Real Estate Tips

How Do Referral Fees Work in Real Estate

By Carolyn Vento Last Updated October 20, 2022 3 min read

Referral fees seem self-explanatory, but it’s essential to recognize the details involved in real estate referral fees—from understanding the laws to upping your chances of getting referrals.

Real estate referral fees are becoming a significant source of lead generation and income for agents nationwide. Networking, creating a referral program, and using social media are all ways to increase your chances of profiting from referrals. In this article, we’ll help you understand and begin benefiting from referral fees.

What are real estate referral fees?

Real estate referral fees are a type of commission paid by one agent’s broker to another for introducing them to a client.

Sometimes agents or brokers know they cannot meet a client’s specific needs, so they refer them to another licensed real estate agent or broker who can. When this occurs, the agent receiving the client pays the referral fee. 

Other times, the fee is paid as a commission when a deal is closed. The more available and reliable agents are, the more likely they will get these valuable referrals.

How do referral fees in real estate work?

Licensed real estate agents can only pay referral fees to other licensed agents, as federal and state laws usually prohibit agents from paying fees to unlicensed people. If an agent and broker decide to pay a referral fee to someone unlicensed, the activity is considered illegal, and their licenses can be revoked. The payment must go through each agent’s broker rather than directly between agents. 

Some agents use third-party marketplaces, which notify them when their services are needed. Then, they pay a fee for the referral, just as they would for a direct referral. 

Additionally, agents can use a real estate referral program to ask clients to recommend them to family and friends. This marketing strategy often utilizes social media and emails to gain attention, and real estate agents can offer the referring clients rewards and discounts.

What is a typical referral fee?

While there is no set number for a referral fee, and the fees are often negotiable, a typical referral fee is 25% of the gross commission.

Who pays the referral fee?

Referral fees are paid from broker to broker rather than directly from agent to agent. The broker then pays the agent.

Reasons for a referral fee

As an agent, you may realize you are unable to meet a client’s needs. In this case, it is best to refer them to another agent and request a real estate agent referral fee. Here are some of the reasons this situation may occur:

Physical location

If your client wants to purchase a property out of state, you may not be licensed in that area.

You can refer the client to an agent who can conduct business there. Then, your broker will follow through to make sure the receiving agent’s broker pays a referral fee.

Different areas of expertise

You may be a pro at selling residential homes, but if your client needs guidance with a commercial property, it may be best to refer the client to a commercial agent.

By networking and referring clients, other agents will likely refer you when they are in similar situations.

Time constraints

There are times when you may have too many clients, are on vacation, or have other reasons why you don’t have the time to take on another client.

In this case, you would refer the client to someone more available. Doing this builds client trust and potentially gains future business and referrals.

How to increase your referrals in real estate and stand out

The more referrals you receive, the better your income will be. Clients referred to you by an already trusted source will also trust your expertise, adding to your future success. But, for agents to consider you when they need to refer clients, you must stand out. 

You can achieve this by having a memorable brand with consistent marketing and listings. An easy way to accomplish this is by using professional real estate photography services.

Not only does Virtuance offer high-quality photographs, 3D tours, floor plans, and aerial photography, but every order comes with a dedicated listing site and access to our Marketing Suite



Referral fees can be negotiable, but on average, the fee is 25% of the gross commission.

No, the referred client does not pay the referral fee. This responsibility lies with the agent’s broker, and the fee generally comes out of the commission.

Real estate referrals are common. As the market changes, they are also becoming an increasingly significant source of income for agents.