The Rise In Referral Fees: Why Property Business Is Now Lead Generation Business

“Tough times never last. Tough people do.” – Robert H. Schuller

But what if the tough times keep getting tougher? What if the tough times do last? 

What if not even the persistent optimism and vibrant go-get-em dreams of a famed televangelist and motivational speaker are enough to provide a glimmer of light at the end of the long proverbial housing market tunnel? 

What then, Robert?

If you’ve been a real estate agent over the past five years – congratulations.

You’re owed a hug and a good long cry because it’s been a hell of a journey, and you’ve seen some things you probably wished you hadn’t. 

From skyrocketing home prices to quickly climbing mortgage rates, don’t forget about the shortage of inventory and the fact that more and more (and more) properties are selling above list price (bet your buyers are having just as much fun as you are).

The punchline?

It’s tougher than tough out there, and if you’re not one of the 60,000 realtors who left their roles within the first half of 2023, you’ve got more skills than Bear Grylls – and we’re taking notes.

And not to be the rainstorm that soaked through your windbreaker of hope that better is beyond the horizon, but another hurdle has just been added to the path ahead, and we should probably talk about it.

Paying Referral Fees Is Draining The Life From Your Commission Checks

Meant to be a positive aid in you getting your next client on the books; the fact is, 82% of all real estate transactions are referral-based. 

It’s all about who you know, who you meet, or who you can get your next lead from.

Real estate is a people and numbers game, and if you aren’t playing – you’ve already lost.

But what happens when one of the core roads to prospective buyers and sellers starts overcharging you for sending that lead your way?

Your chunk of the commission gets cut, and you’re suddenly left in a dangerous cycle of spending too much for leads and sacrificing the time, energy, and hustle that you personally put in to close that sale.

Break It Down: Where Are These Fees Rising?

Short answer? Everywhere.

Some of the biggest institutions responsible for selling leads to real estate agents across the country are now charging a larger percentage of the sale commission.

Let’s start with Zillow. 

A powerhouse in lead generation and distribution, their referral fees recently rose to a staggering 40%.

Up from an already high 35%, this means for each and every sale you finalize through Zillow’s Premier Agent Flex plan, you are now required to compensate Zillow up to 40% of your resulting commission.

While the exact referral percentage is dependent on property location and sale price, Zillow’s demands are steep. And why wouldn’t they be? With friendly advertising and smiling photographs splashed across their Flex information page, the offer seems almost too good to be true.

Receive leads at no upfront cost and pay Zillow absolutely nothing until your sale closes.

The dream, right?

Well, besides adhering to the Flex Performance Standards, complying with all Flex terms, and then ensuring you pay an astronomically high percentage of your commission before any other required splits you’re forced to make as a licensed realtor (such as to your brokerage, other agents, etc.).

Wait, that’s not your dream? Ours either.   

But let’s not just side-eye Zillow as the only culprit here. 

Redfin’s Partner Program has nearly as high referral fees, such as asking for 40% for homes over $900K in California, New York, Texas, and Florida, to name a few.

While their advertised fee is 30%, the market has clearly hit their bottom line, too.

Realtor.com is also catching up fast. For properties that sell above $150,000, the commission cut is 35%.

Not great, and definitely not cheap. But hey – famed actress and everyone's favorite Effie Trinket - Elizabeth Banks will not act for free!

(Watch the series and learn more about how the odds are never in our favor).

Why Is This An Ongoing Issue?

“You’re doing 90% of the work; why are you only getting 60%?” Sean O’Toole, founder of PropertyRadar, empathizes with the community realtors and small businesses struggling under this relentless weight.

He explains that to survive, “you got to find your own leads.”

Think about it this way.

If you sweat for weeks and months trying to find your buyers the perfect home, spending every waking moment digging for new listings, wasting away all of your daylight hours doing walkthroughs, and open houses, and pounding pavement in preferred neighborhoods.

If you work for hours and hours and hours on end to take that stubborn listing across the finish line.

If you burn yourself out sealing one singular deal and then have to turn around give a hefty portion of that golden commission to someone else?

