I could start and end this post at, ” Just STOP taking money for referrals…unless you are providing an equivolent equivalent value.” But this practice is such a hold over from the olden days, that many will say WA??? As in what the heck are you guys smokin’ in WA?

The added “equivolent equivalent value” has to be TO THE CONSUMER by the way, and not to YOU!

‘frinstance: Had a 3 plus hour meeting with some people yesterday.

Them: How can we get referrals from you?

Me: Be on top of your game and the best source of your service for my client. And that changes from time to time and client to client.

Them: Maybe you could get an insurance license?

Me: Why?

Them: So we can legally pay you for referrals.

Me: (after going to bathroom to puke up my lunch) You repay me by giving the clients I referred to you PRIMO attention to their needs. Do the first one or two for free to give me a chance to evaluate your services and talent level.

Them: Scratching their heads, but willing to learn the new way of life I have introduced.

I don’t expect all agents to “get” this. Agents paying referral fees is as old, if not older, than the mls itself. But at least scratch your head and be willing to learn “the new way of life” and society’s elevated stance on this matter.

You refer to someone:

1) Because your client needs that service. They more and more DO NOT and can choose their own.

2) Research and give them a few GOOD and valued options that you have taken the time to investigate. DO NOT STOP AT THE FIRST AGENT WILLING TO PAY YOU A REFERRAL FEE…Yes, sad but true, the way it “was”.

3) Do not simply send them to any office in your Company’s list of other offices. If the BEST agent for them is at RE/MAX and you work at Coldwell Banker, as example, then refer them to the RE/MAX Agent. OR, give them the agent with your Company plus two others and let them choose.

Agents ask me all the time why I am or am not willing to pay or not pay or receive referral fees. Most times I don’t and sometimes I do.

1) I am willing to pay them to Galen, I think, because is a valued service that the client has already utilized. Jury’s still a little out on that one.

2) I take a “referral fee” when the client is here and buying there, as I am the one who meets with the client at this end to do the paperwork. So I am “sharing the commission” with the referred to agent on the Coast or wherever, as the client is here in my office going over the offer. Technically a “referral fee”, but actually a fee for “added equivolent equivalent value”.

We are mostly talking about legal, agent to agent referrals here. But quid pro quo, I’ll scratch your back if you scratch mine good old boy networks are so old fashioned and yesterday’s news. As I said, I don’t expect you to “get” this to the degree that I do. I don’t expect you to go puke up your lunch, like I do when the offer comes around.

But at least start to scratch your head and say WA?? Cause Seattle has it ALL OVER most of the country when it comes to using new technologies to change the world. Your client uses the internet. They can find their own referral. “The times they are a changin'” and you don’t want to “endorse your epitaph” with underhanded, yet legal, practices. AT BEST at least say to your client “can I get you a referral who will pay me 25% of the commission you are paying them?” At MINIMUM please apply full disclosure to the practice.

Thank you.

For those who never heard this song, it’s worth a listen and I still remember every word from when it came out back when I was an impressionable youth and goes with the “endorse your epitaph” line in the post.

It’s always been one of my Favorite Songs. Mr. Business Man by Ray Stevens. Maybe Dustin will turn it into a YouTube insert for me. For now, here’s the link:

So many favorite lines in there. “Do you qualify to be alive, or is the limit of your senses so as only to survive?!?” Love that song.

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ARDELL is a Managing Broker with Better Properties METRO King County. ARDELL was named one of the Most Influential Real Estate Bloggers in the U.S. by Inman News and has 33+ years experience in Real Estate up and down both Coasts, representing both buyers and sellers of homes in Seattle and on The Eastside. email: cell: 206-910-1000


  1. LOL πŸ™‚

    You must have really needed to get this issue off your chest! I mean… what are you doing on a sunny day like today writing about a major issue like this?

    I remember how appalled I was when I first heard an agent talking about “getting a referral” for what amounted to making a phone called to an office a talking to an agent or two, and taking a cut of 20% -25% for what amounted to no work! It was the agents tone in their voice that really got me.

