How do I get good referrals in real estate?

May 22, 2011

Good referrals in real estate require your concentration and an understanding of referrals. The basic message is be diligent when asking for, or accepting, a referral.

© 2015 Richard MontgomeryWhat are good referrals in real estate? Webster’s Dictionary says, “To direct for information or anything required.” That seems straightforward enough on the surface, but let’s take a closer look. In my first year selling real estate, I had an experience that taught me a valuable lesson.

A true confession

The community I served had a number of mortgage lenders. As part of their due diligence process, all lenders required their attorney examine the title to ensure the history was in order. This requirement ensured the seller could deliver the property with no problems. This lender’s attorney found errors or omissions on practically every transaction. As I met more and more agents, most all the agents disliked working with that lender because of the lawyer. I learned to dislike him too!

When customers said they wanted to apply for their loan at this lender – I cringed. I knew it meant there would be extra hoops to jump through trying to clear title for the closing. This attorney found many unremarkable errors that often were not significant. If a buyer asked me where to get their loan, I never recommended that lender. Why should I put the sale at risk when other institutions never encountered such problems? So I “referred” buyers everywhere but there.

Then, something happened that totally changed my perspective. We bought our first home! You probably guessed where I went to get my loan. Yes, I went to the place where I knew if there were any title problems they would be identified and eliminated. I did not want to take the chance something could come up after the closing, or worse yet, some little flaw would come up when I re-sold the home at some point in the distant future.

From that point on, I would always include the “tough” lender when asked for a referral.

Are there different kinds of referrals?

The moral of the confession above is to be careful when asking for, or accepting, a referral. While most of us seek or provide referrals innocently, some referrals are tainted, or unqualified. While “word of mouth” is said to be the best advertising, it does not consider the motive or the history of the “word.”

There are a number of reasons that make a referral less than desirable. When referrals are for remuneration or favor, in ignorance or as the path of least resistance, they should be viewed with caution. Be cautious when an agent has assembled a “team” of service providers to help you through the process. While many of these teams are legitimate referrals, there are just as many bartered for favor, out of ignorance or where there is a low chance of discovery of adverse conditions.

Suggestions on qualifying referrals

When asking for a recommendation, listen carefully to the reason the referrer is suggesting the name. If the referral is a neighbor, a relative or a member of the referrer’s bowling team, there is no indication they are proficient at what they do.

Follow up with a couple of question, ” Have you ever done business with them?” “Beside the fact they are neighbors, what is it about them that makes you think of them?” When you hear something like, ” She brought the papers to our house on a Sunday night because the rate lock was expiring the next day.” While the anecdote does not guarantee it will go as smoothly for you, it is certainly a better indicator than being on the same bowling team.

When asking for a referral, ask for multiple names instead of settling for one. When providing a referral, give multiple names, so they make the choice. Qualify your referrals with caveats like, “I’ve not had the opportunity to use them, but several friends had satisfactory experiences with them.” I would be extra cautious if the referrer is “connected” to the real estate business and only comes up with one name.

When following up and contacting the referral, do not simply accept them at face value because you received the referral. Ask the same qualifying questions you ask the other agents you are interviewing to determine the best fit.

Why should you care?

Remember that in a real estate transaction all the pieces of the puzzle have to fit together. Sometimes an error on what seems to be a minor issue can snowball into a key distraction somewhere in the process. Referrals can be a very positive experience and make a difference in the results. It is indispensable to make an effort to determine the referral is sound. Just keep these comments in your mind and use the information when it feels appropriate.