Referral Agreements: A Clean Checklist

Referrals are one of the most trusted forms of professional cooperation in real estate, but they only work smoothly when the terms are clear. A written referral agreement protects both agents, ensures payment, and maintains compliance with licensing laws. Here’s a structured approach to creating a solid, dispute-free document.

Identify the Parties Involved

A proper referral agreement starts with accurate identification of both brokerages. Include:

• Full legal names of each brokerage and agent

• Office addresses and license numbers

• Contact information for both brokers

This section establishes accountability and avoids confusion if one agent changes offices before the transaction closes.

Specify the Client and the Purpose

Define exactly who is being referred. List the client’s full name, their contact details, and a brief note about the service type (buyer, seller, or both).
Be specific — a vague client description can complicate payment if multiple transactions occur later.

Clarify the Fee Terms

The referral fee is typically 25% of the gross commission earned by the receiving broker, but it can vary. Clearly outline:

• The percentage or flat amount

• The point of payment (e.g., at closing)

• Any exceptions or adjustments

State whether the fee applies to a single transaction or to all future business from that client. Transparency prevents misunderstandings later.

Set Effective Dates and Expiration

Referral agreements should have a start and end date. This helps define the active period during which the referring agent is eligible for payment.
Common practice: set expiration at six to twelve months after signing, unless extended in writing.

Include Required Signatures

Both brokers — not just the agents — must sign the agreement for it to be enforceable.
This step aligns with state licensing laws, including those under the California DRE.

Communicate and Confirm

Once the agreement is executed, send a copy to all parties and confirm receipt. It’s good practice to check in midway through the transaction to confirm progress, ensuring the client was contacted and properly served.

Keep Records Organized

Maintain copies of all referral agreements for at least three years, or longer if required by your brokerage. This recordkeeping protects you in audits, disputes, or tax reviews.

Key Takeaway

Referral agreements work best when they’re detailed, signed, and clearly communicated.
Every item — from license verification to expiration dates — contributes to professionalism, compliance, and trust between cooperating agents.