How many people here think that the business of "referrals" has gotten way out of hand?

Seems that more and more companies are entering the fray with the business model of capturing consumer info and then selling that info under the banner of a "referral" and expecting a fee of 25-30%. A recent Inman Connect tech conference held in NY brought more of these types of companies to view and it appears that they will only proliferate.

Are you willing to tell people "no" if you know that they are not in the business of real estate except to capture and display data? Where is this all leading and are you concerned about the process or resigned to just let things happen? Or do you not care and just think competition is healthy and salute companies with innovative business models?

Should there be a standard definition or set of guidelines for a referral vs. a lead? If so.. what should they be?

That's sort of what the Weichert Lead Network for agents does. I choose not to participate. The referral fee is ridiculous - 35%.

That said I don't know what *I* as an agent can do about it. The listing belongs to the broker...and the brokerage is part of the franchise, and all listings go to the main website - and then, any leads are referrals for the WLN. I handle it by not participating in it or any other program like it.

Also, I turn down referrals that want 35%. I will pay 25%. That's it.

I even think 25% anymore is alot especially with the amount of work it takes to get to closing. Also depending on the sales price.

I have no problem with it on listings. With buyers it tough in our market because of how much work is required recently

I'll agree with that on listings Vacation guy

Great forum topic! Ultimately, I think the answer is relative for everybody. It all depends where a realtor is in their business development. If a realtor doesn't have any of their own leads coming in, working for a % is better than sitting idle and digging deeper into the red. I don't bias toward either side, I'm just saying that the answer is likely "relative" to each agent's career status.

I agree with you also Brian. My wife is a new agent. She is getting lots of spanish language referrals at our company. She isn't saying no to any of them even though they aren't going to make her very much money. If she works them well then they will give her free referrals later on. Some already have. Then later on when she isn't living on other agent's referrals she will join me at my own little company.

The reason I posted this thread is because companies that do not sell real estate (but hold a license), are proliferating in greater numbers to capture consumer info and sell it back to agents as a "referral".

Not sure what can be done but I suspect this will play an even greater role in how real estate is practiced moving forward since it's relativly easy for a company to convince consumers they should shop around for an agent.

Agents can simply not accept referrals, but there is usually another one in line to take it because they need the work. Just like sellers holding out in reducing their asking price - but eventually giving in to market conditions - this may work out the same way for agents in the years to come.

The only thing I can see to slow this down or stop it is to develop a "standard" for a referral vs. a lead, but that's unlikely because everyone has different viewpoints.

There is a difference (at least to me) between a lead (someone who is planing to buy or sell real estate in the next few months) and a suspect. For an on-line company that has a real estate license and provides me with that lead which leads to a closing, I say bring them all here. I'll gladly pay you after the closing.
For those companies that want to sell me a name of someone who signed up on their website before revealing their name, I say, crawl back in your hole. I can find plenty of suspects without letting you help yourself to my money.

This is what I don't understand: why? why will you pay someone who simply "captured" information in order to sell it away a referral fee? These companies add no value to the mix and if they all went away overnight no one would miss them. It's not like they spent time with these people or did anything a brokerage would do - all they did was capture and control information.

So why do agents put up with this? why do you allow these companies to operate in this fashion? if your response is: it's worth 25% to me to pay them if a lead closes... then why not make it 5%? why pay 25%?

Can an Agent actually accept a Referral . . . . or must agreeing to such an obligation to compensate for a Referral be reserved to the Broker ?

I'm one and the same . . . . so I never really thought about it.

What if I had two Agents, and Agent "A" was already working with Customer "C" when my other desperate Agent "D" accepted a Referral for that same Customer "C". What would happen then? I just know that I (call me Broker "B") wouldn't be paying anybody anything anytime.

Kind'a Spooky, heh ?

Of course, most Brokers don't have a clue as to "who" their Agents are working with (or for) until deals are being constructed. Some, not until after there's been a Closing; others not until there's a Summons.

To answer Broker --
I feel this way - this is business that never would have come my way without the referral. I'd rather have 70 or 75% of something than 100% of nothing.
It's easy to play ostrich and ignore the trend, but this is happening with more and more businesses, whether it's home repair companies, service providers or almost any business.
Look at it this way, those of us that handle REO properties often pay a referral fee to an AMC. Without the AMC, most of us would have to spend a lot of money just to garner that business.Real estate agents and brokers spend tons of money on prospect marketing, often with zero results.

Thats why I have added referals to my busines plan. Not paying for them but charging for them.

Real estate has always been about lead generation. Nothing happens without leads.

There's no problem about the referals. The most important thing is, those referals is feeding leads for you to get a client.

I think there is some confusion here. "Broker" appears to be talking about lead generation companies that sell their leads for a fee. The others are talking about agent to agent referrals that kick back a percentage of the commission at closing. I'd never work with the former, but I'm all for the latter, and provide referrals to other agents when I'm unable to work with clients due to conflicts. I expect a referral fee at closing for my effort to acquire the client that is actually interested in buying/selling. If they don't close a sale, I get nothing.