    Some agents do really work hard to find a good agent to help their client, but still, 20% -25% seems high.

    Last time I referred an unrepresented buyer (from an open house at my listing) I gave the name and contact number for an agent who specializes in the buyers neighborhood (to give the buyer a price opinion, and perhaps list) and who I knew would give EXCELLENT service to the buyer. Since my primary goal was to my Seller client, I would not help the buyer myself. I was not interested in that particular case for any type of referral fee, I just wanted to sell my clients house!

    Like you said, it is appropriate in some circumstances and at differing percentages depending on the actual work and value to the client, but too often it’s kind of a “racket”.

    BTW, I never heard that song before…it was very entertaining!

  2. Deborah,

    I grew up in the 60s in the middle of racial crisis. I’m always up in arms about some injustice or another. Then I went to show houses. Now I’m going to garden out front πŸ™‚

  3. LOL lax. As I was typing it that many times I had a feeling… I never use a spellchecker. 2 1/2 years of prolific blogging. People say how do you do it? I show my real self.

    If I don’t know how to spell something…well, I let it all hang out. People are entitled to know I’m not perfect. And people are entitled to know how well their agent grasps the English language. I don’t believe in refining the written word to the point that it becomes “false advertising”. But I’ll go do a couple of strike outs so no one copies my error πŸ™‚

    You can tell when it’s “Sunny in Seattle”. We end our coments with smiley faces more often.

  4. I saw some at Fred Meyer either last week or the week before, try the Bellevue store.

    You might also think about impatients in the front if begonias are hard to track down. Once the nurserys are out of certain plants, they are out until next year! White impatiens never last as long as the pinks and oranges because they are needed to “POP” the pinks and oranges.

    Have fun planting! πŸ™‚

  5. I love impatiens, but I need a little flower hedge in the walkway trench and they have to stand up like little soldiers πŸ™‚ It’s also way too sunny at my house for impatiens, except close to the house, since it sits up so high on the hill.

    There are two “begonia houses” East of Market” that I’ve always loved, and though I was never crazy about begonia, I can see how well they grow on sunny lots near a boxwood hedge. Like a boxwood accent of color.

    Anyway, as you can see, I have my heart set on begonia. Only question is which color. LOL!

  6. I ALWAYS tell the clients who I am referring that I get a fee (I also let the agent’s know I told them that). I tell them that is so I retain an interest in thier transaction and that they can always call me if they need a little clarification or if there is anything I can help them with! I also told my new clients that when I GOT a referral. It will show up on the HUD anyways so it is not a terribly big secret!

  7. I actually agree with Ardell on this one, at least to some extent. I’ve said in the past that there shouldn’t be a referral fee on sellers needing to do a short sale. The listing agent has to do too much work.

    On the other hand, some agents get all their clients through paid referral of some sort. E.g. House Values, company relocation programs, etc. One way or another they’re paying to get their clients, and they probably don’t mind getting a client through another source.

    But, the referral fee, if there is one, should not be structured to adversely affect the client (using the term loosely–maybe they weren’t even a client). It can’t be such that it will affect the other agent doing their job, and I think the standard referral commission does that in many instances. On the seller side, perhaps the house needs a lot of work, but the agent isn’t going to want to follow through with that for a reduced commission. On the buyer side perhaps the agent would be even less inclined to show properties with less than a 3% commission.

    Then there’s also the whole idea of taking money to refer someone to an agent you don’t know at all. I find that particularly distasteful.

    I generally refer things out without asking for anything back. But I can’t say I would not ask for one in all situations. And that’s sort of how I feel about referral fees. I wouldn’t say they shouldn’t exist at all, but there’s far to much of it going on.

  8. The comments got a little off track (I prefer planting things I can eat!)
    But you bring up an interesting point. I just referred a new client to a great agent that works an area south of me… I did it after the client, who I’m helping find their new home in my area, asked me to list their house about an hour south of me in a more rural area. Its still in our MLS area but its not an area I specialize in…

    I could have been greedy and taken the listing but I knew it would not have been in their best interest. I did take a referral fee- how much was my knowledge of the market and agents worth?

