Real estate referral agreements: A comprehensive guide
What is a referral agreement in real estate?
A real estate referral agreement is a legally binding contract between real estate agents, brokers, or service entities (such as mortgage brokers or title insurance agents) that facilitates the referral of clients from one party to another. The fundamental purpose of this type of agreement is to allow parties to share or process clients seamlessly, whilst ensuring compliance with relevant legalities and best business practices. This kind of arrangement can greatly expand the networks of both parties and link sales or services in a way that contributes to a variety of possibilities in a real estate transaction .
While the specific contents of such agreements can vary based on the terms set by the parties, typical components include an exclusionary provision (which states that no compensation will be provided for transactions in which a referral does not occur), details on compensation rates or amounts, the duration of the agreement, obligations of both parties, and jurisdictional specifications that point to where legal action would be taken if necessary.
It is essential that real estate referral agreements are not construed as violating any industry statutes, such as RESPA, and require a careful eye from all parties involved.