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Highlights

I Call that Extortion

– Well, if you don’t I’ll send them to one of the other two Realtors I have been speaking to in your market. – <Flabbergast/Fury/Fierce desire to reach through the phone and throttle said other agent> Personally, I don’t ask for anything other than Karma in return for referrals, and I don’t have any issue with paying someone a referral fee. … 2 – It places the prospective Buyer’s Agent in an position in which he or she should not be placed – telling the Buyer that the money that had been promised to them by the listing agent is not coming – 3 – It might be “ethical” but it goes against my interpretation of the Golden Rule … and it just ain’t right. </rant>

<p>- Well, if you don't I'll send them to one of the other two Realtors I have been speaking to in your market. - <Flabbergast/Fury/Fierce desire to reach through the phone and throttle said other agent> Personally, I don't ask for anything other than Karma in return for referrals, and I don't have any issue with paying someone a referral fee. ... 2 - It places the prospective Buyer's Agent in an position in which he or she should not be placed - telling the Buyer that the money that had been promised to them by the listing agent is not coming - 3 - It might be "ethical" but it goes against my interpretation of the Golden Rule ... and it just ain't right. </rant></p>

photo source: https://www.flickr.com/photos/dave_apple/342355899/sizes/o/

Get your hands out of my pockets … or … Do Unto Others.

There may be a trend on the horizon – an ugly one at that.

Let me lay out a scenario for you –

Buyer prospect calls or emails you, the Realtor. You discuss wants, needs, timelines, goals and set an appointment to meet in the very near future. A few days go by and you get a call from a Realtor you’ve never heard of. The conversation goes something like this:

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Hi, this is Joe Realtor and I want to send you a referral.

– Great! Thanks.

Actually, instead of you paying me a referral, I’d like to you credit the referral you would pay to me to the buyer as a credit at closing.

– Sure, that sounds reasonable. What are their names?

Mary and Paul Buyer, they’re moving from here, and I’m listing their house.

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– Hmmm … I spoke with them a couple weeks ago. They found me on my blog and we’re already scheduled to meet on Thursday. I don’t see how I can justifiably pay a referral fee.

Well, if you don’t I’ll send them to one of the other two Realtors I have been speaking to in your market.

– <Flabbergast/Fury/Fierce desire to reach through the phone and throttle said other agent>

Personally, I don’t ask for anything other than Karma in return for referrals, and I don’t have any issue with paying someone a referral fee. Where the problems arise are –

1 – It’s an after the fact referral. Contact has been made and a relationship is forming.

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2 – It places the prospective Buyer’s Agent in an position in which he or she should not be placed – telling the Buyer that the money that had been promised to them by the listing agent is not coming –

3 – It might be “ethical” but it goes against my interpretation of the Golden Rule … and it just ain’t right.

</rant>

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Written By

Dad, Husband, Charlottesville Realtor, real estate Blogger, occasional speaker - Inman Connects, NAR Conferences - based in Charlottesville, Virginia. A native Virginian, I graduated from VMI in 1998, am a third generation Realtor (since 2001) and have been "publishing" as a real estate blogger since January 2005. I've chosen to get involved in Realtor Associations on the local, state & national levels, having served on the NAR's RPR & MLS groups. Find me in Charlottesville, Crozet and Twitter.

19 Comments

19 Comments

  1. Missy Caulk

    April 16, 2009 at 10:32 am

    Jim, are you living in my brain in Ann Arbor?

    This scenerio happened to us this week, her mother is a Realtor. We had no clue until offer was written, accepted.

    It came from our corporate company and it is still sitting in my mailbox.

    No I have NOT accepted it because it is not a referral. The buyers found our web site, I called her up, she came in town, they found a condo, wrote the offer, accepted.

    Now I am a mom and you better believe my kids know to never find a Realtor without checking with me.

    Plus why would mom NOT even call me just have her corporate office send a form?

    Nada, nope, ain’t gonna happen…..

  2. BawldGuy

    April 16, 2009 at 2:39 pm

    I feel your outrage. Long ago I copied a policy used by one of my favorite mentors. He would immediately call the client who’d come to him on their own. He’d explain in plain English what transpired in the phone call from the other agent ‘referring’ them.

    Over half the time they’re profoundly surprised and/or angered themselves. Generally there’s a phone call about half the time from the ‘referring’ agent completely backing off.

    Those agents should be held to the fire harshly and often. Showing them to their clients as they are has proven both effective, and sometimes even entertaining.

  3. Lisa Heindel

    April 16, 2009 at 4:38 pm

    Agents continue to do this because most of the time the receiving agent will back down and pay the referral fee since “it’s better than nothing”. I like @BawldGuy’s suggestion. If you have already built a rapport with the client, they will more than likely stay with you whether you pay the referral fee or not.

  4. Ken Brand

    April 16, 2009 at 5:56 pm

    Amen brother, that’s parasite marketing. Offering nothing and living off others.

    I’d tell them to go pound sand, it’s not a referral. Like Bawldguy and Lisa said, hopefully you’ve had a chance to demonstrate your expertise and value. If so, they’ll stick with you. If not, “some will, some won’t, so what”.

    In the mean time, plan B, C, D, E, F, G…develop loyal fans, cheerleader friends and an overflow of inbound opportunity. Then you can pick and choose who you work with.

