What is the legal referral fee you can give to someone for sending business your way? Is it a $50 cap or $100 cap or is there NO cap, just as long as you aren't offering a "percentage" of the policy commission? Is it per state or overall a standard?
I have 4 mortgage brokers who are going to send several hundred people my way each month and they are asking.
Well, now, that's a very easy question to which I don't have a specific answer but I will tell you....don't focus on the dollars, per se. Mostly the mortgage brokers are looking for ways to pay for their own marketing, whether that be gas cards (as gifts), advertising, mailings, the like. You just don't want to be in a situation where you have written a check. No one will ever know if you gave them a gift certificate to the Olive Garden (heh heh).
I would say most people don't really want the money, they want what the money will do for them. Everyone in real estate is retracting right now, which means it's time for them to step up their marketing efforts. Great job on the referral pipeline, and best of success!
If you're paying for marketing, that's a legit business expense. You just wouldn't be writing a check directly to the agent, you'd be writing it to the advertiser. I don't give tax advice but I no see no problemo.
It's all dependent on what state you're in. In Texas I know we can pay for referrals but not closed deals. So you would have to pay them for every client that calls. I am not sure if there is a cap on how much you can pay though.
Be carefull, mortgagebrokers need to be wary of giving out information that isn't approved by client, I went through this last year and there are some guidelines you need to be aware of.
How do you figure? Let's say we're talking about a mortgage broker who would like to spend money advertising in the local news(rag)? If the insurance agent pays for the ad (with an underlying agreement that business will be referred to the insurance agent) what's the problem? It's marketing dollars, period.
I have been thinking of doing something similar with business owners I sell to. From what I have seen and heard the big no no is paying a fee based on the sale.
How about paying based on the appointment? If I see the person and get a chance to talk, I pay a referral fee, not based on if I sell.
Why not just set them up as employees of the company and give them shares of a profit pool that are based on business they bring to the agency? Or - if your State allows it - set them up as a Sub-Agent?
Some carriers may have limits because it impacts the type of business that it attracts. I don't think there is any legal limit, but at some point, it begins to smell fishy. You have to use your judgement on that.
Keep in mind, you have to provide the incentive for the referral, not for the business. In these types of cases, most referrals will result in business, but not always. In fact, with todays mortgage underwriting, more cases will go unissued than normal, because the loan falls apart.
It has always been my understanding that there is no cap. You just have to be sure to pay for EVERY referral whether you close the deal or not. The best arrangement for all is to get someone licensed that will have the ability to refer you business consistently. That way you only have to pay for the ones you get and they will get paid for renewal if that is the deal you make.
legal referral fees?
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