How to explain that recommendations aren’t kickbacks

Communicate that suggesting trusted service providers is solely for your client's benefit

Learn the New Luxury Playbook at Luxury Connect | October 18-19 at the Beverly Hills Hotel

Takeaways:

  • Great agents recommend professionals who are going to give their clients exceptional service to help them into their new home quicker with less stress.
  • One way to explain to clients that recommendations aren’t kickbacks is to speak candidly.
  • Explaining that you have had years to build your list and that you revise it often is a great way to help clients and earn their trust.

When your buyer is closing on a home, you probably give them a list of recommended and trusted professionals whom they can use to purchase title insurance, get a home inspection or choose a home warranty company.

So, why do agents give buyers recommendations? Unfortunately, some buyers think the reason is because their agent will get a kickback. Not only is this illegal because of RESPA, but most real estate agents don’t participate in this practice because it is fundamentally unethical.

Great real estate professionals (like you) want to make sure the closing process is smooth. They recommend professionals who are going to give their clients exceptional service to help them into their new home quicker with less stress.

Plus, with an easy closing, they’re more likely to refer their friends and family to you in the long run. Unfortunately, not every buyer will know this is the reason you’re giving them recommendations.

3 essential tools that will 10X your real estate marketing
Smart landing pages, a synchronized database and automation generate results READ MORE

So how do you combat the idea that these recommendations are benefiting you? Here are some tried-and-true answers from real estate agents:

recommendations aren't kickbacks

 

Speak candidly

The first thing is to speak candidly with your clients. Explain exactly why you recommend these professional individuals, and what kind of benefit they will get when they work with someone you have a professional relationship with.

Ed Barski said that most of these professionals look to Realtors to keep bringing them business. “What that means is, if I have an issue or the vendor messes up, they do everything and anything in their power to make it right or help solve our problems,” Barski said.

“We as professionals don’t have that leverage over unknown vendors picked either randomly or by the client. The benefit becomes an anxiety-free transaction and lots of people working together hard to make sure the buyer or seller gets the best outcome,” he said.

It’s important to tell buyers honestly that these professionals rely on business from referrals, and you refer only those businesses that give the best service to the customer.

When buyers see that by trusting your recommendations they will have a smoother closing procedure and better customer service, they’ll trust you and cause you less stress in the long run.

Explain RESPA

One real estate agent, Eve Alexander, explained that the reason many homeowners assume that recommendations come with a kickback is because many did. For that reason, it’s a good idea to explain RESPA to your clients.

When giving your clients a list of recommended professionals, tell them that you abide by the Real Estate Settlement Procedures Act, which has been put in place specifically to protect the buyer and make sure the recommendations you’re giving to them are simply for their benefit.

Give a variety of options

Another way to help combat the idea of kickbacks is to provide a variety of choices on your professional recommendations.

Leslie Vickers Jones said many clients find her list particularly useful, and it’s important to include different options for each recommendation so the client can choose which one fits best.

“Many of our clients look to us for recommendations,” Jones said. “Indeed, it is important we provide a variety of options, and (we) don’t benefit from the referral other than getting the transaction closed or work performed in a workmanlike manner.

“There are plenty of crappy lenders and dishonest contractors out there. Our clients, especially those coming here from out of town, appreciate the list.”

Kate Wilkerson said that she is constantly revising her list, and she tells her clients that as well.

“I explain that I have used them before, and other clients have had a great experience from them as well,” Wilkerson said.

“But I am always growing and changing my list. I also let my clients know they don’t have to use them, and these are my suggestions of professionals to use.”

Naturally, most real estate agents don’t advocate for the vendors. They let clients pick the one they think will be best.

Ask them to trust you

Finally, ask your clients to trust your expertise.

If you explain how long you have been in the business and how you have had a long time to refine your list of recommendations, many homeowners will see that you have their best interests at heart.

Kris Dyer explained that he tells his clients that it’s taken years to put together his list of recommendations, and he knows the professionals he recommends provide excellent service.

“They will get great service and have better success at closing a deal smoothly and efficiently with my recommendations,” Dyer said.

“If things do end up getting tricky, no one will work harder for them than the people I already have long-standing professional relationships with. The only kickback is that you can give them excellent service and get the job done.”

Barbara Hobbs said she has had many instances where buyers will choose a different lender than who she recommends and then regret it after the fact.

“Local lenders are more candid with agents they see daily and weekly that (they) have built professional relationships with,” Hobbs said.

“My lenders nor my inspectors offer ‘perks’ to me or to my clients — that’s not an ethical way of doing business. They earn my return business because they are honest and upfront.”

With these suggestions, any agent can hopefully combat the negative image that recommendations have with some buyers.

Whitney Baum-Bennett is the SEO specialist at Landmark Home Warranty. She creates informative articles and graphics about everything from buying a first home to how to fix your toilet; see more of her content here.

Email Whitney Baum-Bennett.