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OFFICIAL MAGAZINE OF THE NATIONAL ASSOCIATION OF REALTORS®



  Creating and Monitoring Business Systems
Policies for Real Estate Operations
 
Financial Management

Is Your Company Profitable?

Tax Record Keeping

Escrow and Trust Record Keeping

Personnel Management

Compensation Policies

Policies for Real Estate Operations

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  Listing Policies and Referral Fees

The most indispensable risk management tools in any real estate brokerage office are well-crafted and actively enforced policies.

10 Listing Policies to Put in Place

Avoid conflicts of compensation by having firmly established listing policies, such as:

1. What types of listings will the company accept—open listings, exclusive listings?

2. What happens when the term of the listing expires—can other associates from the company immediately solicit it or should the listing salesperson have the first opportunity?

3. What rights does the company retain to buyers who saw the property before the listing expired?

4. How and how rapidly are other associates informed of a new listing to avoid solicitation conflicts?

5. What procedures should sales associates follow to ensure that listings are serviced properly?

6. What fees does a seller pay for withdrawal of a listing and how are these fees divided between the company and the associate?

7. What should be contained in the sales associate’s transaction file and what procedures are in place to keep confidential information safe?

8. What commission rates will you pay for listings referred by company management?

9. What are the company’s specific requirements before agreeing to compensate a buyer’s representative? (For example, the buyer’s agent must have written agreement with buyer.)

10. What does the company consider the procuring cause of sale, in the case of non-exclusive listings?

TIP: Listing files should never be removed from the office.

Source: Policies and Procedures Manual, Real Estate School, Tallahassee, Fla.



5 Referral-Fee Policies to Consider

Few companies actually like to pay referral fees, but specific policies can cut down on potential conflict.

Honor referral fees only if the real estate company or associate is informed of the fee before the listing agreement or buyer's agency agreement is executed.

Never pay fees to unlicensed parties, unless permitted under RESPA.

Develop specific policies for what is and is not covered by the affiliate relationship agreements you have with banks, home improvement centers, etc.

Offer discounted services instead of referral fees in instances where paying a fee may not be legal.

Ensure that sales associates making referrals communicate your policies to the other parties involved.

Keep associates up to date about companies in your area that routinely charge referral fees either directly or through a relocation company.



In Real Life: Referral Business: Does It Pay?

Like it or not, referrals are a way of life, says Betsy Roche, vice president of Weichert , REALTORS® in Morris Plains, N.J.

Q: How important are referral fees to your business?

Roche: Rarely does a piece of business come into the office these days without a referral fee. Most of our referrals come from other brokers in the RELO Network, but we also receive them from corporations and relocation companies that assist companies in relocating their employees.

Q: Are referrals a drain on profits?

Roche: Despite the hefty fees, (often 30 percent to 35 percent of the commission on the transaction) referrals do contribute to the bottom line because they represent business we wouldn't have otherwise received. The fees balance out what we would have spent on marketing to generate fresh leads. Also, referrals from relocation companies are usually productive because buyers and sellers in that situation are highly motivated.

Q: Have you had any problems with referrals?

Roche: Everyone gets blind-sided with a back-door referral at some point. This occurs when clients don't inform the broker at the outset that they are entitled to a discount. As the amount of referral business increases, this issue has become more widespread.



Next Page: Tips for Keeping Referral Fees Legal