The other day I was reviewing my last doctor’s visit.  At the time of the visit, my doctor referred me to a specialist.  Having been in real estate and gotten referrals from friends, former clients, and every once in a while family, I was interested in comparing the two.

Real Estate Referrals

I have a pretty good understanding of real estate referrals.  While some real estate agents work only by referral, our brokerage actively markets our services to anyone looking to buy or sell their home.  Let’s take a look at a real life scenario.

Home seller Jane is looking for an agent to sell her home.  She tells her best friend Kathy that she needs to find an excellent real estate agent to list her home.  She knows Deerwood Realty is a real estate brokerage that has great listing agents, but she doesn’t know anyone in the office.  It just so happens that Jane’s best friend Kathy used Deerwood Realty to sell her home a year ago and so Kathy tells Jane to call Deerwood Realty.  There is your typical referral.

Here Is Another Type Of Real Estate Referral

Real Estate Agent Bob works in Las Vegas, Nevada.  He has a client, Mike, who will be moving to St. Louis, Missouri for work. Bob knows the real estate agents from Deerwood Realty because he met them at a real estate conference many years ago and has kept in touch.  Real estate agent Bob tells his client Mike that he knows that Deerwood Realty will work with Mike to get him the home of his dreams.   When Mike buys a home with Deerwood Realty as the buyer’s agent, Bob will get paid a referral fee.

You might have noticed that real estate agent Bob got paid for his referral, while Jane’s friend Kathy did not.  Why is that?  By Federal Law, a real estate agent is not allowed to pay a referral fee to someone who isn’t a licensed real estate agent.  While you are free to argue the merits or unfairness of this, at Deerwood Realty, we follow the real estate rules.

You might think to yourself, “If I could get paid just by referring people to agents, as a real estate agent myself, I’ll just refer clients to other agents and not have to deal with driving around buyers or dealing with unreasonable sellers.”  And, you’d be on the right track.  There are real estate agents that only look to refer business to other agents.

Have you ever heard of Zillow.com?  How do they collect money for the referrals they give?  Well, they don’t give referrals; they sell leads to real estate agents.  What’s the difference?  Most of the time, a referral will call the referred, while a lead waits to be contacted.  Does that seem strange?  It does to me.  I can’t tell you how many times I’ve been told to call so and so because they are looking to sell or buy a home.  Those usually don’t go well, as it’s not a great referral.  It’s usually exponentially better than a paid for lead though.

Medical Referrals

In my case, I went to the doctor, and he referred me to a specialist.  This seems to be the norm in medicine.  If you have an issue with your stomach, for instance, you would first visit your primary care doctor, and he would refer you to a specialist.  You might ask yourself, “If I have stomach pain, why don’t I just go to a specialist first?”  That seems to make sense to me, but somehow the health insurance companies have decided that you must get a referral from your primary care physician before you visit a specialist.

How do specialists get paid?  It would appear that they get paid from primary care physicians who refer business to them.  Is that a bad thing?  I don’t know, I’m not in the medical field.  I do know there have been articles written about this here.

A Real Estate Referral and Medical Referral Similarity

One thing that jumps out to me as a real estate broker is the relationship between the primary care doctor and the specialist.  This resembles the relationship between mortgage lenders and real estate agents.  Many mortgage lenders spend the bulk of their marketing energy and expense on developing relationships with real estate agents rather than the general public.  Why?  Because something like 90 percent of their business comes from real estate agents.

If you are looking to refer a friend to a real estate brokerage in St. Louis, I would recommend Deerwood Realty.  We have a unique approach to real estate, and we call it the Deerwood Advantage.   Give us a call today and let us show you how it can work for you.

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