ReferralCloud is a referral coordinator for all real estate agents. We assist in the selection of the referral agent, draft referral agreements, and the tracking and payments of the referral fees between agents in a transaction.
What is wrong with the current way Referrals work?
There are a number of problems with the way referrals are given between real estate agents. The biggest is that other than the referral fee (usually 25%) there is almost no other benefit to the agent that gives the referral. In a perfect scenario, as soon as an agent gives a referral to another agent, that agent should also receive a referral to their market. The other major problem is that there isn’t an existing solution to track referrals, and ensure the referral agreements are properly executed and inclusive of the scope of the referral.
Another problem with how referrals work today is they are arbitrary.
Usually what happens when a real estate agent has a referral in a market goes to a Facebook referral group and types in “Looking for an agent in Las Vegas for a referral”. Such a post would likely lead to over 100 responses within a 20 minute timeframe. This would lead to the agents being tagged responding to the post and sending multiple DMs to the agent. Its highly likely that most the agents are suitable for the referral, and selection of the agent to give the referral to is ultimately a random event that does not benefit the agent placing the referral.
ReferralCloud solves this problem and makes giving referrals easy and rewarding.
How much is the referral fee?
We charge a 30% referral fee based on the gross commission at closing. So if the gross commission check to the broker is $10,000 then a $3,000 check is sent to ReferralCloud at closing. Once received, a $2,500 check (25% of gross commission) is sent to the broker of the agent that referred the client. The difference is to keep the network and tech running to benefit the agents.
Why did you build ReferralCloud?
We built ReferralCloud to solve a number of problems. These include but are not limited to:
- Rewarding agents that have referrals to give with inbound referrals.
- Making selection of the referral agent faster and less arbitrary
- Managing the referral paperwork
- Tracking the progress of the client
- Ensuring agents are paid for their referral
Lets start with the first problem. Rewarding agents for giving referral through the platform. This is handled through a process known as a clearinghouse.
A clearinghouse is a central coordinator of fragmented or uncontrolled events. A good example of a clearinghouse is what airlines use when they cancel a flight. When an airline cancels a flight, many times they send the passengers over to a competing airline. The competing airline honors the ticket for no extra fee (in most cases) and the passenger travels to their destination.
Because this happens on multiple airlines, they in effect, share the passengers back and forth. So if a United Airlines flight from Chicago to Honolulu cancels, any passengers that can’t be booked on some other connecting flight are sent over to American, and they fly the same route. Lets say the same day an American flight to Paris cancels. Those passengers would be sent to United (until the plane is full). This process can get extremely complex, especially since all fares are not the same. So the airlines have a clearinghouse that coordinates which airline owes money to the other airlines at given intervals.
How does this idea of a clearinghouse pertain to real estate referrals?
Lets say an agent in San Diego has a referral to Miami. There is almost no chance that agent in Miami can reciprocate with a client in San Diego. Then let’s say that the Miami agent has a client who is selling a house in NY so they do that referral. The NY agent then finds out that their seller, who was referred from the agent in Miami is moving to San Diego. The agent in NY doesn’t know that he should give it to the agent in San Diego that referred to the agent in Miami which led to him being able to give a referral.
This is why a clearinghouse is a perfect way to solve this problem.
Don’t franchises already have their own referral networks?
Yes. Many of them do. The problem still, is that they aren’t large enough to make sure the network works effectively. What if the agent in the above example that referred to Miami used their franchise referral coordinator? Then the agent in Miami did the same, but lets say the franchise doesn’t have an office in NY where they need to place the referral. They’d just use some random process to get an agent to send that referral to. Doing this would break the clearinghouse model since the clearinghouse of a franchise only includes agents in their franchise.
Another problem is that the agent in NY won’t use the referral coordinator from the franchise, they’d just place the referral themself, and the agent in San Diego would not get the client.
Another problem with the franchise/broker coordination model is that what happens if the agent switches to another company? Those coordinators aren’t going to give a referral to an out of network agent that switched companies.
A single coordinator solves this problem, is agnostic and is tied to the agent that gave the referral, regardless of what company they happen to be at. It is strongly recommended that ReferralCloud agents use an email that is under their control and not tied to their broker/franchise.
What if I’m in a market that doesn’t have a lot of people moving to it?
Most markets meet three criteria. People relocating to it (Austin, Miami, etc). People leaving it (New York, Chicago, San Francisco, etc). People moving in and out (Las Vegas, Dallas etc). Just because you aren’t in Orlando doesn’t mean you won’t get inbound referrals. Currently about 35% of the referrals placed through the site by agents are for listing referrals. This means people are selling in those markets. Most referrals in Florida and Nashville are for buyers since those markets have far more people moving there.
It doesn’t matter which market you are in. There are referral agents needed in all markets, especially small towns.
How long will it take to get a referral in my market?
If you are in a market with 30 agents that are in the network, it could take longer than if you are the only agent in a market. Also if 5 agents in that 30 agent market have placed referrals in the platform, those agents will get the next 5 referrals. It is not only important to place your outbound referrals through the platform, but it is highly beneficial since doing so outside the marketplace means there is no chance of reciprocity.
What if I already know someone I want to send the referral to but also use the platform?
First we will check to see if there is a referral agent in that market that’s due an inbound referral. If there is, we will put you in touch with them and maybe you will decide to use the clearinghouse to place the referral and get credit for it to make you a higher priority. In markets where no agents have placed an outbound referral, simply get the agent to create an account and we will assign the referral to the agent you want to work with.
What’s the best way to get more referrals with ReferralCloud?
These are the best practices to maximize your getting referrals.
- Have a complete and up-to-date profile with picture
- Use the platform to place your outbound referrals
- Invite other agents into the platform through the affiliate marketing program.
The team at ReferralCloud is committed to helping as many real estate agents as possible get more referrals. The network only works if agents trust and use the system. As we grow, the network becomes stronger and stronger. Once we have about 40,000 agents on the platform we will be larger than any other franchise referral network and become the de-facto marketplace for agents to transact.
We look forward to helping agents with their referrals and finding great agents in other markets to help their friends, family and clients who are looking for a great agent.