Build a Booming Referral-Based Business

Tips and tools for expanding your referral network.

By Gwen Moran

While REALTORS^® need to be effective consumer marketers to excel in the industry, they have another source of new business and income: referrals. The typical REALTOR^® earned 14 percent of their business from repeat clients and customers and 18 percent through referrals from past clients and customers in 2015, according to the National Association of REALTORS® 2016 Member Profile.

In addition, some savvy real estate professionals are focusing on building referral fee income by doing business with other REALTORS^®, particularly through the CRS Referral Network. With typical referral fees averaging roughly 25 percent of the selling agent’s commission and inbound leads often vetted, warm and ready to buy or sell, a robust professional referral network can quickly become a significant stream of income.

CRS members who strengthen their referral business from existing clients and contacts, and also develop a stream of inbound referrals from other REALTORS^®, are doing so with a combination of great service, meticulous data management and regular follow-up.

Building the Basics

The foundation of building a growing referral base is the level of service you provide your clients, says Jeff Wu, CRS, a REALTOR^® with Keller Williams Capital Properties in Fairfax, Virginia. Fully 80 percent of his business comes from referrals and, of that, 10 percent is inbound referrals from other REALTORS^®.

Wu makes it a priority to get to know the contacts in his “core” referral database as well as possible. At 330 contacts, that’s no small feat. He calls them regularly and tries to get to know their needs. If he can refer a local contact to a business or service in the community, he does so. He uses the Referral Maker CRM software system and has several tiers of referral contacts—those who have referred business to him multiple times, those who referred business once and those who may need education on how to refer business. With the latter group, he tries to build awareness because some people just don’t think about making referrals, he says.

When Wu and his team correspond with prospective referral sources, they let them know how the business operates, he says. “You were referred to us by so-and-so, and because of that we’re able to focus more attention on you versus having to spend more time marketing or paying for billboards or other marketing channels. We appreciate any time you can refer us to somebody to whom we can provide a similar high level of client experience,” Wu says. He also holds between four and six events per year and invites top referral sources. These events include a baseball game, movie night and even a “shredding event” for which he rents a large document shredder and lets clients shred their stuff.

Karen Wolff and Rod Hibner, both CRS members and the team heading up Keller Williams Realty International’s Wolff Group in California’s Silicon Valley, are very thoughtful about their networking. Working in the tony San Francisco Bay area means that homes are pricey, so they devote their time to organizations that are likely to introduce them to the prospective customers and referral sources that are in alignment with the upscale properties they represent. Wolff also feels strongly about taking on leadership roles. She joined the board of directors for the university where she earned her MBA—University of California Berkeley, Haas School of Business—which has become a healthy source of referrals. The duo also belongs to ProVisors, a networking group for successful professionals. Hibner says last year’s $2,000 investment in that group returned $90,000 in referral business. Always business-focused, every January, The Wolff Group sends buyers and sellers their closing documents from any transaction that took place the year before as a convenience for customers preparing for tax time.

“It gives them their file to take to their accountant. They always say, ‘That’s so helpful,'” Wolff says.

The Power of REALTOR^® Connections

Bruce Ailion, CRS, who heads The Ailion Team at RE/MAX Town and Country in Marietta, Georgia, says that building his brand and delivering excellent service helps both referral sources and other REALTORS^® trust him with their business. In addition to the referral business he does with previous clients and his referral sources, Ailion focuses on cultivating a strong network of REALTORS^® with whom he can refer business back and forth. Over the last five years, he’s been an officer on his local National Association of REALTORS^® board and attends state conventions. That positions him as a leader and someone who takes the business seriously. He attends RE/MAX brand conventions to meet agents and develop relationships, and he also connects with other REALTORS^® on LinkedIn, where he occasionally posts to remain visible to them.

“Most of what I’m doing is sending instead of receiving, but it’s a great way to meet agents, meet vendors and talk about what you do well,” he says.

Being a CRS member has also been an important source of referral business. He advertises in the directory, paying roughly $1,000 to advertise in the cities he serves. “There’s not a year that goes by that I don’t make $10,000 [in referrals from other CRS agents] from that,” he says. Today, Ailion estimates roughly 6 percent of his business comes from other REALTORS^® each year. Roughly 1.5 percent of his income is made through referral fees.

William Tong, CRS, managing broker, Golden Land Investments & Financial, Inc. in Arcadia, California, is so focused on referrals that he’s actually listed in the CRS system as William “Loves Closing Referrals!” Tong. A licensed broker for slightly more than four years, he has made that “loves closing referrals” phrase both his tagline and his mantra. Roughly a quarter of his $13.5 million in transactions were referral-based last year, and that percentage is growing.

When Tong receives a referral from another REALTOR^®, he keeps the colleague informed every step of the way to ensure they’re comfortable that the transaction is moving along smoothly. Like the other agents, he typically pays a 25 percent referral fee. While he says he sees other professionals pay as much as 50 percent in referral fees, he sees that as counter-productive. “When an agent has given away half of the commission, what incentive is there for them to give their 100 percent?” he asks. (It’s a good idea to check with your state’s NAR chapter to learn about any restrictions governing referral fees.) Once the transaction has closed, he maintains the relationship by ensuring that the referral fee is paid quickly from an escrow account he maintains—usually within a week.

While the methods may vary, the result is the same. By building a network of REALTORS^® and remaining visible through industry organizations, trade publications, social media and personal connections, they have opened up new lines of business and revenue that continue to grow.

Gwen Moran is a freelance writer based in Wall Township, New Jersey.

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