Grow your real estate business by leveraging relationships and word-of-mouth referrals. Get more tips and advice for more real estate referrals here.
Show of hands: Of the people reading this article, how many have asked a connected friend, former colleague, or satisfied customer to “put in a good word?” Okay, I can’t actually see how many of you have your hands up, but I’m assuming it’s quite a few. If you did raise your hand (even if just in spirit), you’ve relied on the psychological theory of social proof. When friends swear by a new restaurant, this concept of social proof makes us more likely to try it out ourselves. When trusted sources recommend a new book –– like Oprah Winfrey via her Book Club –– we’re more likely to add it to our Amazon lists. And when homeowners are recommended a realtor by a friend, neighbor, colleague, or family member, we can be more likely to follow through with the purchase.1
This idea of social proof is what makes referrals so valuable to real estate professionals and what makes it so important to leverage multiple strategies for earning these referrals. Below, we’ll take a closer look at real estate referrals and outline some ways that realtors can start earning more referrals.
Simply put: Referrals are recommendations or introductions from one individual to another. Law offices might refer clients to other firms if they think they might find better representation elsewhere, and personal trainers might refer a potential client to a physical therapist if they aren’t able to provide proper or safe guidance. In the context of the real estate industry, a referral happens when a satisfied client or referral partner recommends the services of their chosen real estate agent to someone they know, whether they are looking to buy, sell, or rent a property.
Referrals can come from just about anywhere –– including the friends, family, and colleagues of satisfied clients, and other real estate industry professionals who have witnessed your good work. They are generally based on personal experience and trust (two driving forces of social proof), making them a powerful tool for agents looking to expand their client base and strengthen their reputation.
Though real estate referrals can benefit realtors, they also benefit their clients. By working with a licensed real estate agent who has been vetted by a trusted source, sellers and buyers can feel confident in their choice of realtor. Real estate professionals actively seek out referrals in many ways, including offering referral bonus or incentives, maintaining relationships with past clients, and building a strong network of community members and industry professionals. Overall, real estate referrals are an essential aspect of the industry, and they can be integral when it comes to starting, growing, and maintaining a real estate business.
Real estate referrals have proven to be a powerful form of word-of-mouth marketing. Plus, there are countless benefits to implementing a referral-generation strategy. Below are some of the key advantages of having real estate referrals.
Perhaps the most obvious benefit of real estate referrals, these personalized recommendations can bring in new clients –– ultimately leading to increased business and revenue. But, as you’ll soon discover, growing your client base can have compounding benefits.
See, as you gain more referrals from satisfied clients and earn a reputation as a trusted realtor, you’ll find yourself in front of a whole new batch of leads. And as you convert those leads to clients, giving them the tailored, customer-centric experience you’ve become known for, you open up a world of all-new leads: the friends, family, colleagues, and neighbors of your new, satisfied clients. Provide memorable service whenever you’re given the opportunity, and the real estate referral machine may just never stop.
It’s no secret that leads generated by referrals have a higher conversion rate than other, colder leads, because they’re propped up by a foundation of trust. At a glance, the average conversion rate for realtors hovers around one percent, or one-to-two converted clients in a sea of 200 leads.2
Comparatively, according to in-depth research performed by Ruler Analytics, leads generated by real estate referrals can yield almost triple the conversion rate of leads originating from other sources.3
While this might not seem like a huge jump –– considering 3X-ing equates to just six or so converted clients out of 200, I’d wager that many real estate professionals would gleefully accept six homes sold in one year over two at most. And the more vast your pool of referrals from satisfied clients is, the better these odds will be.
Word-of-mouth marketing alone might not be enough to build a successful real estate business, but as a complement to other marketing strategies it can be an invaluable tool. While you’re probably not planning on running ads during next year’s Super Bowl, small-scale advertising efforts can still be pricey –– with some sources advising that realtors be prepared to spend $250-$1,000 a month on advertising endeavors.4
We aren’t suggesting you abandon traditional marketing tools altogether, but by focusing on building relationships with existing clients and generating referrals through word-of-mouth, you can dramatically reduce your marketing spend and maximize your revenue. And with the money you save by taking your word-of-mouth marketing to the next level, you can reinvest in tools designed to help you acquire, track, and convert real estate client referrals.
Have I mentioned how powerful social proof is? A couple of times already? Well then, one more time won’t hurt. When we see even one person we know, like, and trust doing, buying, eating, or wearing something, we’re more likely to follow in their footsteps –– it’s just the way our brains work!
But when we see an entire street, neighborhood, or community buying or selling their homes with a specific realtor, the benefits of social proof are dramatically heightened. By continuously gathering real estate client referrals from happy homeowners, you can bolster your professional reputation community- and industry-wide, establishing yourself as the realtor in your area.
With this enhanced credibility and sterling reputation under your arm, you may find yourself now entrusted with larger sales in more sought-after areas, resulting in better commission, higher annual earnings, and –– you guessed it –– even more referrals.
When you sell a home to a family or help a family sell their existing home, you might not immediately start preparing for the next home you’ll sell to or for them. After all, a homeowner spends an average of 13 years in the same home, according to a 2018 study conducted by the National Association of Realtors.5 With that said, referred clients who were delighted by your service may be more loyal, making you their first call when it comes time to make another move.
For short-sighted realtors, this 13-year payoff can feel like far too long to wait. But for realtors that are envisioning the next two decades of their business, and the work it will take to get there, knowing you have potential business lined up for decades to come can provide a great comfort.
No matter what stage of life we’re in, what tax bracket we occupy, or how many times we’ve gone through this process, buying a home is a big deal. If it’s our first home or your fifth, we want to be sure that the person helping us make this life-changing (or at least zip-code-changing) decision is the right person for the job. Referred clients start their real estate journey on the best foot possible, knowing that the person or agency they’re working with can be trusted.
With this comfort, buyers and sellers may take bigger risks and be open to previously unexplored options –– knowing their realtor can be trusted with the task. This foundation of trust also opens the door for clearer communication and greater transparency, smoothing every stage of the sales process.
By emphasizing the acquisition of real estate referrals, you can grow your businesses, improve and establish your reputation, and optimize your client experience –– leading to better relationships, greater profits, and a more stable real estate business.
With the many benefits that accompany real estate referrals, it’s quite clear that these referrals are a powerful tool for anyone who wants to learn how to be a successful realtor. Whether you’re just getting your start in the real estate business or have been a fixture in your field for decades, here are some rock-solid real estate referral strategies.
There’s an expression, “the reward for good work is more work.” This is applicable in many fields, but especially real estate –– as a job well done can directly equate to more business. For this reason, one of the most effective ways to generate referrals is by providing exceptional service to clients. After all, happy clients are more likely to refer friends and family members to a professional who went above and beyond to help them buy or sell a home.
But this alone is not a referral-generating strategy, and realtors looking to offer truly memorable service should take a strategic approach to this tactic. Leverage a client relationship management tool (CRM) to make sure you’re offering high-touch service, and implement automations to ensure that leads are receiving timely responses to new inquiries. Make their experience memorable from the first phone call to the closing date, and they’ll keep you in mind when someone they care about is in need of an expert.
When you have a positive experience, you might be ready to sing its praises on social media, Google Reviews, or to any stranger who will listen. But not everyone is so willing to dole out praise. So although you might have offered exceptional service to a buyer –– just as you do with every client –– they might take a little convincing before referring you to a friend or family member. In many cases, offering referral incentives to clients who put in a good (honest) word can be motivation enough. These incentives can range from gift cards to local establishments to personalized gifts, depending on your budget.
The more creative, the better when it comes to referral incentives, so dig deep to find something you think will inspire satisfied clients to act.