  9. BTW, even without a referral fee there are also problems. In the attorney world I’m pretty sure you can’t ask for a referral fee, but what happens instead is you end up with a quid pro quo (sp?) type situation, where attorneys refer people to other attorneys based on who they get referrals from, rather than on who they think will best serve the person’s needs.

    Now to some extent, that may be because they don’t know who’s good, because it’s a matter outside their expertise. There are some people that speak at seminars aimed at people outside their expertise because no one in their right mind that practiced in the areas would refer a case to them.

  10. Referral fees are dynamic not static. They depend upon whether the person being referred is a prospect or a past client (or somewhere in between), they depend upon how much work I’ve done prior to the referral for the new agent, etc. There are varying “degrees” if you will. I’ve sent on basic prospects with a list of 3 agents I find in an area (without my doing any research) and have not requested a referral fee. I’ve also sent on family members, whom I’ve already had pre-approved and have already helped them narrow down their search or their work making it a slam dunk for the new agent for a higher than average referral fee.

    This is not a black and white situation – although I firmly agree with you about those who literally throw a dart and pick an agent to refer prospective clients to.

  11. As I Mortgage Professional, I cannot pay nor receive a referral fee. I refer borrowers who are not in WA State to those I trust will best serve their needs.

    I think you’re right on, Ardell and Kary.

  12. Javier,

    I don’t understand “when dealing with exclusive listings”. If you don’t want to deal with both the seller and the buyer in any capacity, you just say NO to one or the other (not that I recommend that). How does your not wanting to work with the buyer on an exclusive listing turn into your getting money for sending them away?

  13. You need to remember that its not 25%. It’s 25% of 3% which equates to .75% of what the referred agent receives. I usually split this with the client I’m referring and I don’t “just make a phone call”.

    As the largest real estate company in the world, RE/MAX has the most detailed agent bio system I’ve ever seen. I know, for example, that if an agent is in the “Platinum Club”, they’ve grossed a half million or more in commissions in the previous year and if I’m referring a buyer, they may likely end up working with a less experienced “buyer’s agent” working under that individual.

    That’s why I tend to refer agents in the 100% club (grossing 100k-249,999 in commissions). I also personally interview them and look at their years in business, years with RE/MAX, what their interests are (whether similar to the client), and what they have to say about themselves.

    This has resulted in clients thanking me profusely for making the effort on their behalf. And I feel totally justified being compensated for my time. For every “easy” transaction we have, there’s more than one occasion where we drive people around for several months and then they decide to add on to their house or a million other reasons it doesn’t “go together”.

    The single most difficult concept for most people to understand is that real estate professionals do lot’s and lot’s of work that they never get paid for. How many professions are like that? You buy insurance and the agent gets paid (not to mention residuals when you renew).

    You mow a lawn and you likely get paid. You work on someone’s car, you get paid. The general public cannot wrap their mind around doing a bunch of work and possibly not getting paid. Try it sometime. Complain all you want about overpaid real estate agents but for some reason, we’re still around despite all the do it yourself outfits.

    You could do your own dental work too.

  14. On a different note, but still relating to your post (I think)…I often have home owners insurance agents offering to do marketing for me that

    1) I would never do.
    2) title insurance companies would be fined for doing.

    It’s bizarre to me. How come our State Insurance Commissioner allows the big insurance companies to do marketing on my behalf but it’s not legal for a title insurance company? (not that I would have a title insurance co. or anyone do my marketing…but me).

  15. Chris,

    I’ve been an agent for 18 years. I “get it”. All the public is asking is that we examine our practices in light of changing technologies. All the public is asking is for us to consider letting them to some part themselves to provide different cost options in the marketplace.

    Is that unreasonable? Clearly we all want to do part ourselves and many things ourselves, to keep costs down. Why is real estate any different? Why must we make people who want to do all or part themselves, and those who accommodate that need, the “enemy”.

