How Do Real Estate Referrals Work? | Ashley Horton Real Estate

Written by Ashley Horton

One of the things that surprises people when they find out I can help them buy or sell real estate almost anywhere is the obvious question…

“How?”

I’m licensed in North Carolina and South Carolina. I’m not pretending to know the neighborhoods in Denver, negotiate a condo purchase in Manhattan or tell you which streets you should consider in Scottsdale.

What I can do is help you find the person who does.

That’s where a real estate referral comes in.

In its simplest form, a real estate referral happens when one licensed real estate professional connects a client with another licensed agent who is better positioned to help them. Maybe you’re moving out of state. Maybe you’re selling a second home somewhere I don’t work. Maybe you need a property specialist whose expertise is different from mine.

Instead of handing you a name I found online and wishing you luck, I can vet the agent, make the introduction and, depending on the situation, remain connected throughout the process.

That’s the part of real estate referrals I think consumers should know more about because a good referral should be much more valuable than simply getting someone’s phone number.

How Does a Real Estate Referral Actually Work?

Let’s say you’re my client in Charlotte and your company transfers you to Dallas.

You call me because you need to sell your home here, but you also need someone in Texas.

I start looking for the right agent.

And when I say “right,” I don’t necessarily mean the person with the most sales.

I want to know whether they actually work in the area you’re considering. Do they understand your price point and property type? How do they communicate? How quickly do they respond? What do their clients say about them? How do they handle a transaction when something goes wrong?

If you’re relocating with three dogs, I may want someone who understands that finding a home with the right yard and local restrictions isn’t a minor detail to you. If you’re buying a luxury condo, I want someone who understands that market. If you’re military and dealing with a PCS timeline, VA financing or an unfamiliar city, that’s part of my vetting too.

The referral should fit the person, not just the ZIP code.

Once I’ve identified the agent, I make the introduction and the agents typically complete a written referral agreement between their brokerages. You then work directly with the local agent for the transaction because they’re the professional licensed and working in that market.

Depending on the client and situation, I may stay involved too.

Not to interfere with the local agent’s job, but because you’re still my client and I care about what happens next.

Learn more about working with a real estate agent with these posts next:

Why Wouldn’t You Just Google an Agent Yourself?

You absolutely can.

A referral doesn’t take away your ability to interview agents or choose someone else. In fact, I want you to talk to the person and make sure the fit feels right before moving forward.

The difference is that I’m starting the search with information Google doesn’t have.

I know you.

I know what you’re trying to accomplish, what your communication style is, what matters to you and, often, what frustrated you during previous real estate experiences.

That gives me a very different starting point when I’m interviewing someone on your behalf.

I’ve built relationships with agents throughout the United States and around the world, including through The Charlotte Experience and the referral network I’ve intentionally developed over the years. Sometimes I already know exactly who I want to call. Other times, I have to research, interview and vet agents in a market where I don’t yet have the right person.

Either way, I don’t believe a referral should mean, “Here’s a name. Good luck.”

I’ve worked on building relationships with agents and peers in other markets for years. My annual event, The Charlotte Experience, is just one of the ways I build relationships with agents across North America.

What Happens If the Agent Isn’t a Good Fit?

This is one of the biggest reasons I stay involved.

A referral isn’t a lifetime appointment.

If you speak with the agent and immediately feel like something is off, tell me. If communication starts breaking down later, tell me. If your needs change and suddenly the person who made sense at the beginning no longer has the expertise you need, let’s address it.

I’d rather find another solution than have you stay in a relationship that isn’t working simply because I made the introduction.

There’s accountability in that for me too.

If I’m putting my name behind someone, their performance reflects on me. I want to know how they treat you when everything is going well, but I care even more about what happens when the inspection goes sideways, the appraisal comes in low, the seller gets difficult or the transaction starts falling apart.

That’s when you learn who someone really is.

How Do Referral Fees Work in Real Estate?

This is where the conversation can get unnecessarily confusing, so let’s keep it simple.

When one licensed real estate professional refers a client to another licensed agent, the agents or their brokerages may agree to a referral fee paid by the representing firm to the referring agent’s brokerage. Notice I didn’t say the buyer or seller directly pays this, and I didn’t say it’s an additional cost to you.

The agreement is typically made before the transaction and, if the referred client ultimately closes on a home, the referral fee is paid to the referring agent’s brokerage from the compensation already earned by the receiving brokerage.

It’s not an additional percentage added to the price of your home because you asked me to help you find an agent.

For example, if I refer you to an agent in another state, that agent and I may agree that a portion of the representing firm’s compensation that their brokerage ultimately earns will be paid to my brokerage as the referral fee after closing.

The exact arrangement varies.

That’s an important distinction because real estate commissions and referral fees are negotiable. There is no legally mandated or universally “standard” referral percentage.

What Is a Typical Referral Fee in Real Estate?

You’ll see plenty of answers online saying 25%, and that’s why this phrase gets searched so often. Don’t get caught up in this. It varies, and it’s not the same for every agent.

In real-world residential agent-to-agent referrals, you may commonly see negotiated referral fees ranging between 25% to 30% of the receiving side’s earned commission, but that is a range you may encounter, not a required rate, fixed rule or industry-set commission.

