Referral fees in real estate are legal when given to whom?

Referral fees are a common practice in the real estate industry, but their legality is strictly governed by licensing laws. When a broker engages in the act of referring clients or leads to another real estate broker, the recipient of the referral fee must hold an appropriate license. This requirement ensures that the broker receiving the referral fee is qualified and recognized by the regulatory body overseeing real estate practices.

By allowing licensed brokers to receive referral fees, the system maintains professionalism and accountability within the industry. Licensed brokers have undergone specific training and have the necessary knowledge to handle real estate transactions properly and ethically. They are also bound by laws and regulations that protect consumers in real estate dealings.

In contrast, individuals without licenses, real estate investors, or property owners may not have the necessary training or legal framework to conduct real estate transactions professionally, which is why referral fees are not permitted for them. This maintains the integrity of the industry and protects consumers from unregulated practices.