In the middle of the current controversy surrounding referral fees, in which some association leaders and brokers are calling for an end to paying them, Seattle broker Jim Stacey says he makes his living totally from referral fees. He says he would not like to see the system changed, except to improve on ridding the industry of a few bad apples.

"As you can guess, my wife and I would not be happy if referral fees were outlawed," says Stacey, "and I can assure you that our clients would feel the same way."

Stacey’s business model is collecting referral fees for providing consultation services to consumers.

"We provide lists and elaborate resumes of screened agents, lenders, and inspectors, plus 15 hours of counseling for each client (mostly first-time home buyers)," he explains. "I act as a third-party to analyze their loan options, attend their inspections and discuss their remodeling options. I get questions from my clients on every imaginable topic, and they in turn have a consultant they can turn to for as long as I am in this business, at no extra cost to them.

"We charge a 22 percent referral fee, which is at the low end from what I have observed," he says. "The agents in our network see it as not just the cost of business, but increased business. We may double a good agent's annual income once they are in the network. They also adore our clients, who are above average consumers with hardly ever a financial problem. This symbiotic situation is business at its best."

While one agent in Stacey's network has received 24 referrals in this year alone, not everyone is thrilled with Stacey's methods. He says that some have taken issue with the fact that he says he provides a free service to the consumer.

"Actually it is a "value added" service," allows Stacey, "but, our clients see it as free; they certainly don't see any increases in the costs of a transaction because if an agent in our network did that, that agent would get the boot immediately."

Stacey also bristles to any comparisons between his business and online referral companies who don't provide consultation services to consumers.

Explains Stacey, "We occasionally do an out-of-area referral, and when we do, we contact a number of CRS agents in that area and interview them. Our service in such a situation does not compare to what we can do for local clients, but it is still more than the consumer gets from online referrals that are probably nothing more than alphabetical lists.

"I think we are all put off by the on-line firms that are in the referral game strictly for the money," he continues. "They don't provide any valuable service that I can see, and their existence puts pressure on the commissions in an upward direction when commissions are already very high. They are trying to milk the cash cow without spending a single day in the barn."

While Stacey doesn't want to see referral fees eliminated, he does believe that the system could use some overhauling.

"Yes, it would be nice to see a little reform in this arena," says Stacey, "but I doubt that referral fees are going to go away anytime soon; there is simply too much reciprocal benefit, and if we chose to, we could make them just as valuable for the consumer by providing more assistance.

"If a client moves to Sioux City, the referrer can do more than give them the name of an agent or a company in that area," says Stacey. "He/she should actually make an effort to find them an agent with a good record. Provide details on moving companies. Keep in touch with them and if things are not going well, follow up with a phone call on the consumer's behalf. In other words, earn the referral!

"What I would like to see would be hundreds of programs like mine across America," he says. "Consumers need independent counseling, and attorneys alone cannot carry this ball. As someone who has been a contractor, loan officer, and broker, I can provide a wide range of input, with more objectivity that someone who is directly involved in selling. Of course, finding consultants with such a background would not be easy, but surely I am not alone."

Referrals are a way to provide a service for the consumer and it provides a steady stream of business that keeps real estate dollars within the industry, reasons Stacey.

"As for outlawing them, that is absurd. If any other similar restraint of trade were suggested, the NAR would scream, so what is the problem here?" says Stacey. "The problem's not with referrals between real live brokers but with the whirlwind changes brought about by the Internet, which conservative organizations may not adapt to with much acumen."

"I sure hope they don't disappear. I'm still a few years away from retiring and I dearly love what I am doing," says Stacey.

Published: December 4, 2002

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Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment. Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and has been twice recognized as a "notable." In 2005, she was named "Top Reporter Covering the NAR" by Delahaye-Bacon's. Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. To contact Blanche, email her at . For more articles by Blanche, click here.