Paying referral fees is a standard practice in the realtor business.

Are you thinking of moving to a new town and need an introduction to a realtor there?  Your agent here will track one down for you, and that agent will pay them a referral fee, which used to be 20% to 25% of the gross commission. The challenge? Getting good help!

Great agents don’t need any assistance with procuring new clients, and they might reluctantly pay a 20% or 25% referral fee only if the new client is motivated and in the upper regions, price-wise.

Less-experienced agents are willing to pay out higher referral fees, which doesn’t do the client any favors.

What we do is tough work, and fewer and fewer people want to do it.

It’s so hard to hire, train, and retain good/great agents now that many real estate companies are just resorting to referring clients, and taking a substantial referral fee instead.

Zillow has staff taking the incoming calls, and qualifying the leads before sending them to their Flex agents. Their referral fee is now 40% of the gross commission, AND they want buyers to use Zillow Home Loans too. Their Flex agents who send their buyers to ZHL will be rewarded with more leads, and vice versa:

Less than five percent of the U.S. real estate agent population works with Zillow (with far fewer Flex agents), and Zillow only touches around three percent of U.S. real estate transactions. They are running a small, exclusive ecosystem of agents that are willing to play by their rules, which now includes tight integration with Zillow Home Loans.

You’ve probably seen the TV ads by Homelight? The ones that pitch teaming you up with the best agents in town? Well, at least with the best agents who are willing to pay them a 30% cut of the gross commission.

Now Redfin is giving up on their agent-employee program, and they are testing the idea of hiring agents on commission splits, instead of salary and paying them “up to 75%”. It’s doubtful they will pay many of their agents the full 75% split. It’s just another way for them to get referral fees of 30% to 50%.

None of the referral fees are disclosed to the client, and it’s never discussed of how the size of the fee will impact the quality of the agent service you receive.

But most of all, any thought of commissions dropping will be fleeting at best. Commissions need to stay high in order to pay the larger referral fees!

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