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A real estate referral fee is a portion of a broker’s commission paid to a party that provided either a listing or selling prospect to that broker. Referral fee programs are commonly used to generate additional business and income for real estate practitioners, brokerage firms, relocation management companies (RMCs) and corporations. Referral fees can be paid only to another entity holding a real estate broker’s license, and can be generated on either the departure (selling), or the destination (buying) side of a move.
Properly structured referral fee programs are an accepted practice in the U.S. relocation industry.
Beginning in 1998, Worldwide ERC® initiated action to address the legislative and regulatory environment impacting employee relocations. In cooperation with the Association of Real Estate Licensing Law Officials (ARELLO), Worldwide ERC® developed a Policy Statement on the Timely Disclosure of Real Estate Referral Fees, which began the process of defining industry-wide standards for the effective and equitable management of the relocation referral fee process. The Policy Statement outlines two basic strategies to follow when placing a referral: proper/timely disclosure and supporting education/communication.
The issue of "after-the-fact" referral fee requests is a glaring example of an unacceptable practice. Worldwide ERC® members and supporters responded to immediately - and continue to do so - by pledging not to tolerate these requests, and by beginning an education campaign aimed at relocation management companies, employees, employers, and real estate brokers, including affinity groups. In addition, Worldwide ERC® set up The Interchange, a reporting mechanism that brings complaints about alleged after-the-fact referral fee requests directly to the attention of senior management officials.
The Worldwide ERC® Coalition has developed communication pieces to aid brokers in educating their licensees about referral programs as well as one for transferees.
A referral fee explanation handout for consumers
The objective of The Interchange is to ensure swift and equitable problem resolution by bringing the issue of an after-the-fact referral fee request to the attention of the appropriate senior executive from employers, relocation service firms and affinity groups. The Interchange is available, free of charge, to contributors and non-contributors alike.