Salespeople love referrals. They’re the sincerest form of compliment and a remarkably cost-effective route to new business.

The idea of attracting referrals is so popular that sales trainers who bill themselves as referral gurus make fortunes promoting magical systems that supposedly deliver more referrals than an agent can handle, all in return for tuition at a three-day seminar. What they talk about for three days is a mystery to me. Referrals are really pretty simple stuff. A lot of it you can only acquire through perfect practice of your scripts, over and over, of referral-generating and referral-cultivation tactics.

Referral Truths and Consequences

Before you turn even a moment of effort away from prospecting activities and before you put all your hopes into winning business through a full-tilt referral-generation program, be aware that in addition to all the benefits that come with referrals, a 100% referral-based business has some downsides. Proceed with awareness of these ironclad truths:

• Truth #1: Especially for newer agents, over-reliance on referrals results in slow-growth simply because early in an agent’s career there isn’t a large enough database of existing clients and contacts to draw upon.

• Truth #2: Relying entirely on referrals for client development is a narrow, exclusive, unbalanced approach. For one thing, if incoming referrals decline you won’t have other prospecting systems in place to bail your business out of trouble. What’s more, when referrals do come in, most will be for buyer prospects rather than seller prospects. What the referral gurus never say is that their approach develops buyers’ agents – when sellers’ agents are the ones who experience greatest success and build the strongest long-term real estate sales businesses.

Building a Referral-Based Clientele

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 health of your business

What is a Referral?

At its core, a referral is a recommendation.

In it’s 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.
Referrals may come from family members, friends, business associates, social and business contacts, or past and current clients.

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. The upcoming sections provide information for working with each group of potential referral contacts.

Current Clients

Current clients are people you are actively representing, right now, 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 with their friends, associates, family, and neighbors. Their conversations revolve around their real estate wants and needs, their moving plans, 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, finding a home, their transaction progress, or progress toward closing. During the course of those conversations, ask for referrals.

Past Clients

These are the people you’ve helped through real estate transactions in the past. They have first-hand knowledge of the quality of service that you provide. You need to tell them that you would like 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 are still buzzing about their recent move to everyone they know in the world.


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.

Truth is, 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 resources were generated. In other words, no networking took place.

To make networking work for you, follow these tips:

• Network with the right mindset. When you network, set your mind to develop prospect recommendations, not just the names of leads.

Many referral alliances are established with the single objective of generating leads. Attendees learn the names of new businesses, new managers, newly arrived residents, or others who are possibilities for your future contact. Now, a lead from a referral alliance is better than no lead at all, but it’s a long cry from the name of a prospect provided by a networking associate 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, so 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 will 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.

Notice the words “give and receive” in the previous sentence. The law of reciprocity is alive and well in 21st century business circles. It’s the old tenet of “I’ll scratch your back if you scratch mine.”

In his book The Seven Habits of Highly Effective People, Stephen Covey talks about emotional bank accounts into which successful people must make deposits before making withdrawals. Apply that wisdom as you build your referral network. Start by sharing business referrals, counsel, help, and wisdom with others and before long the recipients of your kindness will repay you with like efforts. By helping your friends, family, and associates build their businesses, in time they’ll help you build yours.

When dealing with your referral sources, make it your goal to provide service and value in excess of expectations and to keep your accounts with others in the black, rather than the red.

Author's Bio: 

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