A new report examines the agent-to-agent referral, which is a critical component for success in the real estate industry. Among the report’s findings: agent-to-agent close rates are around 50%.
“The Agent-to-Agent Referral Economy: A Study of the Power of Referrals in Real Estate” report by ReferralExchange and the Council of Residential Specialists, reflects the responses from 1,435 successful and experienced real estate agents who participated in an online survey.
“Agents should read the report to understand the role that referrals can play in their business,” Lisa Fettner, vice president of marketing, ReferralExchange told OnCourse Real Estate. “The numbers in the report should inspire them to actively generate referrals from past clients, as well as current clients….”
For example, agents can help clients find agents on the other side of transactions — if agents are helping buyers, they can refer buyers to other agents to help them sell their properties.
“The benefits of a strong referral plan are seen not just in referral fees but in the ongoing strength of enduring client relationships,” Fettner said.
In fact, 40% of inbound referrals are from other agents, while past and current clients generate more than half of outbound referrals, according to the report. These referrals can result in income. Most respondents expect to get paid a 25% commission when they refer out and prefer to pay about a quarter of the commission for referrals they receive.
And outbound referrals make up a sizeable part of an agent’s business—an average 12.5% of an agent’s total annual transactions, according to the report.
But there’s more to these referrals than money. One of the report’s key findings is that respondents indicated their biggest concern when referring out is keeping the reputations they’ve worked to establish.
What is a referral?
A referral isn’t always the same as a lead. Rather, according to the report’s executive summary, it’s a subset of leads, which tends to be among the warmest of leads, from people and with people who are ready to act, versus cold leads that are unlikely to come to fruition.
Referrals are based on a cooperative system of brokers and agents that results in revenue for those who refer and are referred to. This cooperative system, according to the report’s summary, also allows agents to create networks and build their reputations, “simply by providing a successful connection.”
Agents weigh in
Nancy Rogers, [email protected] at LAER Realty Partners, with offices in Chelmsford and Westford, Mass., and a real estate agent with 33 years’ experience, said the internet has become a gateway for securing and maintaining referrals in real estate.
“I work by referral deliberately with planned strategic systems in place, and get 90% of my business from referrals, including working with companies that send leads,” Rogers said.
Rogers said she gets referrals by staying in touch—doing something to maintain the connection with those in her network, or sphere, four times a year.
Eighty-five percent of Jan Brito’s business comes from referrals. Like Rogers, Brito, an associate broker at Heller Coley Reed of Long & Foster Real Estate in Bethesda, Md., said maintaining connections is important for fueling referrals in real estate.
“To get more referrals, I stay in touch with clients through emails, Facebook, calls, texts,” Brito said.
Referrals are the goal, according to Brito. The closing rate on a referral is much higher than on a lead. “There’s a long incubation period on leads, and many don’t pan out. A referral is much more likely to happen,” she said.
Aaron Bellings, of Bellings Brothers Real Estate in San Francisco, said about a quarter of his business as a real estate agent comes from referrals, while 75% is from open houses, his sphere of influence, and marketing. He said the best way to get referrals is to do a good job and, of course, maintain relationships by way of newsletters, emails, and more.
Bellings’ No. 1 concern when referring out is that the client is taken care of. It’s also important, he said, that the agent is taken care of, financially, as agreed upon after a successful transaction.
More ReferralExchange report findings
• How many outbound referrals do agents make each year? Four to 10, according to a third of respondents; two to three, according to another third.
• More than 40% of agents responding indicated that more than 50% of referrals they send out result in closed sales.
• Referrals don’t always result in a fee. While almost two-thirds of respondents said they received fees for more than half of their outbound referrals, the rest said they received fees for less than half of outbound referrals. A small percentage said they received no fees at all for outbound referrals.
• Just what do agents make from outbound referrals? Nearly half said they were making less than $5,000 a year from outbound referrals, while about 5% indicated their referrals resulted in $15,000 or more of annual income.
• One-fifth of respondents said they receive six to 10 referrals a year, while more than 40% said they receive from one to five referrals annually.
• Nearly 60% of inbound referrals result in a closed sale. According to the report, agents say chances of a closing from an inbound referral are highest if the referral originated from their sphere of clients, followed by sources such as brokerage and corporate referrals and sites like ReferralExchange.
What do you think about the report’s findings? How much referral business do you receive from your peers? How much do you send their way? Let us know in the comments below!