Understanding Real Estate Referral Fees

What Is a Referral?

At its core, a referral occurs when one real estate agent recommends a client to another agent, typically in a different market area. This is often done to provide specialized expertise or help the client find an agent in a new location.



For example, if you’re based in Austin and your client relocates to Dallas, referring them to a Dallas-based agent ensures they’re in good hands.

The referring agent typically receives a referral fee as compensation for connecting the client with the new agent.

Who Can Receive a Referral Fee?

Real estate referral fees are strictly limited to licensed real estate professionals. This means only agents and brokers with an active license can legally give or receive fees for referrals.

It’s important to note that unlicensed individuals cannot participate in referral fee arrangements, as this would violate real estate regulations.

Legal and Ethical Considerations

While referral fees are a common practice, they must adhere to strict legal and ethical guidelines. Key points include:

• Compliance with State Laws: Each state has its own rules about referral fees. Some specify maximum percentages or mandate written agreements.
• Disclosure to Clients: Transparency is critical. Clients must be informed when a referral fee is involved.
• Ethical Conduct: Partnerships must prioritize the client’s best interest, ensuring referrals are made based on skill and service—not just the fee.

How Referral Fees Work

The Process of Giving and Receiving Referrals

Here’s how a typical referral process works:



1. Identify the Need: You determine your client requires an agent in a different location or with specific expertise.
2. Partner with a Suitable Agent: Reach out to agents in your network or use professional platforms to find a trustworthy partner.
3. Set Up the Referral Agreement (more on this below).
4. Client Introduction: Introduce your client to the referral agent, ensuring a smooth handoff.
5. Fee Payment: Once the deal closes, the referral agent pays you the agreed-upon fee—usually a percentage of their commission.

Setting Up a Referral Agreement

A referral agreement is a legally binding document that outlines the terms of the referral, including:

• Names and contact details of both agents and brokers.
• The client being referred.
• The agreed referral fee (commonly 20-35% of the receiving agent’s commission).
• Signatures of both parties.

At PRS, we understand the value of strong partnerships, and our tools can help you streamline collaboration with other agents, ensuring smooth transactions and happy clients.

Calculating Referral Fees

Referral fees are generally calculated as a percentage of the final commission earned by the receiving agent. For example:

• If the selling agent earns $10,000 in commission and the referral fee is set at 25%, the referring agent would receive $2,500.

It’s essential to agree on the exact percentage during the initial discussion and document it in the referral agreement.

Benefits of Utilizing Referral Fees

Expand Your Network

Referral agreements are an excellent way to build relationships with agents in other locations. A strong network allows you to serve your clients better while opening doors to future business opportunities.



Generate Passive Income

Referral fees offer the opportunity to earn money with minimal effort. By connecting clients to trusted agents, you can secure additional income without having to handle the transaction directly.

Help Clients Find the Right Agent

Referrals ensure that your clients have access to the best possible expertise, even if it’s outside your local market. This improves client satisfaction and enhances your reputation as a reliable and resourceful agent.

Common Mistakes to Avoid

Not Having a Written Agreement

Operating on a handshake deal may seem appealing, but it can lead to misunderstandings and legal trouble. Always use a documented referral agreement to protect both parties involved.



Ignoring State Laws and Regulations

Every state has its own rules regarding referral fees. Skipping over these laws can result in penalties or even license suspension. Stay informed and ensure compliance.

Neglecting to Disclose the Referral Fee

Transparency is a non-negotiable aspect of ethical real estate practice. Ensure your clients understand that a referral fee is part of the transaction and why it’s necessary.

Premier Realty Services: Enhancing Your Real Estate Business

At Premier Realty Services, we offer more than just real estate support—we’re here to help agents like you grow and thrive. With 15+ years of experience, we’ve partnered with thousands of agents, providing services that make your job easier and your listings shine.



Our services include:

• Drone Photography & 3D Tours: Capture stunning aerial views and immersive walkthroughs that make properties stand out.
• Sign Installation & Storage: Focus on your deals while we take care of your signage needs.
• Virtual Staging: Transform empty spaces into fully furnished, eye-catching interiors to attract buyers.

With over $25 billion in property values serviced and a proven track record, PRS is your trusted partner for scaling your business.

Take Advantage of Referral Fees the Right Way

Real estate referral fees are an incredibly powerful tool when used correctly. They connect agents, expand networks, and help clients find the right expertise. By:

• Staying compliant with legal requirements.
• Building strong referral partnerships.
• Leveraging professional services like those at Premier Realty Services.

…you can elevate your real estate business to new heights in 2025 and beyond.

Curious about how PRS can support your real estate career? Schedule a free consultation today and discover how we can help you close more deals and grow faster than ever.