The referral fee is a payment that a real estate agent receives for providing a client to another agent. Referral fees are typically a percentage of the final commission for one side of the transaction.
The industry standard for referral fees is 25% of one side of the final commission. But referral fees can vary widely. Sometimes agents offer flat dollar amounts for referrals. In other cases, referral rates can vary based on how large or small a potential referral is. Typically, agents on both sides sign a referral agreement in advance of the transaction closing to finalize the fee structure.
There are a number of reasons an agent or brokerage may refer a client and opt for a referral fee:
Typically, only a brokerage can collect a referral fee and then distribute it to a licensed agent. This means that a licensed agent can collect a referral fee through the brokerage, but an unlicensed person can’t. There are some exceptions in certain states where some small referral fees are acceptable for consumers.
It is also frequently allowed for a brokerage to collect a referral fee from a transaction completed in a state where it does not have a license. This is often why agents will refer clients moving to another state to other agents.
Agent-to-agent referrals are fairly common, with some industry data suggesting over half of agents receive over five referrals per year.