Broker - most of these lead companies will not wait for closing to get a fee. They want you to pay them upfront for leads they send you. They hold no license, so are unable to provide leads contingent on closing and receiving a slice of the commission. You pay for an unqualified contact with a good possibility of it not working out.

I still believe that payments for referrals should be made illegal, regardless where they come from.
Some people say it's the cost of doing business, I say, the business will be there without having to pay someone else.

I received a call from one of these companies a few weeks ago, they wanted a 37.5% referral fee. When I balked, they thanked me and hung up. Received a call back about an hour later and the fee was down to 30%. I still said no, but someone must have jumped because they did not call again.

Straight up as broker describes, they collect client information with the intention of receiving a referral fee.

I would never deal with the lead generation company that requires a fee up front, those companies are built on the premise of parting a Realtor from their money.

I don't have a problem with agent-agent referrals. I also don't have a problem with "referral companies" when they are supplying useful referrals. The problem is that the majority of these companies are not concerned about qualifying their leads. If there was a referral company that consistently provided quality leads, or would allow for commissions to be paid upon closing, I would be all for it.

[quote=broker] Seems that more and more companies are entering the fray with the business model of capturing consumer info and then selling that info under the banner of a "referral" and expecting a fee of 25-30%. A recent Inman Connect tech conference held in NY brought more of these types of companies to view and it appears that they will only proliferate.[/quote]

Interesting, I only knew about Homegain. What are these other new companies?

[quote=J_B_Agent]
Interesting, I only knew about Homegain. What are these other new companies?[/quote]

No suggestions?

I also PM'd Broker, who said there are plenty and I just have to "look around" but I have looked a few times and found nothing.

I don't think there are many of these, and if there are, they are hiding under rocks.

You may want to refresh your understanding of the rules on this Forum prohibiting this kind of solicitation.

But meanwhile, have you joined athe "Licensee only" Forum that talks about specific companies ? That's the Forum entitled "BPO, REO, and Foreclosure Asset Managers".

Submit a copy of your License to a Forum Moderator and that will allow you to do a search, or research, that should reveal the kind of material you are seeking.

Vermont, I didn't think he was asking for BPO sources - he wanted to know what kind of companies broker is talking about in this thread re: scraping realtor information then using it to get leads to feed back on a referral basis to realtors.

[quote=Perky_REALTOR]I didn't think he (J_B_Agent) was asking for BPO sources - he wanted to know what kind of companies broker is talking about in this thread re: scraping realtor information then using it to get leads to feed back on a referral basis to realtors. [/quote]

This is correct.

I have no interest in BPOs. I simply want more buyers and sellers, and am happy to pay a reasonable referral fee upon closing in exchange for leads. I'd like to look up some of the companies Broker was talking about, but I cannot seem to find a single one.

Update: I revisited the thread to see if there were any companies named, there were none so I tried Googling for a while. I still haven't found any of these new companies Broker is talking about.

Some of the searches I did include:
"inman connect referral"
"real estate lead pay referral fee at closing"
"real estate leads"
etc
also I searched on Inman.com for a while.

Plenty of lead generators out there selling leads for an upfront or monthly subscription fee, only a couple of old companies we all know by name selling leads for a referral fee at closing.

If there is a crop of new companies selling Internet real estate leads to agents for only a referral fee, they are apparently doing it very quietly. Or maybe there is a really obvious way to find these companies that's escaping me?

I guess there's no real problem, if the person sending you leads is a trustworthy one. No point in paying for referrals that don't go anywhere or take up more of your time than they should. Gotta stay on that money highway.

I was thinking of adding referals to my business plan for next year as well. I'm still playing with how I'm going to do it. I'm hoping to get an agent with a good lead to contract ratio in an area and supply them listing leads at 20%. Ofcourse I wouldn't sell them in my brokers areas.

I see no problem with selling or buying referals. Just watch which ones you accept. If someone sends me a ready and able buyer or a motivated seller I'd pay for that like I do now with advertisements.

What is most alarming to me is that brokerages are sitting back and watching this trend happen. Agents who need the business will be willing to pay referral fees, even if they are exorbitant. (they are way higher than the value being provided by the referrer)

Why aren't the big brokerages freaked out about this? Those are dollars out of their pockets too, and you'd think that if you ran a brokerage, there would be some incentive to become a solid lead source for your own agents. If the brokerage provides less and less value to their agents, loyalty to that brokerage will suffer long term.

I wrote about this last year on Activerain:

http://activerain.com/blogsview/1567011/big-brokerages-will-die-a-slow-death-via-referral-fees

I know in Western Pa the big brokerage firms are charging 20% for referrals to their own agents on top of the split they already get. As a new agent this seems like double dipping to me, but as a new agent trying to get that first closing I still do it. Eventually I'll quit taking those leads or try to negociate a lower rate. I'm pretty good at finding listings to generate my own leads.

And yes I'll consider what value the brokerage is to me and act accordingly at the end of the year.

Now that I think about it, is it likely that agents will sell leads referred to them by their broker?