Referral fee for purchase of a property for yourself?

Question

As a licensed out-of-state real estate agent purchasing a property in another state for a personal investment, is it appropriate and/or legal to ask for a referral fee of the commission? I am not using a buyer's agent so the listing agent would be getting both sides. The property is in VA. I do not want to step out of line (or break the law), but it would certainly help to cover my closing costs if it's allowable.

Nathan Gesner · Answer

1. You don't require a license to sign a contract. You only need a license to represent someone else as their agent.

2. You should NOT let the Listing Agent get both sides. They represent the Seller, not you. You should have your own agent that is representing you and watching out for your interests. Your agent's commission will be paid for by the Seller, so it doesn't cost you anything to hire someone and provides you a lot of protection, an additional set of eyes and ears, and a buffer for negotiations.

3. Shop around for an agent. Explain that you are licensed in another state and would like local representation. Tell them you would like to be paid a referral fee of 25% (or whatever you would normally request). Referral fee should be a percentage of the entire Buyer commission, not just what the agent nets after splitting with their Broker. You can also ask for a flat fee.

David M. · Answer

@Chase Hoover

If you are good trusting the listing agent to do all your paperwork, I don’t see a problem with asking for a referral. I’m not as familiar with reducing the cooperating fee. I guess you could have it applied as a credit, but I forget what’s legal to negotiate fees like that, especially since you are a Realtor but not licensed to broker real estate in the State. Besides, are you really representing yourself? Who is opening the door during inspections, for example? If it’s the listing agent or homeowner, than you really aren’t representing yourself....

Good luck.

Steve Morris · Answer

Most of the time, you'll get blowback from the local agent how they can't pay a fee to someone not licensed locally.

However, there are ways to kick you back something. If nothing else, ask for a price reduction equal to your referral fee desired.

Mike Cumbie · Answer

Hi @Chase Hoover,

Personally I prefer to have someone local represent me. It's always those little nuances that get you. "You filled your 5092.384 form with the village right"? I am currently buying one out of state. I didn't ask for a referral personally. But I think it would be appropriate to request 25% of a side etc. Keep in mind that it has to come to your brokerage you are licensed and then be issued to you (most likely as 1099 income at the end of the year). If they have splits etc it will most likely come out unless you and the primary broker make a deal. We do it for people buying a personal residence but I know many companies that take their cut anyway.

Good Luck!

Chase Hoover · Answer

That definitely sounds like the path of least resistance, thanks

Aaron K. · Answer

@Chase Hoover just make it clear to that agent that you are representing yourself and you would like a 3% discount off the price because they do not have to pay a buyer's agent, if you just need someone to walk you through the paperwork that is one heck of a lot cheaper than 3% of the purchase price in most cases. In some states offer documents are publicly available so you could fill out the offer yourself and everything.

Chase Hoover · Answer

I am technically representing myself but am not licensed in that state so the seller's agent would get both sides of the commission, right? Real estate sales is not my strong suit (I'm a property manager) so please correct me if I'm missing something here.

Aaron K. · Answer

If you aren't buying with a buyer's agent why just no do the research and represent yourself?

Referral fee for purchase of a property for yourself?

Referral fee for purchase of a property for yourself?

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