Policy Statement on the Timely Disclosure of Real Estate Referral Fees
The payment of referral fees between licensed real estate organizations is a common practice. Nailed It Tallahassee, LLC drafted this policy statement in an effort to provide guidance on the timely disclosure of referral fees.
In addition to brokerage firms, other licensed real estate organizations that may legally participate in referral fee arrangements include:
· Licensed corporations (with in-house employee relocation or other employee benefits programs)
· Licensed relocation management companies (RMCs)
· Licensed affinity program, lead generation, or other groups
· Licensed internet referral networks
Nailed It Tallahassee, LLC research has shown that when real estate referral fee complaints arise, they are most often the result of a lack of awareness of the referral fee requirement at the beginning of the transaction by real estate licensees, transferees (which include employees and/or applicable program participants), or both. Complaints can arise on the departure/selling and/or the destination/buying sides of transactions if all appropriate parties are not properly informed. Frequent and numerous opportunities exist for buyers, sellers and real estate licensees to come into contact with each other (i.e., through social/local networks, phone and internet inquiries, open houses, etc.), which make disclosure and continuous education and communication efforts about the presence of referral fee relationships essential.
Timely disclosure is a critical factor in evaluating what constitutes a properly placed referral fee request. This policy operates under a "first contract, not first contact" philosophy. In other words, properly executed, legal, contractual agreements may supersede relationships or contacts licensees have with transferees, depending on the order in which they come and subject to the provisions of state laws. Therefore, referral fee program disclosure, education and communication efforts are essential. These contractual agreements include, but are not limited to:
· Blanket agreements (and/or other contractual service agreements)
· Listing agreements
· Buyer brokerage agreements
· Purchase and sale agreements
The Policy Statement on the Timely Disclosure of Real Estate Referral Fees assumes the following:
· Full, timely disclosure of the referral fee obligation
· Clearly defined processes that create the obligation to pay a referral fee
· Supporting education and communication to help ensure all parties are aware of and agree to those processes and know of the obligation to pay a referral fee at the outset of the process
1. PROPER PLACEMENT OF REFERRALS
Clearly defined procedures are necessary to ethically and legally support the collection of referral fees. Referrals can be established via phone, fax, e-mail, or e-commerce system. Best practices indicate that referrals outline specific details, including the amount of the referral fee, and that phone requests be followed up and/or be confirmed via other written means, such as fax/e-mail, e- commerce system, etc.
The referring party should exercise care to be sure the referral is being sent to only those individuals who have the authority on behalf of the brokerage firm to contractually agree to pay a fee or portion of the commission to the referring party. Again, best practices indicate that procedures should be in place for checking referral obligations on the part of both referrers and referral recipients.
The referral fee request should occur prior to the execution of a valid listing agreement, buyer/broker employment agreement, or purchase agreement.
Referrers are obligated to disclose the referral fee requirement to the referral recipients.
Real estate firms participating in referral programs are responsible for disclosing the existence of business relationships which may obligate licensees to pay referral fees.
In the cases of blanket agreements, referrers still should make every effort to disclose the referral fee obligation according to the terms/timing requirements specified in the agreement. A blanket agreement must be clear enough for the Referral Recipient to understand when a contact and potential transaction will be considered a referral. This can be done through several means, including: (A) the Referrer providing the Referral Recipient with a listing of participating organizations that are subject to the Referrer’s programs; (B) the Referrer setting forth in advance, procedures or actions from which the Referral Recipient would be aware that the contact and potential transaction is the subject of a referral; or, (C) a communication from the Referrer that the contact and potential transaction is a referral. In situations where there is a communication from the Referrer, the communication of the referral would need to be based upon a pre-existing relationship with the seller/buyer that was intended to result in a referral; and occur, either (1) before a contract for the purchase or sale is put in place or, (2) there has been significant brokerage activity on the transaction, in either case so that the seller/buyer contact with the broker can reasonably and proximately in time be understood to arise from the referral relationship that existed before the contact. As noted above, blanket agreements should not be used as means to avoid or circumvent timely disclosure responsibilities.
3. EDUCATION AND COMMUNICATION
The goal of referral fee education and communication is to ensure upfront that all parties are aware of, and agree to, the details of the referral requirements, including the obligation of the referral fee.
Referrers are responsible for implementing programs for those who administer or participate in their referral programs. This may include, among others:
· Different types of transferees as identified in the introduction
· Counselors, managers or other employees who counsel or assist individuals moving
· Department managers and others who notify or otherwise advise eligible transferees at the first discussion of the move
· Real estate licensees
· Real estate web site administrators
As failure to follow the proper referral fee program procedures may result in a loss of benefits, reduction in payment and/or additional "out of pocket" expenses to transferees, it is essential that such information be communicated to transferees at the start of the process.