How are you supposed to survive?

The reality? Many can’t.

Let’s not forget that in 2022, realtors with two years or less experience were only bringing in a median gross income of $9,600. Not to mention, The National Association of Realtors is increasing dues for realtors by 4% in 2024.

And with these rising referral fees?

It’s going to take a lot for that income number to get better. 

So, what can you do as a real estate agent in this economy and in this housing market?

Use Hyperlocal Lead Generation To Protect Your Commission 

The real estate business is dead as we know it.

Gone are the days when a flashy website or the picture-perfect business card, painstakingly crafted in the wormholes of Photoshop, would be all you need to garner enough leads to keep yourself and your real estate business afloat.

Now, the business of buying and selling property is something else entirely.

“The business is the lead generation business,” O’Toole emphasizes.

Getting your worth out of your hard-earned commission should be the fundamental ticket to entry. 

You shouldn’t be required to shell out nearly half of your earnings when you’re the one doing all of the heavy lifting.

Thankfully, there’s a better way.

Hyperlocal Lead Gen Cuts Out The Middle Man

You want leads? You go get ‘em.

There are lots of ways to market yourself within your community and get leads the organic way without those corporations digging into your hard-earned dollars. Read about ten of our all-time favorite ways to make a splash in your neighborhood. 

While you’re at it? Dive into some more hard truths about hyperlocal lead generation (and why you’d be missing out by not coming aboard). 

The bottom line?

You need to leverage lead generation software now.

Well, like yesterday. 

Because you can’t afford for your sales to profit a corporation any longer. Because you and your financial runway are on the clock.

You need enough fresh, exclusive, quality leads without the competition to allow you to help those who need it most while also ensuring you make enough commission to keep yourself in business.

Generate Leads Differently With PropertyRadar

“Our goal is to rescue small business in America,” explains O’Toole. 

Passionate about giving every opportunity for success to the little guy, O’Toole feels strongly about setting up these integral players for freedom from the rising referral fees threatening to take them down. 

And success doesn’t need to look like buying another list of outdated properties with sub-par information to target everyone and anyone. (Gross, does anyone still do that?) 

The thing is, we can do marketing better than that:

Marketing that is targeted (only focusing on the right leads vs all the leads).

Marketing that is relevant (with personalized, local, need-to-know information that’s not big brand vague).

Marketing that is outbound (specifically meeting the consumer in an avenue best for them).

Marketing that is neighborly (always built on trust, community, and knowledge).

So, how does all of that boil down to an actual process? 

Discover

Leverage PropertyRadar to quickly filter by location, demographic, property type – you name it. Find motivated buyers and sellers, find homes with absentee owners eager to sell, find cash buyers, find foreclosures…you get the idea.

Be proactive in your search and watch it pay off, all while being intentional and only seeking out the very best opportunities.

Understand

Use PropertyRadar to dive deep into your fresh leads. Review data, property history, current and past owners, equity, and more. Understand what next steps are best for each, and which will unblock you from reaching out in a personalized, neighborly fashion.

Spamming everyone with offers that don’t relate to them? So old.

Connect

What’s better than having all of this information at your fingertips? Having the ability to follow up on your research with a call, an email, heck – maybe even a postcard sent straight to the homeowner’s mailbox.

And because you’re operating off detailed, fresh information that is updated live from public records, your outreach will be genuine, factual, and exceptionally relevant.

Automate

Compiled a customized list of leads that’s working for you? Take it to the next level with automation.

Receive instant notifications when a new lead fitting your personalized criteria becomes available. Take the next step by getting outreach sent their way without any work from you.

Succeeding In Today’s Market With Big Business Tools

If you’re spending your days swinging into the air against corporations hard at work stealing your dollars, we’ve got to tell it like it is. 

You don’t have a fighting chance.

To win the game, you have to change the game.

And you can change the game by tapping into millions of properties, billions of prospective clients’ phones and emails, and making sure you become a certified expert at the one thing these corporations believe they have a monopoly on - lead generation.

Go show ‘em they’re wrong.

Knock the referral fees and get started now with a free PropertyRadar trial.