Real estate referral fees may affect what home buyers pay, report says

(InvestigateTV) — Many home buyers and sellers start their search for an agent with a referral. Sometimes that comes from a friend, relative or coworker. Other times, it may come through an online platform or matching service.

But a new report from the Consumer Policy Center says consumers may not realize there can be a business arrangement behind some of those referrals.

The report looked at real estate referral fees, which are fees an agent may pay to a website, matching service, or another broker for sending them a buyer or seller.

Stephen Brobeck, a senior fellow with the Consumer Policy Center, said those fees can take a large cut of the agent’s commission.

“Eventually, the buyer will have to pay that 30 to 40% fee, which means that for certain, they will not be able to negotiate a commission that’s lower than the 3%,” Brobeck said.

The report’s argument is that the fee does not usually show up as a separate bill to the buyer, but Brobeck said it can still affect what consumers pay if it makes commissions harder to negotiate.

InvestigateTV contacted major referral-fee services for comment.

A spokesperson for Zillow responded, saying in part that the report has little to no evidence for its claims.

The company said the report is right to point to Zillow’s emphasis on connecting potential homebuyers with high-performing agents, and to the benefits these referrals can provide to agents.

The spokesperson also said there is no evidence showing referral fees actually impact commissions, adding the vast majority of buyers and sellers feel their agent’s commission was either fair or too low, not too high as the report suggests.

Brobeck said a more effective approach is to do their own search, to look at local agents, talk to friends, relatives and business associates for referrals, and then do their own research, interviewing at least two or three agents before making a selection.