A referral agreement form is an agreement between individuals who refer potential clients or lead to the other party, in exchange for some form of compensation for the referral.
A Referral Agreement Form is a real estate document used when a broker has a client that he or she would like to refer to another broker in exchange for a fee. As an agreement, it is generally used when a client is looking to buy, sell, or lease a property outside the jurisdiction of a broker or is requesting a service that a broker does not offer. Some instances include a real estate broker whose client is moving out of state or neighborhood that he or she is not familiar with and an agent who focuses on residential properties whose existing client intends to purchase a commercial property that he or she is not an expert at.
A broker or agent may use the referral agreement form and enter into a commission-based transaction with another broker or agent if he or she, among other relevant reasons, wants to work with a professional who has contacts and manages properties in a state or neighborhood that he or she is unfamiliar with, and understands that his or her expertise about a sector in real estate is limited and another professional could provide supplementary service to his or her client.
In real estate, referral fees are given when an agent or broker refers a client to another agent or broker depending on the commission when the sales transaction closes. In most cases, referral fees range from 20% to 35% of the earned commission, the standard being around 25%. In addition, while most broker-to-broker or agent-to-agent referral fees are straightforward, conditions such as referring to an agent who is in another state and referring commercial real estate could affect the percentage of the fees. Therefore, the Referral Agreement should clearly state all discussed arrangements and provisions for transparency.
Take note that a real estate agent or broker cannot pay referral fees to non-agents or non-brokers. In most states, it is illegal to pay referral fees or “finder’s fees” unless the receiving party is a licensed real estate professional or attorney.
A Referral Agreement Form is straightforward, only requiring necessary information about the people who are entering into an agreement, including the agents or brokers and the client, client particulars, and the referral fee agreement.
Before filling out the document, it is a prerequisite that you thoroughly understand the needs of your clients and have assessed that you need the assistance of another real estate professional. Prior to contacting other agents or brokers, make sure that your client knows and accepts the arrangement.
Follow the guide below to complete the referral agreement form accurately.
The Referring Broker/Agent section asks for the information of the primary broker or agent; the one who has a client and needs the assistance of another professional. For this section, provide the following:
The Receiving Broker/Agent section asks for the information of the secondary broker or agent who will assist the primary broker or agent. For this section, provide the following:
The Client Information section asks for the information of the client. For this section provide the following:
The Client Particulars section asks for the referring broker or agent’s experience in dealing with the client. By providing the required details, the receiving broker or agent will get an idea of how to manage the client as they proceed with the transaction.
The Referral Fee Agreement section details the fees to be paid to the receiving broker or agent. Aside from listing the basis of the referral fee, it also includes payment terms and date.
Both brokers or agents need to sign the agreement for validation.
Lastly, write the referral agreement creation and expiration dates.