    Shake the loser and Rock ON.

  5. Ken Montville - The MD Suburbs of DC

    April 16, 2009 at 6:06 pm

    I guess in tough economic times some Realtors will do anything for a few extra bucks.

    Obviously the “referring” listing agent didn’t have either the rapport or presence of mind to suggest to his clients that he could refer them…or the clients didn’t want to be referred.

  6. Elaine Reese

    April 16, 2009 at 7:54 pm

    A few years ago sellers who planned to use me to list their home (but hadn’t called me yet) attended an open house in another suburb that is further away than where I work. They told the agent at the open that they would be listing with me. That agent called me and told me she had a referral. When I learned where it was (my own neighborhood) I refused to pay. I eventually told the sellers what had taken place. They were very upset because the agent had “misrepresented” (lied) about their conversation.

  7. Dan Connolly

    April 16, 2009 at 10:12 pm

    I would tell the Buyers that I just don’t do that, and if they want to go with a Broker who is willing to discount his fees, and probably his services at the same time, to go ahead! I would give them the “You get what you pay for” kind of advice, and then wish them good luck!

    You may have dodged a bullet anyway; with an agent like that selling their house, who knows if they ever could buy!

  8. Aria Kilpatrick - Austin TX

    April 17, 2009 at 11:25 am

    Agents are getting greedier and clients are getting less faithful. That doesn’t sound like a referral anyway, and why do we pay/get paid for referrals again? I forget.

  9. GenuineChris Johnson

    April 17, 2009 at 12:57 pm

    I wouldn’t tolerate that. I would do the following things:

    Warn them in no uncertain terms that unethical behavior is punishable and is a career ender. Make a video presentation that highlights the following future moves:

    Register their name,put a WordPress site up, and make 100+ posts where = That person is an unethical thief.

    Then, I would call the department of commerce and division of real estate.

    Then I would litigate against their BROKER demanding dismissal, and seeking 4x commissions (lifetime value of client) in exchange.

    I would then call all of their listings and say that they are violating ethics, and that they should terminate the agreement, and here are the forms.

    Think I’m kidding? An agent in Columbus, OH is no able to be part of RE/MAX. All of his listings got the copies of the police reports from him beating his wife and mom, indicating that they were supporting violence against women–and here’s a cancel form.

    HE was an unethical jackass that stole an offer of mine off of a fax in a competitive bid situation, and then gloated about it to me.

    If you’re gonna go to war with me, I will not go half way. That kind of behavior should be punished, and those kind of people should be ejected from (y)our real estate industry. You have a responsibility to put his name on this blog, and to keep the bs gone.

    Or just ignore it. But I think this needs to have action taken and this guy must be expelled from the industry in a hurry.

  10. Karen Goodman

    April 18, 2009 at 8:26 am

    Part of the complication here is that the agent asked you to give part of your commission as a credit to the buyer at closing. It would be easy enough to explain to the buyer that the listing agent had tried to get a referral fee, and that your policy is that you only pay referral fees when the referring agents truly connects you to a client that had not already contacted you.

    But, I can see how the buyers would still want you to give them some of the commission at closing now that they know about the option, or would keep looking for another agent.

    I’m fortunate that crediting a buyer part of the commission is not allowed in Missouri.

    The only time when I will pay a referral fee when the client contacted me directly is if there is a relo company involved (no choice) or if the client tells me themselves that they have a relative and want to make sure the relative gets a referral fee on the transaction. That’s happened twice to me, and both times it was worth it to agree.

  11. Jonathan Dalton

    April 18, 2009 at 2:09 pm

    Dan and Karen seems to be the only ones to see what many have missed:

    > Actually, instead of you paying me a referral, I’d like to you credit the referral you would pay to me to the buyer as a credit at closing.

    Greed on the part of the agent isn’t the issue here. What it comes down to is the buyer asking for cash back and not having the courage to make the request up front, which would have been the better way to go, and having someone else do it for them instead.

    Whether you are willing to give a rebate is your own business. As for the agent, I would have a two-word answer for him.

  12. teresa boardman

    April 19, 2009 at 7:31 am

    I don’t ask for anything in return for referrals either and I don’t take referrals with fees attached unless the buyers or sellers are above the half million dollar range. I can’t afford to pay the fee’s and honestly have so many own my own pipeline that I don’t need to take them.

  13. Matthew Rathbun

    April 19, 2009 at 9:02 am

    …all this will get worst before it gets better. I don’t know where the tipping point is, but we’re fast approaching it.

    Referrals, client incentives etc.. have become so ubiquitous that agents and other consumers begin approaching at least 25% of commissions as discretionary income.

    This is all supporting the fee-for-service model.

    Because of the internet lead companies, corporate referrals and the like, it seems that everyone is just ready to fork over 25-40% of the commissions to who ever holds their hand out.

  14. Chris Cliff

    January 23, 2010 at 10:26 am

    First my disclaimer. I am not an agent currently, but have been one and am married to one.

    With that out of the way, let me just say that I have never seen an industry so rife with incompetent, greedy people as real estate sales. Far too many of the agents I have interacted with were under educated in their field and were more concerned about their own bottom line than anything else.

    This has thinned out some since the crash, but not a whole lot. I am not surprised that they were calling, asking for money. That is what agents do and why the profession is still viewed as little better in status than used car salesmen.

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