Difference between a Referral and a Lead
Running an agent-sourced referral platform I get asked “what is the difference between a referral and a lead” all the time. People that are new to the site often ask how soon they will get “leads” or how will they get notified when they get a “lead”. The problem is that the site isn’t designed to be a lead generation site. Its designed for real estate agents with actual client referral to have them placed with another agent, and then have an easy way to track everything with the referral.
What is a referral?
A referral is either when a client has asked to be referred to another agent, or the agent has asked if the client wants to be referred to another agent and the client says “yes”. Its pretty simple. There is a baseline understanding that the real estate agent knows that the client wants to be connected to someone else and the client knows that the agent is going to have someone contact them.
In real estate, a referral refers to a situation where a real estate agent recommends or directs a client or potential client to another real estate agent or brokerage. This can occur when the referring agent is unable to provide the required services to the client or when the client’s needs are better suited to another agent or brokerage.
For example, if an agent specializes in residential sales but a client lead is looking for commercial properties, the agent may refer the client to a colleague who specializes in commercial real estate. In exchange for the referral, the referring agent may receive a referral fee or a percentage of the commission earned by the referred agent.
Referrals are common in the real estate industry and can be a way for agents to build referral relationships and expand their networks. However, it is important for agents to ensure that they are referring clients to agents who are trustworthy and professional, as their reputation may be on the line.
Referrals are usually “very strong” meaning the implicit consent and trust that the client has given to the real estate agent means that they are expecting that the person be competent, prompt and listen to the clients needs so that they can serve them.
Another measure of what is a referral is that it is exclusive, meaning that no other real estate agent has been contacted and given their information.
What is a lead?
A lead is nothing more than when a customer has left some information that they are searching for an agent, either to ask a question to, or interview to hire. There is no inherit trust and no other agent has any input into the selection of the other agent.
Many times the “lead” is not only a lead for that agent, but many agents. Sometimes this is because lead generation companies get paid to provide leads, so they give these leads out to numerous agents at the same time. This practice can be frustration for both the agent and the client, where they are bombarded with different agents trying to contact them and sometimes even having multiple agents “looking for houses” etc for the customer.
In real estate, a lead refers to a person or entity who has expressed interest in buying, selling, or renting real estate. Leads can come from a variety of sources, including online advertising, open houses, direct mail campaigns, and referrals from friends and family.
A lead can be considered “hot” if they are actively searching for a property, have a clear idea of their requirements and budget, and are ready to take action in the near future. On the other hand, a lead can be considered “cold” if they are just in the early stages of their search, have not yet defined their requirements, or are not in a position to take immediate action. Hot and cold real estate leads can come from companies like Zillow or Realtor.com.
Real estate agents and brokers use leads to grow their businesses and build their client base. They will typically follow up with leads to gather more information, answer any questions they may have, and try to convert them into paying clients. This process can involve sending emails, making phone calls, or scheduling appointments to meet with the lead in person.
Generating and nurturing leads is a critical part of a successful real estate business, as it helps agents and brokers to build their pipeline of potential clients and ultimately, close more deals.
Why do real estate agents use the term “lead”?
Lead generation companies have turned the service-oriented real estate industry into a free-for-all competition to see which agents can “convert” the customer to a client. This is usually from a follow-up campaign that can include emails of properties for sale, phone calls, emails, text messages or asking for an in-person meeting.
Many times the customer might have a different opinion as to whether they are working with an agent or not. I’ve seen numerous times where an agent submits an offer with a client on a house, and then a completely different agent is submitting an offer on a different (or even the same house) with that same client. This stems from a client belief that agents are disposable offer monkeys, merely showing houses and sending in offers to collect a big commission at the end of the process. The customer doesn’t usually feel any sense of conviction to their agents and they just drop them as they see fit.
Does ReferralCloud allow Leads to be placed on the platform?
The simple answer is “no”.
Leads are not allowed per se. What is required is that the agent who has placed the referral in the platform has either been asked by the customer if they want an agent to contact them, or they have asked for someone to contact them. There is a sense of awareness that the client knows that they will have someone contacting them.
The simple solution is that agents who are placing referrals in the portal need to have a simple conversation with the client.
The conversation goes something like this:
Agent: “I can have an outstanding agent in that market help you (sell your house/find a house to buy) and guide you through the entire process. You won’t have to waste time sorting through a bunch of agents you randomly find online and I can even help with the handoff so it works best for you.”
Agent: “Is this something you want me to help you with?”
Client: “Yes that would be great, thank you”
Its literally this simple. Get their consent. Get their acknowledgement. Get their permission.
What if I have a “strong lead”?
Real estate agents need to learn to communicate with clients and be open to them about the entire referral process. It is important the client understands 3 things about a possible referral:
- The agent will be selecting the client or using a coordinator to do so.
- The agent will be involved in helping the handoff so that the client doesn’t feel abandoned.
- The agent is going to get some share of the commission in the form of a “referral fee”
What is the referral fee for ReferralCloud and how is it distributed?
The referral fee structure is simple and the same for everyone:
30% gross commission paid to ReferralCloud at closing by the receiving broker.
25% gross commission paid to the referring agent by ReferralCloud.
5% retained by ReferralCloud to run the platform and pay staff.
What if I determine that the referral I have been given isn’t actually a referral but a lead?
There are times agents have asked if they can place a “less than referral” in the platform. In these instances we always get consent from the agent that is being assigned the client that it might not be a referral but instead a strong lead. Agents who are on the platform are not obliged to accept any assignment and can refuse as assignment to not hurt their internal score. Their internal score is measured by how many referrals they have been given vs how many closing they have had. This score also includes the numbers of referrals the agent has placed and how many of those led to a closing.
Currently the strongest metric are twofold. Number of referrals placed in the platform, and number of referrals they have worked on that have closed.
What if I have a specific agent I want to have the referral assigned to?
In some cases you can choose the agent that the client referral will be assigned to.
One of the reasons you can have is that you would otherwise place the referral outside the platform. You may do this because you can negotiated a different referral split, or your broker has a set policy or network they are required to use. Most ReferralCloud agents place their referrals in the platform because they are interested in increasing their score for inbound referrals.
What if the agent that I want to send a referral to isn’t on the platform?
The smart thing would be to send them your personal link that allows them to register under you. When they do this you get $100 when they have their first closing with us. You get this $100 even if you are the one that sent them the referral. You can also just put their email into the platform and the system will send them an invite that allows them to create an account and the system knows they are your invitee.
If you do not see them, its either because they haven’t created a referral agent account yet, or that they didn’t use your link but they just went to the site and created an account. In these instances, just email the ReferralCloud staff and ask for them to be added to your list of referral agents.
Is ReferralCloud the best place for real estate agents to get referrals?
ReferralCloud is a platform that helps real estate agents and brokers connect with other agents and brokers to build referral relationships. It provides a network for agents to share referrals, track their referral activity, and receive referral fees from other members.
Whether ReferralCloud is the “best” place for real estate agents to get referrals depends on a variety of factors, including an agent’s specific needs, the size and composition of the ReferralCloud network, and the agent’s overall experience using the platform. ReferralCloud currently has over 3,000 agents in all 50 states and every major US city.
In general, real estate agents may benefit from using referral networks as a way to expand their reach and connect with other agents who have clients that they may not have access to. However, it’s important for agents to carefully evaluate any referral network they are considering joining, including looking at its fees, the number of members, and the level of activity and engagement among members. Ultimately, the best referral network for any particular agent will depend on their individual needs and goals.