No matter how memorable your client experience is, humans are forgetful by nature –– so don’t take it personally if clients don’t immediately remember the person who sold their home 10 years ago. But there is a way to fight that forgetfulness and stay top of mind for when satisfied clients are in a position to refer you business. Things like email newsletters can help you keep in touch with past clients, offering new homeowner tips or even neighborhood restaurant recommendations at your chosen frequency. Holiday cards, too, can offer clients a friendly reminder that you helped find a space to accommodate that 12-foot tree they’re gathered around. No matter how you do it, staying in touch with former clients can make their positive experience feel fresh, and help you maintain these valuable relationships.
You might be an independent realtor building your own business, but that doesn’t mean you should go it entirely alone. Building relationships with other professionals in the industry, like a mortgage broker, home inspectors, contractors, and other realtors, can mean infinitely more referrals from these sources. And by collaborating with these professionals, real estate professionals can dramatically expand their network.
Of course, this relationship goes both ways –– and you should be sure that your referral partners are also reaping the benefits of the relationship. If they know you’re keeping their business in mind, they’ll be more likely to keep yours in mind when it comes time to make a referral.
Though it can be easy for some to write realtors off as standard salespeople, realtors can be bonafide community fixtures. They help families find forever hopes, help make dreams come true for first-time homebuyers, and offer invaluable guidance along the way. For realtors looking to generate more real estate referrals, stepping into this community leadership role can be a great way to do so. But as anyone who has done so can attest to, you don’t become a fixture overnight.
So, where do you start? Depending on your budget, hosting events for clients, their friends, and their family members can be an effective way to generate referrals. A client appreciation party, commemorating a closing date can be a great way to stand out, showing clients that you’re personally invested in this new chapter. Given the knowledge gap in many younger generations of home buyers, hosting an educational seminar can be another great way to connect with potential referral sources –– while also establishing yourself as a valuable resource in the community.
Considering 95% of all home buyers (from ages 23 to 96) use the internet as a part of their real estate search, the importance of the world wide web as a referral tool cannot be overstated.6 Social media, in particular, is an essential component of your referral acquisition strategy. Start by encouraging clients to leave reviews on sites like Zillow, Yelp, and Google, allowing you to amass a collection of success stories to repurpose. Share these client success stories on social media platforms like Facebook and Instagram to showcase your expertise and attract new business, or see if your satisfied clients will give you a signal boost by raving to their own audience.
Sometimes it doesn’t take a years-long email drip campaign, savvy social media use, or a $50 gift card to generate real estate referrals –– sometimes, all you have to do is ask. After offering incredible service and making the home-buying process a breeze, many real estate professionals overlook the importance of asking for referrals, missing out on the countless benefits. You helped them enter a new chapter, chances are they’ll be glad to help you continue growing your business. That is, if you’re willing to ask!
Social proof, word-of-mouth marketing, Oprah’s Book Club –– all of this was to say that the importance of referrals in real estate cannot be overstated. And for more information around real estate market trends or marketing strategies, Truehold is here to help. By becoming a certified partner, can start getting more referrals and growing your revenue. Learn more today!
Sources:
1. National Association of Realtors. Highlights From the Profile of Home Buyers and Sellers. https://www.nar.realtor/research-and-statistics/research-reports/highlights-from-the-profile-of-home-buyers-and-sellers
2. Elevate. What agents should know about real estate lead conversion. https://tryelevate.com/what-agents-should-know-about-real-estate-lead-conversion/
3. Ruler Analytics. Updated 2023: Average Conversion Rate by Industry and Marketing Source. https://www.ruleranalytics.com/blog/insight/conversion-rate-by-industry/
4. Agent Crate. How much should realtors spend on marketing? https://www.linkedin.com/pulse/how-much-should-realtors-spend-marketing-agentcrate/?trk=organization-update-content_share-article
5. National Association of Realtors. How long do homeowners stay in their homes? https://www.nar.realtor/blogs/economists-outlook/how-long-do-homeowners-stay-in-their-homes
6. Statista. Frequency of internet use for home searching in the United States in 2021, by age group.https://www.statista.com/statistics/507513/frequency-of-internet-use-for-home-searching-usa-by-age-group/
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