    I remember times when we made a cake ourselves instead of buying one. Coming from a family of 9 we almost always got a “real” birthday cake. But sometimes my Mom couldn’t afford it and she made one. Should the bakery come over and call her names? Like a FCBM (For Cake by Mommy) πŸ™‚

  16. Rhonda,

    I know exactly what you mean. I never had that happen until I moved from the East Coast to the West Coast. No one did marketing for…anyone in my first 8 years in the business, and everyone knew what “a kickback” looked like. Then I moved to the West Coast in 1998 and it was rampant. I just called it “The Wild, Wild West” and said “no thank you”.

    The problem is they make it a $ factor, as in “no more than X” instead of saying, just say no. We get gifts all the time from a lender we never use. Barely know. Came home to a potted plant the other day. Chrysanthemum. I did plant it in the garden. I’ve never met the person.

    RESPA, I believe says you can give things to get business as in to promote yourself and your business. Just not for business gotten. I feel badly for this person because the more she gives us, the more she solidifies our NOT using her ever. Still, I wouldn’t let the plant die. I’ll just sell it with the house πŸ™‚

  17. The one that kills me are agents who “refer themselves.” If you find me and choose me to help you with your transaction, whether on the buying or selling side, don’t expect me to give back to you the compensation that I have earned JUST because you have an active real estate license. I would NEVER ask for a referral on my own transaction.

    Ardell’s post is spot-on.

  18. Pingback: How much do I charge for sending out a referral? | Real Central VA

  19. ‘frinstance-love it!!!
    I don’t have as much distaste for referals paid to other agents as I do for “kick-backs” paid from related businesses i.e. insurance, escrow, mortgages, home warranties, home inspections and the like.
    When I refer one of these companies to my clients, I do it because I think it is the best for my client, and have yet to collect any monetary gain from referring an associated service. Many agents however refer whoever gives them the best ‘kick-back” and will only refer someone who will give them a piece of the action. It is underhanded practices like this that give agents a bad name. Thanks for speaking out on this issue.

  20. I’ve chatted with a couple mortgage lenders and they were suspiciously eager to recommend particular agents when they heard I didn’t have one. Do they get referral fees?

    btw I’m stunned to read above that home-made birthday cakes aren’t “real.” Both my parents are talented cooks and I grew up with way better and more creative cakes than what you could get from a bakery.

  21. c.

    Stay away from lender recommends agent scenarios. Not because there is money involved, as there is not allowed to be money involved. The reasons you should stay away are:

    1) It is part of the agent’s job (IMO) to recommend best lender for you, given your particulars, and that may not be the lender who referred you to the agent. It is very hard for an agent to tell you to switch lenders, if necessary, if you were “a lead” from the lender in the first place. Don’t reduce yourself to “a lead”. Be someone’s client by choosing them…and not their “lead” by having been referred to them.

    2) Another reason a lender likes you to use an agent from their “preferred list” is that the agent will “close you out quickly”. Lenders (not Rhonda, of course :), but lenders who like are anxious to choose your agent, got caught in qualifying people who did not buy quickly. Maybe the buyer changed lenders by the time they found a house due to time passed. Maybe the buyer didn’t qualify on the same basis anymore, by the time they found a house. For these reasons, some lenders want to choose an agent who gets a lot of leads from them who will close you out as quickly as possible…so they are both assured they will make money off you…and SOON!

    Choose your own agent. It’s not about a referral fee, as agents and lenders cannot connect via referral monies in any way by RESPA, but there are still problems with a referral, even when money does not change hands. The above two are the biggest reasons, but there are other minor ones.

    On the other hand…agent choosing lender is often a good thing. Lender choosing agent is not unless it is just a list of suggestions of people you should consider.

  22. c and Ardell,

    I will recommend agents when a buyer does not have one to work with. I try to recommend at least two only because personalities are different. There is no money that changes hands and I also don’t “push” anyone. I never redirect buyers who are all ready working with an agent.

