What Is A Referral Agent In Real Estate?

When you are a referral real estate agent generating leads is your main responsibility. They spend time identifying people who are interested in a specific service and direct them to organizations or people who can meet their needs. An excellent resource for realtors who are just starting out or may be struggling to generate their own business, referral real estate professionals direct prospective buyers to other professionals who are prepared to assist them.

People often ask for recommendations when they want to work with a professional realtor. When a buyer or seller asks a referral agent to recommend someone they can work with, that agent will be compensated to pass that referral on to you. A referral agent is a real estate agent who introduces a customer to another agent and gets paid a small portion of the sale or a flat fee for each referral. Let’s take a closer look at the details of being a referral real estate agent.

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How a Referral Agent in Real Estate Works

An individual who receives compensation for directing customers or clients to a company or another person who can meet their needs is known as a referral agent. For instance, a seller of mobile homes would wish to find more prospects who are eager to purchase mobile houses. Working with an agent who sends clients his way in exchange for a fee is one way he might achieve this. In some circumstances, a referral agent may be compensated for each reasonable prospect he refers, while in others, pay may be given each time the company receiving the referrals closes a deal.

Despite holding real estate licenses and being associated with real estate brokerages, they typically do not advertise or locate properties for customers; rather, they help people connect with an active agent. In fact, A referral agent is not allowed to show property in New Jersey. Since there are no exceptions to this rule, a referral agent cannot show property even when house hunting for himself or a family member. If and when the deal closes, they are compensated with a finder’s fee from the agent they recommended, which is a portion of the agent’s commission.

Referral brokers collaborate with both listing (seller’s) and buyer’s brokers. Their referral fee’s amount varies depending on a number of variables, but it typically ranges from 10% to 50% of the total commission collected. The buyer’s agent or seller’s agent typically charges a 25% commission.

You can read about The Benefits Of Reciprocity In Real Estate in this article.

What responsibilities does a referral agent have?

Finding people who are interested and eligible to buy real estate, commodities, and services, is frequently a key component of a referral agent’s employment. For instance, if the agent is tasked with generating leads for an adult-only community, he may evaluate potential residents to ensure they satisfy the requirements for living there. Additionally, he might want to ensure that the leads he creates are from people who are interested in adult-only neighborhoods and have the means to buy or rent property there.

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What are the advantages of being a referral agent?

A referral agent receives a portion of the commission that an active real estate agent receives as a result of the customer they referred. This choice is ideal for those who wish to start a family or who may be wanting to retire soon and are unable to continue the daily routine of listing and showing properties. They have the chance to continue a revenue stream from a network they may have spent years building by working as a referral agent.

The Debate Regarding Referral Agents

A seasoned real estate broker or agent who is semiretired may change careers and become a referral agent. Alternatively, suppose a home buyer decides to expand their search into a neighboring state that their real estate agent isn’t familiar with or for which they lack a license. They might get referred to a colleague by that agency who can assist for a fee. The majority of experts acknowledge that practically every real estate agent in the industry will consent to pay a reference fee in exchange for a customer at some point or another.

The referral agent should ideally suggest individuals they are familiar with—seasoned professionals with proven track records who are knowledgeable about your sort of property and the neighborhood market. However, the referral agent typically does nothing more than select one or two names from a list. This is especially typical of the growing number of internet referral businesses that claim to be able to locate agents in other states or even foreign nations. Other referral agents make recommendations based only on the numbers; they suggest the agent with the greatest referral fee.

How is a referral agent compensated?

A referral agent’s method of earning a living may differ from agent to agent. While some may receive payment for each lead they produce, others would need to refer a certain amount of clients in order to receive payment. Sometimes producing quality leads is sufficient to receive a fee, while for others it could be necessary to produce leads that result in sales. Additionally, some agents receive no compensation at all for the leads they create. These workers could be paid an hourly wage or even a salary.

Keep in mind that real estate agents who must compete with one another for referrals by giving up a piece of their valuable commission may be struggling to generate their own leads. Some can be new to the area or the field and require referrals to launch their careers. However, some agents look for recommendations because they lack any other means of obtaining clients. Does a representative who lacks skill or expertise sound like a fantastic choice to you? Be careful who you send your leads to because their performance will reflect on your reputation.

Real estate is a challenging industry. The National Association of Realtors reports that in 2018, the median income was barely $41,800. 2 Some earn a lot more. A top-producing agent, however, is unlikely to rely on recommendations as a source of clients.

How do you become a referral real estate agent in New Jersey? 

A person must complete the pre-licensure education requirements for licensure as a salesperson or broker and pass the salesperson or broker license examination in order to be eligible for licensure as a real estate referral agent. Additionally, the applicant and his or her broker must provide certifications stating that they have read the laws governing the brokerage activities of referral agents. You can submit an application for a referral agent license as soon as you pass the state licensing exam. The relevant certifications can be filled out on the license application form by both you and your broker.

In August 2018, New Jersey updated the regulations governing real estate referral licenses. As a result, anyone who wishes to continue acting as a referral agent or to do so must register their license with a referral-only office that is capable of processing referral commissions.

A referral agent is also not permitted to keep their license as a salesman or a broker-of-record. In other words, you are unable to do both roles simultaneously. Although it is possible to alter a license from salesperson or broker-salesperson to referral agent through a simple online procedure through their employing broker or broker of record.

How to succeed as a real estate referral agent

Depending on how a person wants to operate, you may need different qualifications for being a referral agent. Starting a referral business may not require a specific level of education or work experience, but having strong sales skills may be beneficial. Some businesses that employ these types of agents could favor those with academic credentials and prior sales experience. Real estate licenses are additionally required in some places for real estate referral agents.

Your marketing activities will be the key to your success once you are qualified to work as a referral agent. You will benefit from an existing client database if you are a retiring real estate agent. By including any additional people you know who might be interested in buying or selling real estate, such as family, friends, and other acquaintances, you can further improve it.

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In the real estate industry, middlemen have always been there; take mortgage brokers as an example. However, many real estate experts aren’t fond of referral agents as they stand by the notion that “Those who can, do; those who can’t, refer.” Accordingly, depending on your circumstance, referral agents with expertise may be of assistance.

Anyone who wants to enter the real estate industry but doesn’t want to deal with the difficulties of negotiating transactions and concluding contracts should think about becoming a real estate referral agent. This is about as convenient a position as anyone could ask for in the real estate industry and earn commissions simply by supplying a lead (Name, Address, Phone #, and Email) that turns into a closed transaction.

Want To Become A Referral Agent? Enroll in Our Next NJ Real Estate Salesperson Course

Additional Resources


  • Kristen Johnson, Esq.

    Kristen E. Johnson, Esq. has been practicing law (https://kejlaw.com/) at the Jersey Shore for over 20 years, focusing on all aspects of residential and commercial real estate. Kristen is originally from Monmouth County where she currently resides with her husband and three daughters. Kristen is a graduate of Drexel University (’00) and Villanova School of Law (’03). Kristen has over twenty years experience in foreclosures, Condominium Law, Landlord Tenant law, and residential and commercial real estate. Kristen also is the owner and operator of the Ocean School of Real Estate, where she is licensed educator.