Referral or extortion?

[Silverfall]

Originally Posted by 399083453

Its ironic how realtors will spend thousands in advertising to get a new clients but get upset paying $1500 for a client who is being handed to them on a silver platter. Penny wise, pound foolish.

It's a cost per client thing. Paying out a 25% referral fee on a $125,000 seller doing a short sale isn't the same thing as paying out a 25% referral fee on a $600,000 home buyer. Paying 40% to a relocation company, no thanks. Remember most agents will pay a split in addition to the referral fee. So if you pay 25% and then another 30-50% in splits? I don't judge any agent that walks away from that.

[1insider]

Originally Posted by 399083453

Its ironic how realtors will spend thousands in advertising to get a new clients but get upset paying $1500 for a client who is being handed to them on a silver platter. Penny wise, pound foolish.

I imagine an agent spending thousands of dollars on advertising might be more willing to pay a referral to get a new client than those of us who spend little or nothing. I choose not to foster the attitude that it's OK to expect money from another agent just because I have the power to hand over a client to them. In tight negotiations some agents are willing to concede some of their pay to make the deal work but if the agent taking care of my client is already paying me a 25% referral, she may not be willing to concede any more and consequently, my client may not get the best outcome.

I imagine all of us participating here would claim to not sort listings according to rate of commission paid but that unknown agent who was willing to pay me 25% to get my client may just exclude the low paying listings from what my client is shown.

An agent expecting another agent to pay her a referral should be asking herself:

• Will the other agent be showing my client all listings including those paying low commission?
• Will the other agent be willing to concede any of her reduced commission in a tight negotiation to get my client the property they want?
• Is the other agent the best choice for my client or the best choice for me?

It's less about the money for me than it is about potentially damaging a client by demanding a chunk of the other agent's pay. I stand by my position that the referral tradition has a foul odor.

For the record; the original post was not about an agent who was expecting a referral for handing over a client. It was about a greedy agent inserting herself into a situation where the buyer had already contacted an agent in Florida recommended by his sister. The greedy one was demanding 25% just because she had a license in New York NOT because she handed over a client.

[yousah]

There's what I call hard and soft referrals. I prefer a hard referral where the referrring agent is asking for a referral fee in exchange for them to refer a seller to me who is ready to sign a listing agreement.

A soft referral usually involves a buyer who isn't interested in signing a buyer agency agreement. Those are worthless.

[tomocox]

You know, I have thought a lot about this thread. While I agree the OP has few choices, there are indeed choices, including one not yet discussed.

I am not certain how I might attack it, but there certainly is a question of REALTOR ethics laying in here somewhere. If I were the OP, I would contact my state association of REALTORS and get a probable cause ruling. If the state as a third party can see the same ethical issues as I do, then they might give you the ethics clause to file a notice of violations under against the girlfriend. Just a thought.

[1insider]

Not sure that any association of Realtors would see that asking for a referral, regardless of circumstances, an ethics violation. It's firmly ingrained in our Realtor culture and a huge chunk of income for many brokerages. Almost every licensed client I've ever represented has at some point in the process asked for a chunk of my pay because they held a license elsewhere.

Girlfriend isn't licensed in Florida anyway and not subject to any reprimand by FAR. She is a New York license holder. Not to mention, boyfriend who wants to work with me might prefer to sleep in a bed and not the doghouse.

[yousah]

I think there's a problem when the referral fee is requested after the agent has already established a relationship with the buyer or seller and was not advised UP FRONT that the transaction would involve a fee.

This is very similar to the after-the-fact referral fees that were being demanded in the relocation industry years ago. A relo company would pop up well into the transaction and demand a fee. Many brokerages paid that fee because they were concerned that they would lose the relo company as a long term client. So the fee was basically being extorted from them.

The relo industry eventually figured this all out, mostly with education, so that everyone knows up front whether or not a referral fee is due to someone.

The whole idea of referring someone to another agent/broker is that the referring agent be initially involved to guide the process.

In this case, if the girlfriend was so concerned about her boyfriend's transaction then she should have assisted him up front by finding a good agent and actually earning her fee.

These unearned referral fees do bring up the issue of RESPA compliance. I'm not sure how that would work under RESPA, but otherwise unearned fees where no service is being provided are illegal.

[rjrcm]

Originally Posted by yousah

...These unearned referral fees do bring up the issue of RESPA compliance. I'm not sure how that would work under RESPA, but otherwise unearned fees where no service is being provided are illegal.

RESPA does not apply to referral fees between brokers.

[yousah]

Thanks. That's what I was wondering.