“A lead is simply an inquiry on a property. A referral is a lead that’s been qualified: The person giving the referral has taken time to ask specific questions that qualify that lead.” — agent quoted in the 2018 Agent-to-Agent Economy study by ReferralExchange
For newer agents entering the industry, leads are an important part of how they grow their business. However, for more established agents, referrals represent a real opportunity not just in business coming in but in creating a network where they can refer clients out. Many clients may need an agent outside their main agent’s geographic area or service parameters. When that occurs, some clients may feel they have to go it alone, however having a referral system that supports their sphere doesn’t just provide the agent with additional income, it delivers peace of mind for agents and their clients.
What does a strong referral business look like and how can this be a potential “side hustle” for agents, providing a secondary income stream?
ReferralExchange recently published its second referral report, and the data continues to show that doing more referral business just makes sense – both personally and financially. In fact, this year’s data showed that the value of referrals is increasing along with real estate prices.
The report surveyed over 1,800 top-performing agents who are members of the ReferralExchange Network. The majority of agents participating agents had over 14 years of industry experience and had done more than $5 million and/or 20 transactions in the past year.
The full report can be found here, but highlights of the report include:
Referrals can have significant impact on your bottom line. While the amount of referral business varied due to average price point and location, over 40 % of the agents surveyed earned $10,000 – $50,000/year in referral fees.
- 25% earn $10-$20K
- 17% earn $20-$50K
- 8% earn $50K+
Most agents are part of at least one referral network. And, over half of them are members of 2 or more networks. Over one third of them report that 20% of their inbound referrals come from these network(s).
Most of the agents don’t purchase leads, and for those who do, many don’t track the annual income that they earn from them
- 66% purchase no leads
- 16% purchase up to 50 leads/year
- 16% purchase +50/year
- 27% of agents did not know how much income they earned from their leads
Agents generally receive more referrals than they send out. Most agents who send out referrals are more concerned with a positive client experience and maintaining their reputation vs. the income they end up earning. Research shows that sending out a greater number of referrals can definitely impact their annual revenue.
Timing is everything – Agents define “referrals” as prospects who are ready to act: We asked what they think the difference is between a lead and a referral. Most felt that a referral is a person who’s made contact with the intent to sell or buy. Whereas referrals are considered “warm” and “vetted,” leads are described as “cold” and “unqualified.”
Take advantage of ways to increase your referral business
Many referral networks allow agents to submit referrals in addition to receiving them. By actively generating and submitting more referral business, agents can counter local lack of inventory. Ways to generate referrals include:
Expand your sphere of influence to include friends, colleagues and family members. You need to let everyone they know they can support their real estate needs – no matter where they’re located.
Always ask for both sides of the business if you have a client who is moving into/out of the area. For buyers, offer to help them find an agent wherever they’re moving from. For sellers, continue the relationship by finding an agent wherever they’re locating.
Work your local connections with local vendors such as nail/hair salons, dry cleaners, doctors, etc. Many of them know who’s moving in/out of town so let them know you can help provide connections anywhere in the country.
Take advantage of chance encounters when you’re out-and-about. People love talking about real estate and any conversation – even when you’re on vacation – can be a referral opportunity
Become the local relocation contact for small to midsize local companies or organizations who might not have an in-house relocation contractor. You can provide this service for employees moving into – and out of – your area.
Improve the ROI on your marketing and advertising efforts by monetizing every lead – even those outside or your preferred price point or property type. Consider referring out those leads. While you won’t earn a full commission, a referral can provide you with additional marketing funds.
Your real estate business is bigger than you think. ReferralExchange matches your clients with 3 great agents and pays you a 25% referral fee at closing.