About Referral fees

Asked by Yucaipa Real Estate, 92399 Wed May 7, 2008

If you weren't a Realtor, but had a website that gathered leads, is there a limit on the refferal amount or percentage that could be given to the non-realtor?

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9
Ute Ferdig, Agent, Newcastle, CA
Wed May 7, 2008
BEST ANSWER
I read the article and nowhere in that article does it say that the referral fee is paid to someone without a real estate broker license. I bet you that the lead generators that work on a referral fee basis have a real estate brokerage behind them. The referral fee issue is really mostly a federal law issue, not so much a state law issue as paying a referral fee to an unlicensed person is prohibited under RESPA (the federal Real Estate Settlement Procedures Act) which applies to a real estate agents engaged in a residential
transaction for one-to-four units with a federally-related mortgage loan and generally prohibits paying a fi nder’s fee or referral fee to an unlicensed person. If someone pays all cash, there are no RESPA concerns and you'll have to look at state law to see if paying a referral fee to an unlicensed person is permitted. Since there are not many all cash purchases in CA, it does not really matter whether payment of a referral fee would be permissible under state law as you'll have to contend with federal law which preempts conflicting state laws. I hope this helps.
0 votes
Jennifer Pit…, , 89135
Thu May 8, 2008
Why would you not want to just get your license? Then you can refer the leads and get paid.
2 votes
Dean Moore, Both Buyer And Seller, 74104
Sun Dec 19, 2010
Why would I want real estate agent (again) to have someone in the corner office make all the money and I do all the work. I have succesfull business doing referrals and property management without having a real estate license.

It is the same old bunk, that you have to have to a paper, to do what you are doing...but when you have individuals that have a real estate license that don't know a key hole from a knot hole!!!
1 vote
Heidi Everett, Agent, Oklahoma City, OK
Thu May 8, 2008
As far as I have been able to find out no state allows for refferal fees to be paid to an unlicenced individual. Many states allow refferal fees to be paid to a corperation like house values some of these charge a flat fee, most charge refferal fees, but most good Realtors know how to get thier own business and do not believe the get rich quick by doing nothing lie. If the business needs refferal fees to make its money and the only Realtors you can get are the new ones with not great at conversion rates then you are going to be waiting a long time for a check.
1 vote
Ute Ferdig, Agent, Newcastle, CA
Wed May 7, 2008
You can't receive a referral fee based on a percentage of the commission earned, but you can sell your leads to anyone who is willing to pay for them. It would have to be an up front fee independent of the commission. The problem with selling leads is that many leads are worthless because they are not screened well and you don't get sufficient info to work with.
1 vote
Mr. Melby, , Milton, MA
Wed May 7, 2008
In Massachusetts, unless you have a real estate salesperson's license and work for a broker, or have a real estate broker's license and either work for a brokerage or own a brokerage, you cannot be paid a fee or receive any compensation of any type for leads. Unless you have a real estate license or a licensed brokerage, no payment of any kind. I suspect that the rules are the same in your area.

If you are asking whether someone who is a Realtor (belongs to the National Organization of Realtors) and is licensed to practice real estate in the state in which they gather and try to sell leads, can sell leads to a non-Realtor (not a member of NAR) but who is a licensed real estate agent, then the answer is whatever the agent's brokerage will pay as a referral fee.

In addition, I, as a brokerage owner, refuse to pay for leads. It is a fool's game since it is so easy to run afoul of the above rules, because these lead generators produce garbage leads, and many even try to sell the same garbage leads to multiple agents!
1 vote
Darin Walk, , Tampa, FL
Fri Oct 7, 2011
Non-realtors CAN be paid for referring a buyer. Its called an Assignment Fee. Non-realtor signs a contract that discloses their intentions. In other words the Assignment of rights under a contract is the complete transfer of the rights to receive the benefits accruing to one of the parties to that contract. Its common law.
0 votes
Mr. Melby, , Milton, MA
Thu May 8, 2008
In Massachusetts, my best information is that, receiving a fee involving a real estate transaction or paying someone who is unlicensed is not allowed, whether a percentage of the transaction or pay-per-lead(s). The only way to receive compensation on a pay-per-lead basis for lead generators is to have a licensed brokerage involved.

I can't pay my neighbor for information that leads to a real estate purchase or sale (nor would I!) Same thing applies to lead generators. If the lead generator is a licensed brokerage, or a licensed agent, no problem paying a referral fee or per-lead.
0 votes
Yucaipa Real…, , 92399
Wed May 7, 2008
Thank you both for your answers-
I was doing some reading at the California association's website http://www.car.org/index.php?id=MzcyOTE=
"stick with those that find the online lead generator getting a 20 to 30 percent referral fee when a sale closes"
So are these arangements not legal in california? If so then why was it on CAR.org ?
0 votes
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