Transcript Real Estate Coalition Update and Action Plan

Coalition Corner:
Business training tools for HR staff, real estate licensees and other
service professionals in the relocation and real estate industries
Referral Fees
© 2005, Employee Relocation Council/Worldwide ERC® Coalition
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Program Objectives
• This program supplements a monthly editorial feature in
ERC’s Mobility magazine
• In this segment, users will learn:
– How to define a real estate referral fee
– To name “trigger mechanisms” that help outline
proper procedures
– How to define “blanket agreements”
– The importance of clear and timely communication
for all parties impacted by referral fee programs
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Referral Fees Defined
• A real estate referral fee is a portion of a
broker’s commission paid to a party that
provided either a listing or selling
prospect to that broker
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Referral Fee Programs
• Referral fee programs are commonly used to generate
additional business and income for:
– Real Estate Practitioners/Brokerage Firms
– Relocation Management Companies (RMCs)
– Corporations
• Referral fees can be generated on either the departure (selling)
side, or destination (buying) side of a move
Important Note: Referral fees can only be paid to another
entity holding a real estate broker’s license
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Referral Fee Programs
• The Coalition’s Policy Statement on the
Collection of Referral Fees
(http://www.erc.org/coalition/library/referral_policy.shtml)
outlines two basic strategies to follow when
placing a referral:
– Proper/timely disclosure of referral fee program
details
– Supporting education/communication for those
impacted
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“Trigger Mechanisms”
• The party receiving the benefits of referral fees has primary
responsibility for timely disclosure of program details. Certain
“trigger mechanisms” can help define the process:
– Service orders from an employer, RMC, or affinity group
establishing the referral, ideally provided to real estate
relocation department or other authority
– Notice to a licensee by an individual covered by a referral fee
program arrangement (and written confirmation by licensee)
– Acknowledgment by a licensee of a “blanket agreement” in
separate, written form, ideally used in conjunction with the
above two steps
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“Blanket Agreements”
• A “blanket agreement” occurs when a move
management organization and a broker outline a
referral fee arrangement in exchange for volume of
business
• Brokers opt to sign such “blanket agreements” at
their own discretion, and agree to pay a referral fee
on any transaction for that particular client/employer
• Regardless of how contact was made between the
employee/program participant and agent, a referral
fee will be owed to the referring party if such an
agreement exists
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Referral Fee Programs
• “Referrers” (employers, RMCs and affinity groups) need to be
responsible for communicating the details and expectations of the
referral fee program to the appropriate audiences:
– Transferring employees/affinity program members
– Department managers and others who notify or advise
transferees/program participants
– Relocation/HR managers and other personnel who counsel
transferees/program participants
• Communications should note that relocation/affinity benefits may
be negatively impacted if disclosure/program rules are not followed
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Referral Fee Programs
• Brokers should also be responsible for communicating the details
and expectations of referral fee programs to their appropriate
audiences:
– Relocation department personnel
– Branch managers
– All licensees in the firm
• Communications should note the proper “trigger mechanisms” as
well as questions for the licensee to ask – early in the process –
that may help alert him/her to the fact that a referral fee may be
warranted
Note: See http://www.erc.org/pdf/BrokerStop.pdf
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In Conclusion
• Properly structured and communicated referral fee
programs are an accepted practice in the relocation
industry
• Complaints generally arise when licensees are
unaware of the requirement at the beginning of a
relationship, so timely and clear communications about
the details and expectations of the program to all
parties involved are essential
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