Appropriate audiences should also be educated to the fact that individual agents cannot act on behalf of their companies. Therefore, blanket agreements must be signed by the broker and referral initiations placed with or confirmed by only those with the authority to accept them.
Referral recipients, or those who agree that they or their designated representatives will pay a referral fee, are also advised to establish a general training and communication program for the members of their affected audiences. These may include, among others:
· Real estate licensees
· Real estate web site administrators and/or call center personnel
Best practices dictate that sound communication and educational efforts should include:
· Details of internal company referral policies, and in particular, the definition of what constitutes an obligation to pay a referral fee.
· Formal registration procedures to help eliminate duplicate referral fee requests and assist in determining the crucial timing aspect as outlined above.
4. POLICY SUPPORT
The effectiveness of this policy depends on its voluntary adoption by those responsible for managing referrals. It should be reiterated that in addition to the above obligations on the part of the referrer, receiving brokers, too, have a responsibility to educate their licensees on proper referral practices. All parties in the referral transaction must comply with the policies outlined herein.
Should referral fee disputes arise, the end result might well be averse to the transferee if the sale or purchase was not closed. Parties are encouraged to establish internal procedures to resolve such disputes. In addition, Nailed It Tallahassee, LLC also provides a resource to facilitate dispute resolution known as the Interchange, which is detailed in the following section.
5. RESOURCES FOR RESOLVING COMPLAINTS: THE INTERCHANGE
Nailed It Tallahassee, LLC maintains an online, confidential, referral fee complaint resolution mechanism known as the complaint email. It is designed to facilitate the communication of after-the-fact referral fee concerns and the collection of general information that will aid in Nailed It Tallahassee, LLC efforts to discourage and ultimately eliminate practices which unfairly cause adverse effects on transferees, RMC’s and real estate brokers. The Interchange is free of charge and is available to anyone; membership in Nailed It Tallahassee, LLC or support of its policies are not required for use.
The Interchange has been created to help organizations raise specific issues or practices that may not be in compliance with this policy.
The Interchange operates in the following manner:
· Complainant submits the confidential details of the complaint via The Interchange web site.
· Complainant receives an e-mail confirming receipt of the submission.
· The respondent conducts the evaluation and decision regarding the
issue; replying to the complainant within 10 business days. If extenuating circumstances prevent a reply within this timeline, complainant is notified by e-mail.
As Nailed It Tallahassee, LLC role is to monitor and facilitate only, and does not act as an arbitrator of disputes. Once Nailed It Tallahassee, LLC notifies the respondent of the complaint, the parties have the sole responsibility of attempting to reach a resolution and Nailed It Tallahassee, LLC involvement ends.
6. POLICY SUMMARY
· The payment of referral fees between licensed real estate organizations is common.
· Nailed It Tallahassee, LLC research has shown that when real estate referral fee complaints arise, they are most often the result of a lack of early awareness of the obligation to pay a referral fee on the part of real estate licensees, transferees, or both.
7. CURRENT PAYMENT SCHEDULE
· The payment of referral fees between licensed real estate organizations is for fully executed deals with procurement, full representation and involvement of the buyer by the agent receiving the referral, the fee is 2.5% of the home or land sale price which ever or both that are applicable to the transaction per real estate board rules. The buyer’s agent must have a letter of buyer representation agreement filled out with the buyer, and commission agreement, to be emailed to email@example.com or presented at the first meeting between the buyer, the buyer’s agent and Nailed It Tallahassee, LLC.
· Nailed It Tallahassee, LLC will offer a flat $2,500.00 referral fee to any authorized real estate agent or person as outlined in this document that brings a buyer to Nailed It Tallahassee. The buyer must agree to purchase and or build a home with Nailed It Tallahassee, LLC for the agent to qualify for a referral fee. The flat referral fee is an option of management to be offered to any qualified agent that does not meet the conditions for a standard referral fee that involved full buyer representation and procurement. All fees are subject to change at any time, this document is not a guarantee of any payment to any parties.
· Nailed It Tallahassee, LLC’s standard policy is that the less work an entity providing the referral provides the less the referral fee, the referring agent is likely to receive. A mere mention of the company Nailed It Tallahassee, LLC in general without sufficient follow-up paperwork and communication with Nailed It Tallahassee, LLC about the buyer’s representation, needs, and intent may not warrant referral compensation. If the agent mentions other builders simultaneously when discussing builders with a client and Nailed It Tallahassee, LLC is not the exclusive builder mentioned or promoted, no compensation or referral fee may be expected by the agent.
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