Trends & Tides takes a look at the ever changing environment of New York City real estate – past, present and future – by offering observations, analyzing perceptions and challenging myths, while giving a dose of reality along the way.

There have been many times over the course of my 25-year-long real estate career in which I have sent a friend, family member or customer to an agent in another city with the expectation of receiving monetary compensation for my referral. On many of those occasions, I took on the role of a liaison between my customer and the agent to whom I referred. In the spirit of adding value to a transaction and actually earning my referral fee, I would provide advice, guidance, opinions when asked and even assist with negotiations on some occasions. That said, there were also times where I simply made a phone call to another brokerage in the area in which my customer was searching and was pleasantly surprised months later when I received a check in the mail that could be as high as six figures for merely making a connection. With referral fees typically ranging between 10% and 40% of the broker’s side of the commission and 25% being an unwritten industry standard, the opportunity to make serious income abounds.

So many in the real estate industry believe that simply providing another agent with a qualified, ready, willing and able buyer or seller entitles them to a piece of that commission. Others feel strongly that they should add additional value to the experience in order to “earn” their referral fee. I feel quite strongly that unless you are at minimum vetting the agent with whom you’re suggesting your customer work or staying connected as a liaison and adding value to the transaction, then you are not entitled to a referral fee.

Most recently, it dawned on me when a long time loyal customer of mine called me to tell me that they had gone to contract on a large parcel of land in another part of the country. My initial reaction was “ouch, that stings” as the referral fee would have been upwards of $500,000. I immediately considered contacting their agent to “introduce myself” as their referring agent. Seriously! I was actually going to call and suggest that I get paid nearly $500K for a transaction in which I played absolutely ZERO part. ZERO! I know for certain that many agents do make an effort to insert themselves into deals in which they have played no part. After I calmed down and really considered all aspects of the situation, it dawned on me that I was not in fact entitled to take nearly a half a million dollars out of another agent’s pocket. I added no value and I didn’t even make the connection between the agent and a ready, willing and able buyer.

In short, it is my opinion that adding value to a transaction in which you have referred a buyer or seller is the only thing that entitles you to a referral fee.