What is your Risk Being in a Network/Referral Group?

by | Sep 14, 2017 | Legal Tips

Many real estate agents, and even attorneys, belong to breakfast or lunch network/referral groups in which the members agree to refer business to each other. Is there a risk to your business in being a member of one of these network/referral groups?

Consider this scenario. I picked up one of my best clients due to an issue with one of these groups. The buyer hired a real estate agent who belonged to a lunch network/referral group. As part of her agreement for being in the group, she referred the closing to the attorney also in the group. The buyer had no idea that the real estate agent and attorney were members of this group and had this arrangement.  The closing attorney made several mistakes, in the closing including failing to disclose to the buyer that the house significantly violated the front set-back line. When the buyer discovered the issue post-closing, the closing attorney also failed to rectify the situation.  The buyer then called the real estate agent to complain. During the conversation, she discovered that the real estate agent referred the closing attorney not because of the quality of his work but because they were in the same network/referral group.  The real estate agent then referred Blair Cato to the buyer to correct the title issue.  The buyer was furious and filed an ethics complaint against the closing attorney.  Afterward the buyer told me that she was also furious with the real estate agent since she referred the closing attorney for the financial benefit she got and not because of the quality of the closing attorney’s work. As a result, the buyer never used that real estate agent again. In the four years since this occurred the buyer has closed on ten other properties using a different real estate agent, which has cost the original agent tens of thousands of dollars.

This scenario shows that you should make vendor referrals not based on any extra financial benefit that you may receive, but rather based on the quality of work the vendor performs. Your business depends on it.

As an aside to referral groups, when determining how to spend your marketing time you should consider your time invested when determining your “Return on Investment.”  If you spend two hours each week at the referral group meetings and get 5 to 10 referrals a year, is the 100 plus hours you spend annually truly time well-spent?  Would you have been better to spend 100 hours calling your “circle of influence” or other leads?

BLAIR CATO IS PROUD TO ANNOUNCE that Cynthia Blair has been nominated, as President-Elect of the American Land Title Association (ALTA). She will be installed at ALTA’s National Convention next month. ALTA is the nation’s largest trade association of title agents, title insurance companies and title abstractors. The closing statement that most attorneys use in closings was created by ALTA. Cynthia has traveled the country speaking to trade groups as well as lobbying the federal government trying to protect what you and I do for a living.  


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