The circumstances matter.

Corporate relocation is a good example. Relocation companies may charge substantially larger referral fees for business they coordinate, with published industry resources showing ranges around 35% to 45% and, in some markets or programs, as high as 50%.

Again, none of that means there is a standard fee every agent must charge or pay.

The referral agreement between the agents and their brokerages determines the arrangement. This is something that occurs between us as professionals, not you as the client. Your costs don’t increase because of it, and we don’t penalize you for it. You get the benefit of a solid agent and everything transpires as it usually would. Most people aren’t even aware a referral fee may have been paid because it never impacted their sale, nor should it.

For consumers, the more important takeaway is that a traditional agent-to-agent referral doesn’t mean I’m adding a new referral charge to your home purchase or sale simply because I helped connect you with an agent.

There are a lot of forms and agreements to sign when it comes to buying or selling a home, learn more about one of these forms by reading: What is the Working with Real Estate Agents Disclosure in North Carolina?

Can Anyone Get Paid a Real Estate Referral Fee?

No.

This is another misconception I hear occasionally.

Your dad can’t call me and say, “My daughter is buying a house. I’ll send her to you if you pay me a referral fee.”

That’s not how it works.

Real estate referral compensation is regulated. In North Carolina, for example, the Real Estate Commission specifically prohibits brokers from paying referral or finder’s fees to unlicensed people for referrals. South Carolina similarly restricts paying referral fees to unlicensed individuals for activities requiring a real estate license.

There are important legal distinctions depending on jurisdiction and whether someone is actually a party to a transaction, but for the average consumer the takeaway is simple: a professional real estate referral fee is not a finder’s fee that anyone can collect for sending a friend to an agent. It is a fee paid between licensed real estate professionals through their brokerages.

And this is also where I want to make another distinction.

Real estate agent-to-agent referrals are different from referring mortgage, title or other settlement-service business. Federal RESPA rules place significant restrictions on paying for referrals of settlement services involving federally related mortgage loans.

Different referral. Different rules.

Are you moving to the Carolinas? Here are a few more posts you might find interesting:

Why Would an Agent Pay a Referral Fee?

People sometimes hear that an agent is paying a referral fee and assume it means they’re somehow buying the client.

Not even a little bit.

If another agent sends me someone they genuinely care about, they’re handing me a relationship they’ve spent years building. It’s an opportunity for me to continue earning that agent’s trust by showing them I will consistently provide a high level of service to their clients, and that they can expect that same level of care for every person they refer to me.

That matters.

They’ve already done some of the work of helping me understand who this person is, why they’re moving and what they need. The client is usually warmer than someone who clicked an ad online, and there’s another professional involved who cares about the outcome.

The same applies when I refer someone out.

Yes, there may be a referral fee involved, but as agents, we’re happy to pay it. It’s the cost of having the assurance that our people are going to be taken care of and being able to support them, closely or from a distance, so our clients never feel alone.

But I also have every incentive to make sure I send you to someone excellent because the money isn’t worth damaging your trust in me.

If I send you to the wrong person and you have a terrible experience, you’re probably not calling me the next time you need help. You’re definitely not telling your friends and family that I took care of you. The relationship is worth considerably more than one referral fee.

What Most People Don’t Know About Real Estate Referrals

You don’t have to already be my client in Charlotte for me to help with this.

I’ve had people reach out because they’re moving somewhere I’ve never practiced real estate and simply don’t know where to start. That’s okay.

You also don’t have to accept the first agent I introduce.

And the referral doesn’t mean I suddenly become licensed in another state or insert myself into a transaction I shouldn’t be handling. The local agent is there because they know that market better than I do.

My value is making sure we’re getting you to the right person in the first place.

Sometimes that’s someone I’ve known for years. Sometimes it’s someone I’ve met through my international network. Sometimes I have to go find them.

That’s where vetting matters.

Referrals Work Both Ways

The same network that allows me to help a Charlotte client move somewhere else also brings people here.

An agent in New York, Chicago, California, Toronto or another market may have a client relocating to Charlotte and call me because they need someone they trust locally.

That client may never have heard my name before.

But their agent has.

That’s one of the reasons I’ve invested so heavily in relationships with real estate professionals outside of Charlotte. It’s also why I created The Charlotte Experience. I want agents in the markets that feed Charlotte to understand this city, understand how I work and feel confident when they trust me with someone important to them.

The referral isn’t simply business changing hands.

It’s trust changing hands.

Final Thoughts

So, how do referrals work in real estate?

At the technical level, they’re fairly simple. One licensed real estate professional connects a client with another qualified agent, the brokerages document the referral arrangement and, if the transaction closes, a negotiated referral fee may be paid according to that agreement.

But that’s the least interesting part to me.

The part that matters is whether the person on the other end of that introduction is actually right for you.

I’ve built my referral business around vetting, relationships and staying connected because I don’t believe my responsibility ends when your move takes you outside North Carolina or South Carolina.

Sometimes the best way I can serve you isn’t by being your real estate agent.

It’s knowing exactly who should be.

Ashley Horton | 704.975.5418 | ashley.horton@charlotteluxehomes.com
Global Real Estate Advisor
Licensed in North Carolina & South Carolina
Premier Sotheby’s International Realty