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Real estate agent finding referral service facts

Internet real estate websites assist people to find investment properties or a new home. Alongside the property listings, a new type of business has emerged " Real estate agent referral websites.

How do real estate agent rating and referral sites work?

These sites offer to assist vendors to locate "the best" real estate agents to help them to sell a property.

Some rating sites are genuine testimonial aggregation sites. These businesses ( often part of major sites like ) publish genuine user comments to assist people in the property agent selection process.

The property referral sites that need careful consideration before anyone should consider using their services, are not as helpful.

Anyone can set up a website and become a real estate agent referral service.

There is no requirement for a licence, as the service does not sell property.

Real estate agent referral service operators do not require qualifications.

There is no meaningful industry code of conduct in place.

There is no regulation of fees.

Referral sites stand in the property marketplace as middlemen - middle women - middle persons. They are spotters who collect the names, addresses and contact details of people wanting to sell real estate and they sell that information to ( some ) real ( as in genuine ) real estate agents for a fee.

That fee, for handing over leads, is often around 20% of the total commission that a real estate agent, who buys the lead, will get if a sale is made.

It is commission sharing with people who are not licensed real estate agents.

Many licensed agents will collaborate and "conjunct" which means that they will allow other agents to introduce buyers to a property that is listed with another agent. That is normal property industry practice.

Agent referral services are different in that they do not assist in the sale process yet earn a part of the commission by being spotters. In effect, many circumnavigate the laws in each State or Territory, which require property industry professionals to be licensed ( vetted and qualified )

It is important to be aware of the fact that many real estate agent referral services do not do any property industry research. Their "recommendations" are often made in response to the highest bid that they receive for a lead. So, the worst agent in town can get a referral on the basis that he will pay the spotter the most money, in percentage terms, of the commission.

The authentic real estate industry is getting somewhat annoyed at the imposition of the referral services in the marketplace.

Stewart Bunn, National Communications Manager, First National Real Estate issued a press release saying,

"A range of real estate agent finder websites are misleading consumers, hounding agents, and potentially driving up the cost of vendors’ selling fees"

‘There are a variety of agent finder websites that have inserted themselves as middlemen in the marketplace, claiming to connect consumers with the best local agents for free, but charging agents a 20 per cent referral fee’'

‘Consumers don’t understand that some of these services simply pay salespeople to find whichever agent is willing to pay a 20 per cent referral fee. If the best agent in an area refuses, as is often the case, they call lesser agents until they find one who will pay the fee. We’ve had reports of agents being hounded with up to five phone calls demanding they accept the referral of a listing.

‘That’s not helping people find the best agent; it’s most likely helping them find an agent who will charge a higher fee in order to cover the cost imposed by them.’

Jeff Grochowski, the principal of Accrue Real Estate agrees:

"It is commission sharing"

"These outsiders are depriving sellers of the opportunity to deal direct with a real estate agent and are locking vendors into paying more commission. Most agents will negotiate with vendors who go to them directly."

"Foolishly, many people have dealt with referral services in the belief that they are independent and using data that validates the decision to refer a person to any agent, when in fact, it is reward driven"

Research for this article has confirmed that vendors and indeed buyers, should do their own research on real estate agents. They should ask:

1.  How many properties have you listed and sold?

2.  How long have you been in the property industry?

3.  How long on average does it take you to sell a property?

Jeff Grochowski, a licensed real estate agent, said,

"If an agent takes longer than six weeks to sell a property on behalf of a motivated vendor then there may be a problem with their selling method"

"When in doubt about how to proceed with the marketing of a property, approach the principal of a prominent agent with a good reputation. Do your own reconnaissance before choosing and avoid the mistake of paying too much commission. Ask him or her, to auction your property and in that way, on average, you will get true market value"

As a rough guide, a property in a affluent suburb in Victoria selling for around one million Dollars will attract a commission of around 1.5%.

A property in a less attractive suburb with properties in the half million dollar bracket will attract selling commission of 2.5%

While most agents will negotiate with a vendor, there is almost zero chance of a vendor saving on commission when a referral service is standing in the background with its hand out for 20% of the commission.