My colleague in Charlottesville, Jim Duncan, has a great post about how referral fees work.

One of my problems with referral fees is that they're almost never disclosed to the buyers and sellers. The person who refers you to another agent doesn't want you to know that they got a referral fee (kickback?) from doing that. The person who gets the referral fee often feels disgruntled about paying it. Service can definitely suffer as a result.

It paints with too braod a brush to say that the best agents won't work with referrals, especially corporate relocations. But there are reasons that some of them run from this business. You do more work for less money. That's hardly ever a successful business strategy! Relo companies want paperwork and lots of it. If you are a listing agent for a home where the owners are being relocated, you may be responsible for winterizing the house or for lawn maintenance during the summer.

That being said, personally, I love corporate relocation buyers! It's fun to help families learn about their new community! I get to be the "first friend" for a lot of newcomers to our area. I'm honored by that! And, generally speaking, it's a pretty good bet that these buyers will actually buy and will make a quick decision. That's always good for business! (The exception is the couple of families I've worked with who came, saw, got sticker shock and turned down the job offer!)

So, referrals are a mixed bag. Full disclosure is part of making sure referral fees don't get in the way of good customer service. In my opinion, referral fees are one more symptom that the current economic model for real estate is broken. But that's a rant (er, I mean, post) for another time!

Have a great weekend!