By Howard Rudin
When it comes to referrals, most of us think about utilizing past clients, friends and relatives. These, of course, are important referrals to grow your business, but there is an untapped source of referral income that many Realtors are ignoring. Agent-to-agent referral income is a great way to grow your business. You can earn thousands of dollars each year by giving and receiving referrals both in, and out, of your marketplace.
Think about your database (past clients, current clients and potential clients), your friends, your relatives, past coworkers, etc. How many of these people may know someone that needs a Realtor in another location? You can easily earn a 25 percent referral fee, or more, by spending an hour or two finding a qualified Realtor in the area where someone needs help. For example, find an agent out of state to help your client purchase a $400,000 second home and earn $3,000 for just a few hours of work.
These types of referrals are more prevalent than you may think. About two years ago, a former coworker told me his son, Ryan, had graduated from college and was moving to Dallas from Austin, Texas. I asked if Ryan needed help with a real estate referral. At the time, Ryan planned to rent, so I told him to call me when he was ready to find a great agent. A year later, Ryan gave me a call. Asking the questions earlier and planting the seed paid off! After getting specifics from Ryan, within two hours, I had screened three agents and reached an agreement with the one I thought would be the best choice. Within 60 days of the referral I received a check for 25 percent of the commission the agent had earned.
I have also spoken with friends and relatives with kids going away to college about purchasing a condo for their children to live in and then renting out the extra bedrooms to their friends. When they looked at the amount of money they would spend on rent over four or five years of college, some of them decided to make the investment and I benefited from the referral.
Another idea is to let your database know that you can refer them to a Realtor when they buy a vacation home. How many of your clients have purchased a second home and you did not find out about it until after the sale was complete? Most people going on vacation to find a second home do not have an agent already selected. They want someone who knows the area and is dedicated to handling the details full time while they are in town.
I help people find second homes here in Scottsdale, Ariz., all of the time, and I am always happy to pay a 30 percent referral fee to an agent for bringing me a willing, ready and qualified buyer. If you know you have clients that escape for the winter or summer, make sure they know that you can help them with all of their real estate needs. If they trust you at home, they will certainly trust you to help them find a great Realtor in another location.
One more potential target is property managers. I have one property manager that I trade referrals with throughout the year. Whenever a client of mine purchases an investment property or decides to rent out their home, I refer her, and in return she refers me all of her clients looking to sell. I pay her a referral fee for the sellers and she takes excellent care of my investment clients. This is a great relationship that has resulted in a lot of business for both of us.
These opportunities are out there and may seem hard to uncover, but they really are not. It is a matter of talking to everyone you know and sending a couple of mailings to your database.
You can also network with Realtors in other states that have a lot of people moving to Chicago. Try attending a conference in that state and be sure to bring a card or handout that advertises your referral fees and areas of expertise. You can also advertise in that area’s local Realtor association magazines.
I always recommend that any referrals be put in writing before giving out client information. Protect yourself and your income by being specific in your referrals. Your agreement should be for no less than 25 percent of the total commission earned by the agent, and your referral should be paid within 10-14 days of close of escrow. Be prepared to send a copy of your brokers’ license and federal tax identification number to the broker paying you. Ask them to follow up with you after initial communication with your client and throughout the process. You should also call your client periodically to see how things are going. They will appreciate this and remember how helpful you were.
On your end, if you are receiving a referral, be proactive and provide periodic feedback to the referring agent. Let them know when you are in escrow, send thank you notes and be sure to send out their check as soon as possible. The power of sending an agent their referral fee via an overnight envelope is priceless. It may cost you $15, but agents will remember you and you will receive additional referrals over time from that agent and others in their office.
A few referrals each year earned through some simple work on your part can provide thousands of dollars in additional income.
HOWARD RUDIN IS A RESIDENTIAL REALTOR WITH RE/MAX EXCALIBUR IN SCOTTSDALE, ARIZ. HE CAN BE REACHED AT 602.390.8088 OR HOWARDRUDIN@REMAX.NET.
Copyright 2008 Agent Publishing LLC