In the real estate industry, referral fees are a common practice that many clients might not even realize exist. These fees are essentially a commission paid to an agent or company for introducing a client to another agent. While they might seem innocuous on the surface, referral fees have a significant impact on keeping commissions high across the board. Let’s dive deeper into how these fees work and why Kearns Realty Group (KRG) does things differently.
What Are Referral Fees?
Referral fees are payments made when an agent or company refers a client to another agent or brokerage. These fees typically range from 25% to 40% of the commission earned on a transaction and can come from various sources:
Paid Lead Sources: Companies like Zillow and Realtor.com often generate leads for agents, but these leads come with a hefty price. Agents who accept these leads agree to pay a significant portion of their commission back to the platform as a referral fee.
Individual Agents: It’s common for agents to refer clients to other agents outside their office or in different geographical areas. For example, if a client is moving across the country, their local agent might refer them to someone in their new city—for a fee.
Relocation Companies: These companies, often used by employers to assist employees moving for work, also charge agents substantial referral fees for connecting them with clients.
Typical Referral Fee Experience
I received an out of state phone call about one of my listings in Pennsylvania, a couple asking a few questions about the area. They explained PA wasn't their top choice and selling first is their best option. They were curious if I knew anyone in their local market who could help them sell their $1.6 million condo.
I spent about an hour between 3 phone calls to connect them with an agent in an affiliate office near them. For the introduction our referral agreement entitled me to 25% of the listing-side commission upon closing.
The Hidden Cost of Referral Fees
Referral fees often mean that the consumer—you—is indirectly footing the bill. Whether it’s a family member receiving a cut for referring you to their favorite agent, or an online platform taking a slice of the commission, these fees inflate the overall cost of real estate services. They highlight one of the fundamental truths about the industry: the most important part of real estate is capturing leads. Understanding Referral Fees in Real Estate
Why KRG Doesn’t Pay Referral Fees
At KRG, we believe referral fees are an unnecessary expense that ultimately penalizes the consumer. Our approach is simple:
We do not pay referral fees, whether to platforms, agents, or relocation companies.
Instead, we focus on capturing leads through our commitment to excellence, integrity, and accurate pricing strategies.
We believe that the consumer should not have to pay a large sum simply for an introduction. By eliminating referral fees, we reduce inefficiencies and pass the savings directly to you.
A Better Way Forward
At KRG, we’re redefining real estate by focusing on what truly matters: delivering exceptional service and results for our clients. We let our reputation, expertise, and results speak for themselves. By breaking away from industry norms like referral fees, we’re creating a system where the consumer—not the system—comes first.
If you’re ready to work with a team that puts your interests ahead of outdated industry practices, we’d love to hear from you!
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