Real Estate Blog

I <3 Referrals: Referrals De-mythed

You hear agents say all the time that they love referrals, but what exactly are they talking about? The term ‘Referrals’ actually refers to a few different things.

Referring a friend in the area

The easiest type of referral to grasp is when a satisfied customer recommends a friend, family member, coworker or anyone else to work with the agent directly. This is the best type of referral. (Although may be better termed a top recommendation) This tells the agent that you, as a client, have loved working with them and want everyone you know to have that same great experience. In return for providing your friends with the same great experience, the agent will be compensated through the transaction.

Vendor referrals

The second type of referral or recommendation an agent can make or receive is to a trusted vendor. Vendors can be anyone from your weekend handyman, thorough inspector, great lawn care, local lender or anyone in between. This is usually an individual whom the agent has done business with in the past and has done a great job. There’s no monetary gain for the agent in this case, but more the personal connection that’s made. Great vendor referrals are more likely to get a client out of a tough situation should one arise.

Agent-to-Agent Referrals

Agent to agent referrals are oftentimes the most difficult to understand. I’m not going to get into specifics of real estate license law here, but the gist of it is that agents can only get paid by other licensed agents or brokerages. As an example, an agent cannot pay you for telling your Aunt Sally to do business with them. However, if Aunt Sally is moving out of town and needs to buy a new home in Kalamazoo, then your favorite agent will be happy to sent her up with a real estate agent up there. Typically your local agent will talk to Aunt Sally and get a general understanding of her wants and expectations, do a little research, make some calls and ask for a referral. In this case the Kalamazoo agent will pay a negotiated portion of their commission to your local agent for providing them with a buyer. It’s a win-win-win-win. Aunt Sally is happy because she has an agent already working for her that has been pre-screened. You are happy because your favorite local agent has found some to work with Aunt Sally. The Kalamazoo agent is happy because they have a buyer that’s ready to buy and an idea of what they’re looking for. Finally, your local favorite agent is happy because they have made you happy, Aunt Sally happy, Kalamazoo agent happy AND got compensated for their efforts.

So, to recap on referrals: It’s all about networking, making friends, doing business and making people happy. So yeah, what’s not to love!!!

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