P. Barton Erickson
e-PRO, SFR, SRS 
REALTOR since 1987
Co-Founder of the HouseJeanie Team

Finding a Realtor, Finding a Home,
or Selling your Home Using
Referrals or Relocation Companies
(It's a Jungle Out There)

by P. Barton Erickson, e-PRO, SRS

There's no shortage of Real Estate Web Sites on the World Wide Web. In fact, for the Internet Home Buyer and Home Seller, it is a complicated maze for serious searchers of Real Estate or Realtors. With the following we hope to help you understand that maze or at least give you a better understanding of how to deal with it.

Referrals and Referral Companies:

Mixed in with the legitimate Realtor web sites are the Pseudo Real Estate Company dot-coms like ServiceMagic, ZipRealty, HomeGain, Lending Tree (Realestate,com) and HouseValues. They have figured out how to make money from Realtors by obtaining online leads. These companies, called "Lead Flipping Companies" by Realtors, are not genuine real estate brokerages or do they conform to the accepted standards of a real estate brokerage. They are set up solely to scrape names and telephone numbers off the internet of people interested in Real Estate. Their business models may vary, but they all make their money by charging the Realtor for your name and a telephone number.

For example Lending Tree takes an up front fee from the Broker/Realtor (free if the broker/Realtor provides them with the listings of homes for sale). Then Lending Tree charges the selling Broker/Realtor a 35% referral fee, keeps 17% and gives 18% to the buyer in the form of store coupons.

There is little to no value for the home buyer/seller to be gained by signing up with any of these companies. The name and phone numbers are given to as many Realtors who are willing to pay for them. Very little effort is made by these companies to assure that the Realtors are full time Realtors, experienced or that the information about the Realtor that they receive and give to you is correct.

Agent Generated Referrals:

To add to the confusion, Realtors also like to get into the action of referrals. It's all about money.

Many Realtors actively seek or give referrals from/to other Realtors. For example, if you are selling your home and moving to a another State, your Realtor (A) may ask you if you want them to refer you to another Realtor (B) in the area you are moving to. For that referral, Realtor (A) could receive as much as 40% of Realtor (B)'s commission.

If you have been surfing the web you may have come across Realtors that may, or may not, identify their location that would be willing to refer you to an out of area Realtor. Same thing, the Realtor that owns the web site and gets your name and telephone number and passes it on could receive as much as 40% of the Realtor's commission.

We prefer the self help approach, with no sharing of commissions. Over the years we have been a member of a Real Estate List Service that has over 8,000 Realtor members across the country. By monitoring their posts on the list service and having conversations with them, we have developed a short list of competent Realtors located in the various States. It's not perfect, but it's a good place to start. Go to The HouseJeanie Realtor Locator.

Note: All this being said, if the Realtor who has your name, phone number, knows you, then goes to the trouble of interviewing the prospective out of town Realtors, gives you the names of two or three Realtors in order for you to pick one, there is some value added and the referring Realtor deserves a small referral fee for their time spent.

Relocation Companies:

Relocation Companies have been around for a while and operate in a similar fashion to the Referral Companies described above.

Basically, a relocation company is an independent company (They could also be a division of a large Real Estate Company) that assists families or employees of companies to move or relocate to another area or state. Relocation Companies in turn contract with real estate companies or individual Agents to sell or list properties or represent buyers in the purchase of properties. These relocation companies are not required to be licensed in Real Estate any State by any Real Estate Board.

If a person is using a relocation company contracted by their new employer, the relocation company will, by contract, demand a large percentage of the real estate company and agent's commission. Most relocation companies are also have contracts with Mortgage Companies, Moving Companies, and in some cases the Insurance Companies and demand a percent of the fees from them also. (This compensation can amount to 15% to 30% and in some cases 50% of the commission or fee.)

Real estate companies are selected generally by relocation companies based on the highest percentage of commission given to the Relocation Company and the number of "referrals" the real estate companies give to the Relocation Company.

If the buyer or seller's employer has signed a contract with a relocation company the buyer or seller will have no say in the selection of these service companies or a Realtor, unless the service companies or Realtors agree to cut their fees.

Post Script:

Ultimately as the buyer or seller you must be in control of the selection of a Realtor and the service(s) you want to receive. You must be proactive. In using any of the companies or services described above you may or may not receive a happy Real Estate experience. That in a large part is determined by yourself and the decisions you make.

Also, have the courtesy to inform the Realtor you are working with of all relationships with other Realtors, Relocation Companies or Referrals. There is nothing more disturbing than to find out half way through that you are going to get a cut in pay because someone mentioned your name or they have a relative in the business.

Realty Times and Columnist Blanche Evans has this to say to consumers about Referrals and/or Relocation Companies
(See  http://realtytimes.com/rtapages/20030808_cbs.htm):

"Consumers use these lead generation and referral companies because they believe they just might get something special - a better agent or a better commission rate or both. What they don't know is that they are getting the same agents they would have found any number of other ways, only now there is a referral fee to be paid which is covered by a larger commission because that is the only way brokers can afford to pay such high referral fees."

MarketWatch editor Steve Kerch says this in the article "Consumers As Commodity" See (Consumers As Commodity published on CBSMarketwatch 8/7/2004): 

"Internet services that match borrowers with lenders and homebuyers and sellers with real estate agents earn good money for "qualified" consumers they present to clients.

"The services say they screen and monitor their clients -- bankers, realty agents and contractors -- but the fact is the services have little incentive to strenuously police those on whom they depend for revenue."

You are welcome to use our HouseJeanie Realtor Locator. No fees will be paid for this service. In our selection of Realtors, we have paid particular attention to Realtors that have their personal and informative web sites. These Realtors are also competent in the use of email for communication with "out-of-towners."