Fair Referral Fee for Out of State Agents?

[Joseph Cacciapaglia]

I'm in a market that gets a lot of interest from out of state investors, and because of this I often get asked by out of state agents if I will pay a referral fee if they send investors my way. I've only been involved with a few referral transactions so far, but expect that to increase, as more investors become interested in OOS investing.

I'm wondering:

What is a fair referral fee amount? Is it a flat amount, or a percent of my commission?

Do you expect anything other than contact info and an introduction? Would you pay more if the agent had completed deals with the client in the past, or if they brought them to you pre-qualified for a loan? Does the quality of the client change the fee you would pay?

What about future transactions? Do you continue to pay in the future, or maybe only if the client comes back through the agent again?

Do all states allow agent referral fees? I know we had pretty specific rules for it, when I worked in NJ/PA. Here is TX, it seems much less formalized.

What other issues arise with referred business?

[Russell Brazil]

25% referral fee is the industry standard. Yes you can pay a referral fee to any licensed person in any state. It goes to their broker just like a normal commission would.