Building a Referral-Based Real Estate Clientele - dummies

Building a Referral-Based Real Estate Clientele

At its core, a referral is a recommendation. In its best form, a referral is a high-quality lead and a high-probability prospect that is introduced to you by someone both you and the prospect regard highly.

A referral-based business is a business that generates most of its leads as a result of contacts provided by friends, family, clients, colleagues, and other associates. Sounds great, doesn’t it? It is great, if — and here’s a big if — you have a large sphere of influence and enough patience to wait out a lag time of at least 90 days (and most of the time longer) between when you begin to cultivate referrals and when referrals begin to generate revenue for your business.

Building a referral-based clientele is a long-term strategy rather than a quick-fix tactic. If you’re looking for near-term results (and what newer agent isn’t?) you’re better off developing clients through a traditional lead-development program that involves prospecting, conversion of expired and FSBO listings, and open houses.

Relying exclusively on referrals, especially when you’re a new and undercapitalized agent, is a quick form of business suicide that will move you out of the real estate industry within a year, guaranteed. Instead, consider referrals a second-stage strategy — one that follows your initial round of business development and contributes to the long-term growth and success of your business.

Sources of referrals

Most referrals come from current clients, past clients, people you’ve met through networking situations, and people you know through social or business dealings.

Current clients

Current clients are people you’re actively representing, in real estate transactions. Current clients are a rich pool of referral opportunity mainly because, more than any other group, they have real estate on their minds. They’re in the midst of deals that they’re constantly talking about with their friends, associates, families, and neighbors. Their conversations revolve around their real estate wants and needs, their moving plans, and the latest real estate trends and market activity.

If you don’t ask your current clients to recommend you to their friends or to refer their friends to you for follow up, you’re really missing out on a huge opportunity to reach potential prospects. You can bet that your name comes up in your clients’ conversations, even if it’s just to say they have an appointment or that they’re awaiting information from you. Putting in a few good words on your behalf would be a natural and easy thing for them to do. You just have to ask. You talk to your clients regularly to communicate about the sale of their home, the process of finding a home, their transaction progress, or their progress toward closing. During the course of those conversations, ask for referrals.

Past clients

Past clients are the people you’ve helped through real estate transactions in the past. They have firsthand knowledge of the quality of service that you provide. You need to show them that you want to provide the same level of excellent service to their friends and family by requesting their referrals.

Clients you’ve recently served provide the most fertile opportunity, both because their experiences are fresh in their minds and because they’re still buzzing about their recent move to anyone who will listen.


In sales, networking is a buzzword for building business contacts into referral alliances.

The objective of networking is to meet success-oriented people with whom you can exchange referrals, advice, counsel, contacts, and even wisdom. Ideally, networking results in professional relationships with others who are committed not only to their success, but to your success as well.

The truth is that most salespeople talk about networking more than they actually do it. They attend a Chamber of Commerce or Rotary Club meeting, have an enjoyable lunch, visit with a few friends, and chalk the time up to networking even though no new alliances were formed, no existing alliances were deepened, and no referral sources were generated. In other words, no true networking took place.

To make networking work for you, follow these tips:

  • Network with the right mindset. When you network, set your sights on developing prospect recommendations, not just the names of leads. A recommendation or phone call to a prospect from someone that you have a referral relationship with is more valuable than just getting the name of someone thinking about moving.
    Many referral alliances are established with the single objective of generating leads. Attendees hear of the names of new businesses, new managers, newly arrived residents, or others who are possibilities for your future contact. A lead from a networking associate is better than no lead at all, but it’s a long cry from the name of a prospect provided by a referral alliance who shares extensive background and then offers to put in a few good words on your behalf.
  • Acquire warm referrals. A warm referral begins when a networking associate makes contact on your behalf with a person who is in the market for your services. Warm referrals involve calls or correspondence that convey your qualifications, the quality of your service, and reasons why prospects should at least interview you for the opportunity to represent their interests in real estate transactions.
    When establishing networking relationships or referral alliances, work to gain a mutual agreement that those in the network will engage in the practice of exchanging warm leads.

Business and social contacts

Many people you meet socially or through business dealings never become clients. They may have previously established agent relationships or they may not be in the market for a real estate transaction. Nonetheless, they’re important to your business because they’re in a position to give and receive referrals.

When dealing with your referral sources, your goal should be to provide more service and value than is expected. Also be sure to keep your accounts with others in the black, rather than in the red.