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Making Money with Referral Fees

agent hacking Dec 03, 2021

Believe it or not, you can make money in real estate without doing any "real estate" at all.

Let's just assume you don't want to Flip Hack, House Hack, or even Agent Hack (represent your family and friends as a real estate agent).

There's still a way you can make extra income from real estate.

Referral Fees.

What you may not know is that when one agent refers a lead to another agent, the referring agent will often be rewarded with a percentage of the commission (often 25%).

You must be a licensed agent to get this referral fee, but you don't actually have to represent any clients to make this extra money. And getting your license is a fairly quick & easy process. See the post entitled, The Best Places to Get Your Real Estate License.

We have a neighbor that does this exact thing. She was an active real estate agent for years, but now that she's older, she really doesn't want to be active in the business anymore. But, of course, she'd still love to make some extra money. The way she does this is by referring all of her contacts to another agent that gives her a cut of the commission. And she doesn't have to do any work. Brilliant!

Let me give you a practical example of how this could work:

  • You get your real estate license & tell your family & friends that you can give them a referral to a good real estate agent the next time they sell their home & buy another one. You probably already know a great real estate agent in the area & you talk to them about a commission split for all referrals you send to them. 25% to you is a common split, but you could negotiate higher or lower with that agent.
  • When your parents call you up letting you know that they're ready to sell their house & buy another one, you refer them to this agent. Let's say they're going to sell their house for $350,000 and upgrade to another house for $450,000.
  • On the $350,000 transaction, the commission to the listing broker will likely be around 3%. That's $10,500. Remember, 25% of that is now owed to your broker. That's $2,625. Let's assume you found a flat fee broker like we recommend on this blog who charges a $500 flat fee. In that case, you'll get a check for $2,125 for that referral.
  • Now the agent helps your parents buy a $450,000 house. At 3%, the gross commission is $13,500. 25% of that goes to your broker — that's $3,375. Your broker takes a $500 flat fee and send you a check for $2,875.

$2,125 + $2,875 = $5,000

Think about that!

Without doing really any work at all (besides getting your license), you just made $5,000 by referring your parents to this real estate agent.

Let's say you referred 2 people per year (one family member & one friend) that use the agent to sell their home & buy another home with numbers similar to the ones above. That's $10,000 extra for your family without having to do hardly any work at all! Wow!

What a great & easy way to earn some extra income for your family!

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