. Best of luck-

Jeff Stricker
Broker and Attorney
Alain Pinel Realtors
0 votes Thank Flag Link Wed Jan 27, 2010
Might need more details on why you are leaving him. Are you planning to buy one of the homes he showed you? Did you sign a buyer agreement to work with just him?

Glen
0 votes Thank Flag Link Wed Jan 27, 2010
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2015 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer