Best Practices With Referral Partners - A Tale of When It Goes Bad...
A year ago I took a pair of referral listings from a local attorney in the area. Both were short sales and both took a lot of hard work and time to only have one get approved to go on to a sale. I offered a percentage of my commission to this attorney for the referral and she agreed. No referral form was ever sent over or signed prior to listing the properties and until this day. I forgot all about the fact that she was looking for a referral fee on these until she emailed about it late yesterday after reviewing my commission statement.
Referral #1 went under agreement with a buyer that I found through my marketing efforts. This buyer had special needs being in a wheelchair and was buying his first property. The short sale process was lengthy and difficult for him. In the end, the short sale was denied because the seller did not want to pay the deficiency the bank was requiring him to pay. He rented it out on his own and I lost the sale. My buyer decided he did not want to look in the winter months and was so frustrated that he gave up on wanting to buy. Lost my buyer. Oh well...it is the name of the game in real estate sometimes. Referral #2 went under agreement and I found the buyer on this listing as well. Awesome! After months and months of hard work and keeping the lines of communication going to keep this buyer happy and on board, we get our approval letters to close. The attorney I was working with emailed me and my seller telling us that my commission has been approved on the HUD by the lenders. I didn't think twice about it and was very happy to hear this. Yesterday I was working the numbers for my office to prepare the commission statement and noticed something was off from my calculated commission versus what was on the HUD. I do the math and find out that my commission as stated in our listing contract was NOT approved and it was knocked down by 1%. Okay...not cool, but okay. I sent in the commission statement at the reduced amount.
Later yesterday afternoon I get an email from the attorney with an attached email from last April asking how she will be paid her 25% referral fee as discussed previously. OH MY! I totally forgot about this conversation back then and we forgot to sign a referral agreement beforehand! I want to honor my word, but clearly these referrals did not go as planned and were much harder than we thought they'd be so I figured I would contact the attorney and see if we could work something out. I emailed her asking her for some compassion to see if she'd be wiling to remove or reduce our original referral agreement since I just found out that she in fact did not get my full commission approved and we lost the other deal (both buyer and seller) due to the deficiency disagreement that had nothing to do with us. She was still paid upfront by her client for both short sales and gets paid on the HUD. No loss to her, I've taken a HUGE loss here with both transactions. Normally I'd never even ask and I'd just eat it, but I've been in a tough spot these days so I had to.
Her response to me was she'd look forward to receiving her FULL 25% on the ENTIRE sales commission. I wrote back and said OK, here is a referral agreement we need signed and submitted before closing this afternoon in order for my broker to pay her. I explained to her that she referred the seller to me and that there was 2.5% being offered for buyer's agent side and 2.5% offered on listing agent side. She'd be getting 25% of the listing side since that is the side she referred to me. She had nothing to do with finding the buyer. She wrote back outraged that I was unprofessional and that I will never get her business in the future. She said it was agreed that she gets 25% of the ENTIRE transaction since I represent both parties and that other agents have honored this in the past for her. I am sorry, but what did you do to produce this buyer and why should my broker be paying you on that portion of our commission??
I am not one that wants to fight. I like to make everyone happy. I worked extremely hard on this and helped keep it together. In the end she's getting overcompensated and I've been cut all over the place and then told I will never get another referral? Thanks, but no thanks. I am a hardworking, ethical Realtor and have many good business partners that would never stab me like this in the end.
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