No, you generally cannot pay a referral fee to a non-Realtor unless they are licensed. RESPA (12 CFR § 1024.14) prohibits unearned fees and referral payments in residential real estate transactions unless the recipient is a licensed party providing a bona fide service.
However, commercial, cash, or out-of-scope deals may be exempt. Learn the legal risks, exceptions, and smart alternatives.
In this guide, we’ll walk through exactly when referral fees are legal, when they’re not, and how you can reward referrals the right way.
Referral Fees vs. Finder’s Fees vs. Commission
What Is a Referral Fee?
A referral fee is a negotiated payment, typically 25% of the commission, paid to a licensed real estate agent who introduces a client to another agent or broker. It’s only earned if the deal closes, and it must be processed through the broker, not the individual agent.
This fee structure allows agents to generate income from clients they can’t service directly, whether due to location, expertise, or time constraints.
What Is a Finder’s Fee?
A finder’s fee is a murkier concept. It typically refers to compensation paid to a non-licensed individual who connects parties in a transaction. While it’s occasionally used in commercial, cash, or non-RESPA deals, it’s legally risky in residential real estate.
For example, paying a handyman for referring a homebuyer might be legal under state law, but still violate RESPA if the deal involves a federally related mortgage. In practice, finder’s fees should be handled with extreme caution and legal review.
Commission vs. Referral Fee
A commission is the standard payment to an agent for directly representing a buyer or seller and closing the transaction.
A referral fee is a portion of that commission, usually agreed in advance, that goes to another licensed agent or broker who introduced the client but didn’t work the deal.
Think of commission as the paycheck for doing the work, and a referral fee as a tip you’re legally allowed to earn, for sending the business to someone else.
What the Law Actually Says (RESPA)
RESPA was created to protect consumers by eliminating kickbacks and hidden costs in real estate. Under RESPA, it’s illegal to give or receive anything of value for the referral of business involving a federally related mortgage loan.
This means most traditional home sales, where a buyer gets financing through a lender, fall under RESPA. And in those cases, only licensed real estate professionals can receive referral compensation.
There are, however, a few exceptions:
- Commercial transactions often don’t fall under RESPA.
- Cash deals or vacant land may be exempt.
- Some states, like California and Kansas, allow limited forms of unlicensed referral compensation, if the person isn’t involved in the actual transaction and the payment isn’t contingent on closing.
But here’s where it gets tricky: state allowances do not override federal law. Even if your state permits finder’s fees, if the deal involves a federally related mortgage, RESPA takes precedence.
Licensing requirements also differ. Some states allow inactive licensees to earn referral income; others do not. That’s why agents working across multiple states need to be especially careful and consult legal counsel or their broker before structuring any agreement.
Questions You May Be Asking
Can I just give a “gift” instead of cash?
Answer: No, you can’t sidestep the law with dinner, gift cards, or tokens of appreciation. Under RESPA, “anything of value” tied to a real estate referral is prohibited, regardless of form. Whether it’s a bottle of wine or a vacation voucher, if it’s offered because someone sent you a client, you’re violating federal law. Many well-meaning agents fall into this trap, thinking the gesture is harmless.
What if the deal doesn’t close?
Answer: This is where things get murky. Paying for introductions or leads that don’t result in a closing might be legal, as long as the payment isn’t tied to the transaction’s success. For example, paying a flat fee to a marketing agency for lead generation is generally permitted. However, if you promise someone a reward only if the deal closes, that crosses into RESPA territory. Always consult with your broker, and if needed, legal counsel, before setting up these arrangements.
Can I partner with an unlicensed person in a joint venture?
Answer: Technically, yes, but only if that person doesn’t engage in any activities that require a real estate license. Structuring a joint venture with someone unlicensed is a high-risk move and needs legal vetting. If they participate in negotiations, show properties, or otherwise act in a licensed capacity, you’re both exposed to potential penalties. If your goal is profit-sharing without compliance risk, keep the unlicensed party completely removed from real estate-specific activities.
Smart Alternatives to Illegal Referral Fees
If you want to thank someone who sends business your way without crossing legal lines, here are strategies that work, and stay within the rules:
- Feature their business in your newsletter or social media platforms. Promote their services in ways that aren’t tied to a specific real estate transaction.
- Refer business back. Mutual referral arrangements keep the relationship beneficial without exchanging money.
- Share public resources. Offer them access to your marketing guides, templates, or content that helps them grow, no strings attached.
- Show appreciation legally. A handwritten note, a public thank-you, or a general gesture unrelated to a specific deal goes a long way.
Debunked Myths
Let’s break down a few misconceptions that still circulate among agents and brokers:
❌ “It’s only illegal if someone finds out.”
This kind of thinking puts your license on the line. RESPA violations are enforceable even without a complaint. Compliance isn’t optional, it’s mandatory.
❌ “Referral Only agents can’t do anything else.”
Not true. At Realty Hub, many agents hold an active license just to earn referral income. You’re not limited unless your brokerage or state sets additional restrictions.
❌ “RESPA applies to everything.”
Incorrect. RESPA governs residential transactions involving federally related loans. If you’re dealing with vacant land, commercial property, or an all-cash deal, those transactions may be exempt. But don’t assume, verify before acting.
Play It Safe, Stay Compliant
Paying unlicensed individuals for real estate referrals may seem like a kind gesture or smart business move, but it isn’t worth the risk. The penalties under federal and state laws are real, and agents can find themselves in trouble for what felt like a harmless thank-you.
The good news is: you don’t need to break the rules to build your business.
There are plenty of legal, creative, and profitable alternatives, especially when you’re plugged into a brokerage like Realty Hub. Our referral system is designed to give agents the freedom to earn passively, stay legally protected, and keep 100% of what they’ve worked for.
So if you’re tired of second-guessing every referral opportunity or navigating vague legal advice, take the guesswork out of your business. Stick with licensed partners, follow broker-approved procedures, and watch your network, and income, grow.
Ready to Earn Referral Income, Without Risking Your License?
If you landed on this blog, chances are you’ve either wanted to thank someone for sending you a lead, or you’re trying to figure out how to earn referral income without stepping into legal gray zones.
The truth is, you can’t pay a referral fee to an unlicensed person in most cases, but you can build a smart, compliant referral system that earns you real income.
That’s where Realty Hub comes in.
Here’s What You Can Do with Realty Hub
- Send legal, broker-approved referrals to any licensed agent in the U.S: We provide you with the referral forms, templates, and compliance guidance so you’re never guessing.
- Keep your license active and your income flowing without MLS or association dues: We support full- and part-time agents, including those who want to earn without selling.
- Earn referral income from anywhere: No splits. No pressure. No desk time. You only pay $100 and keep the rest.
When You Join Realty Hub…
You stop worrying about fines, legal technicalities, or whether that thank-you gift is going to cost you your license. Instead, you start building a scalable referral business on your own terms, with full legal protection, flat fees, and broker support only when you need it.👉 Ready to Stop Guessing and Start Earning? Join Realty Hub’s Referral Program