    My concern as a lender is that I would rather have a buyer hooked up with a “buyers agent” than have them stumble into a plat with a site agent or something along the lines. I’ve seen many buyers who thought the agent was working for them and did not realize that they were representing the sellers interest.

    A good Mortgage Professional will know which agents are good to work with and who looks out for their clients over their commission.

    I see no difference with a lender referring an agent as the agent referring the lender.

  23. “I see no difference with a lender referring an agent as the agent referring the lender.”

    The difference is that an agent “represents” a buyer and a lender doesn’t. So it is the job of the agent to oversee all aspects of the purchase, including the loan costs, but it is not part of the lender’s job to oversee all aspects of the transaction including home selection and agent selection.

    If lenders become fiduciaries, then there will be no difference. Until then, their is is HUGE difference.

  24. I believe effective June 12, LO’s in WA State will have fiduciary duties. Jillayne can confirm or deny this.

    I have always looked out for my clients best interest…I don’t need legislation to do so…but I welcome it.

    Ardell, if a borrower asks a lender for a referral to an agent, which this happens often, what would you recommend the LO tell the borrower?

  25. Recommendations are fine to lender from agent from agent to lender. It’s when, as c said ” they were suspiciously eager to recommend particular agents when they heard I didn’t have one.” that a buyer should be on the alert. “suspiciously eager” being the key words in that phrase.

  26. Regarding comment 32, this new fiduciary duties law effects licensed loan originators who work for a mortgage broker, licensed by the State of Washington, DFI.

    This does not effect loan officers who work for a bank, credit union, or consumer loan companies, unless the consumer loan company also brokers loans. Then they are subject to the MBPA for those loans that they broker. (MBPA = Mortgage Broker Practices Act.)

  27. Jillayne,

    How long is the period for them to learn what “fiduciary” means and who is teaching them how to do business differently under the new law? How long is the training to be “a fiduciary”?

  28. Ardell, you should be asking the same question for yourself. The new Distressed Property law goes into effect June 12, and it may make you and even your buyer clients not only a “fiduciary” but also a fiduciary who has to put even their own interests behind that of the seller.

    I know this forum is more consumer orientated, but this law will have a huge effect on some consumers–both buyers and sellers.

    I know you try to stay away from P-I land for some reason, but we have at least four separate pieces on the legislation over there (in reverse chronological order):

    New Statewide Forms Available:

    Don’t Buy a Property in Foreclosure Without Consulting an Attorney:

    Why Can’t Legislators Write Decent Legislation:

    And finally: Fiduciary as a Solution For Everything (Updated):

  29. Jillayne,

    re 34 “unless the consumer loan company also brokers loans”…Mortgage Master, a correspondent lender which is also a direct endorsed HUD lender (Full Eagle) is in the process (thanks to the new State CLA law) of obtaining a consumer loan license. DFI has advised us to drop our licenses under MBPA even though we do broker some loans (less than 10%).

  30. Hi Rhonda,

    You’re subject to the act (MBPA) when you broker, (fiduciary duties) even though you’ll let your license go.

    Also, if your firm pays LOs on a 1099, they have to obtain an LO license. However, since I know your firm is FHA approved, this also means your LOs are paid via W-2.

  31. Hi Ardell,

    The answers are: between now and June 12th.

    They can take a continuing ed class on the subject of fiduciary duties from me.

    There is no “required” training by the state.

    HOWEVER, I just received my copy of this month’s Scotsman Guide which is a mortgage industry trade magazine and there are two articles in there about fiduciaries, one written by a well known Seattle area attorney, John Long, who specializes in representing mortgage brokers. He wrote a good article and I’m sure that will get some brokers thinking about education and training.

    I have had several mortgage brokers call me this past week to schedule in-house trainings on fiduciary duties.

  32. Jillayne, I normally toss my Scotsman Guide…but checked this one out due to your reference. Interesting how 90% of the articles are on ethics…you wouldn’t have seen that this time last year.

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