Once they’ve asked for and received a referral, most salespeople stop and wait for the magic to happen. In fact, this is when Phase 2 of the referral-generation process kicks in. Follow these steps:

1. Thank your referral source, immediately! Say thank you the moment the referral comes through, and say thank you again when you follow up with a hand-written note.

2. Determine the nature of the referral. To increase the probability of a successful first call you need to determine level of lead you will be dealing with. Slot the referral into one of four referral tiers:

• C Level: This is really a cold referral. Your referral source has provided you with the name and phone number of a potential prospect but doesn’t want you to use his or her name to create an opening.

• B Level: This referral is lukewarm. You have the prospect’s name and phone number and permission to use the name of your referral source to open the door, and from there you’re on your own.

• A Level: This is a warm referral. You have the prospect’s name and number. You have permission to use the name of your referral source as a door opener. Plus your source has given you time to ask questions about the lead that will improve your odds of connection with the prospect on the first call.

• AA Level: This is the whale in the referral fishing game. With an AA-level referral, you have all the resources that you have at the A level, plus the insider’s edge because your referral source agrees to contact the prospect in advance of your call to introduce you. This advance contact will pave the way for a welcomed first call. It also can lead to a lunch or face-to-face meeting where you, your referral source, and your new lead get together to transfer the relationship into your hands.

To significantly increase your conversion odds, when receiving referrals spend a few minutes with your referral source to learn the answer to the following questions:

• How do you know this person?

• How would you describe your relationship?

• What type of a personality will I encounter?

• What are a few of this person’s personal interests?

• What organizations does this person belong to?

• Is there anything that you can see that we have in common?

Get more than the prospect’s name and number. Ask questions and go the extra mile to move the referral lead up to a higher probability of conversion.

3. Thank your referral source again, offering your assurance that you’ll provide the same level of quality service that your referral source has received from you in the past.

Not all referrals will turn into transactions. In fact, not all referrals will possess the desire, need, authority and ability necessary to qualify as likely prospects for your business. That doesn’t mean that every referral isn’t important to your business; it just means that not every referral demands the same follow-up approach.

When handling referrals, take these steps:

1. Qualify the lead and determine the odds that your investment of time and resources will result in a commission check.

2. Develop only qualified referrals into client prospects. When working with referrals, agents often feel compelled to work with every lead, regardless of the person’s qualifications of willingness to commit to an exclusive agency relationship. I believe this is an error. Ask yourself: If this person came from an ad call, sign call, open house, or any other lead generation system, would I pursue the business given the person’s qualifications and commitment? Don’t change your standards, expectations, or code of conduct simply because the lead was referred to you.

3. Thank and reward your referral sources for every single lead. Too many agents reward referral sources only when the leads they provide produce a return in the form of a commission check. To me that is a huge mistake. If you train friends and associates to think that you only value referrals that result in closed deals, you run the risk that they’ll start trying to prescreen leads, passing along only the ones they think will result in sales. Reward and acknowledge each and every referral you receive.

4. Keep your referral sources informed of the lead’s progress. Especially if you’re faced with the need to drop a prospect, let your referral source know what’s happening. Explain that although this time the match didn’t work out you sincerely appreciate the recommendation and are honored by the referral. Try to avoid the gory details as you walk the tightrope, sparing yourself from wasted time while preserving the strength of your established referral relationship.

Published: October 9, 2009

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Dirk Zeller is a sought out speaker, celebrated author and CEO of Real Estate Champions. His company trains more than 350,000 Agents worldwide each year through live events, online training, self-study programs, and newsletters. The Real Estate community has embraced and praised his six best-selling books; Your First Year in Real Estate, Success as a Real Estate Agent for Dummies®, The Champion Real Estate Agent, The Champion Real Estate Team, Telephone Sales for Dummies®, Successful Time Management for Dummies®, and over 300 articles in print. To learn more regarding this article, please visit www.realestatechampions.com.