Do Referral Fees Add Cost to the Consumer?
Lately, there have been a few online postings that referral fees should be illegal because they add cost to the consumer. I’ve read all the arguments, yet I’m not sure how they arrive at that conclusion.
I could see the argument, if I were to raise my cost to the consumer on transactions where I have agreed to pay a referral fee. While this may happen from time to time, I believe the vast majority of brokers see it as the cost of doing business. I either pay to advertise, farm, or some other means of acquiring new clients or I pay a referral fee to an out of area broker who has a client needing to buy or sell a property in my area.
While I don’t work relocation business, relocation companies collect referral fees from brokers who accept their relocation clients. Why is a broker-to-broker referral any different?
The bottom line is that unless brokers raise prices on transactions involving a referral fee, there is no additional cost to the consumer.
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