Referral Fees Are Having a Moment: Try Not to Sabotage It Online

From a Saturday Night Scroll to a Bigger Question About Trust

By Summer Goralik

Big thanks to Rob Hahn for publishing this piece on Notorious Rob here.

An agent, a consumer, and a regulator walk into a bar… Actually, this is no joke. This was my Saturday night.

I made the mistake of going down a rabbit hole on Instagram. I know others have fallen victim to this too. But before I tell you what I saw and heard, I need to rewind a bit and paint you a colorful prelude.

I have spoken to many REALTOR® groups over the years. My experiences with these audiences have been overwhelmingly positive, truly. However, if I had to name one thing I don’t particularly enjoy, it’s being corrected on how to pronounce the word REALTOR®.

It’s not the friendly, lighthearted kind of correction. I’m talking about the rude, stop-you-mid-sentence version: “It’s REEL-tor, not Real-IT-tor, honey.” Yes, that was a bona fide quote. The kind of tone that suggests I’ve committed some sort of linguistic crime.

Believe me, I know. And if I’ve ever slipped, I sincerely apologize. But I was thinking about this the other day — Saturday night, to be exact — when a much more compelling counterpoint hit me.

Mispronouncing REALTOR® is nowhere near the real “crime” of publicly telling consumers, clients, attorneys, or regulators that disclosing referral fees is unnecessary, confusing, ridiculous, or somehow beneath you.

And that brings me to the bar I wandered into the other night, or the social-media trap, rather. I found myself in a dark place, knee-deep in reactions to the industry’s newfound push to disclose legal referral fees and strengthen its commitment to transparency. I shouldn’t have been there, but it was too late. I’d already seen enough.

Frankly, I was completely caught off guard by the palpable angst rising around the concept of referral-fee transparency.

Summer, what do you mean exactly?

I basically came face-to-face with a whole Pandora’s box of complaints:

“Ridiculous.”

“Over the top.”

“Not required.”

“Confusing to consumers.”

“None of their business.”

“No other industry is expected to disclose like this.”

It was a stream of comments and rants that felt endless.

Ironically, online commentary aside, the industry’s true trajectory appears to be moving in a different direction entirely. The profession is increasingly embracing referral-fee disclosure, possibly fast-tracked by recent events — namely, the shocking and disappointing vote at NXT in Houston, where NAR’s Delegate Body said “not today” to adding referral-fee disclosure to the Code of Ethics.

Since then, we’ve seen a domino effect of brokers saying, “Not us, NAR. We stand for referral-fee transparency.” And in California, the Association of REALTORS® issued its own announcement embracing change.

Just as quickly as I might call out the wrongs of some, I’m just as eager to applaud the rights. So yes, we officially have positive momentum when it comes to referral-fee disclosure in the industry, and I’m supportive of any changes that are consumer-centric.

And this is precisely why that Instagram rolodex of comments was so deflating. I had that moment where your fingers start furiously typing… and then I slowly backspaced, backspaced, backspaced, and deleted.

Why? Because I’m not sure that particular crowd is eager to listen or shift perspectives.

Still, these public declarations of “I don’t want to disclose referral fees” are fascinating to me. It’s as if no one realizes social media is the public universe. Regulators peruse social media. Consumers are definitely scrolling. Supervising brokers are reading their agents’ social content, and if not, they should be.

And if that doesn’t resonate, try this: your clients are on your platforms, reading your posts.

So let’s add this commentary up, shall we? On one hand, NAR’s Delegate Body voted against adding referral-fee disclosure to the Code of Ethics. And on the other hand, some agents are on Instagram proudly declaring the whole idea “absurd.”

Those comments, and that national vote, are sitting in a giant fishbowl for the world to see — regulators, attorneys (hi Doug), journalists, consumers.

It reminded me of that line from the film The Social Network: “The Internet’s not written in pencil, it’s written in ink.” Once an agent publicly dismisses transparency, it is preserved and interpreted long after they hit “post.” True story.

Listen, I will be the first person to say that even talking about referral-fee disclosure in the public arena is a new milestone. For years, the failure to disclose referral fees was an industry-wide unspoken norm. It was never prioritized and, if we’re being honest, rarely enforced. I’ve asked knowledgeable, well-known real estate attorneys about this phenomenon, and they’ve agreed: you must disclose them. But yes, historically, these fees often weren’t disclosed.

You could attribute various reasons for this widespread omission. From my vantage point in California, a few stand out:

• NAR and many associations never pushed it.

• In California, C.A.R.’s forms didn’t require principals to sign the template referral-fee acknowledgment (this looks to be changing).

• The Department of Real Estate rarely took action against brokers who failed to disclose legal referral fees.

• Compensation disclosure, mostly buyer-side, was minimal — because buyer-representation agreements weren’t commonly used.

But today? We’re in a different era. And if we can’t agree on that, then definitely a more litigious one.

Speaking of, the industry has quantifiable baggage, or rather, expensive “scar tissue,” from nationwide class-action lawsuits. Attorneys are already threatening new litigation, and referral-fee disclosure could easily become the next job market for the legal professionals circling the real estate industry.

If the threat of lawsuits isn’t enough, I believe consumers are paying more attention now, aided by media outlets and litigation that are bringing a variety of issues front and center.

And I suspect state regulators will play catch-up. They don’t want to be left behind or contribute to the perpetuation of legacy habits. Hopefully, they want to be part of new solutions rather than old problems.

To close out this piece (“is this mic still on?”):

There is a more blunt quote from that same scene in The Social Network, which I intentionally left out before but am ready to reveal now:

“As if every thought that tumbles through your head is so clever it would be a crime for it not to be shared.”

Putting that quote into practical, non-Hollywood terms: If you’re still resistant to disclosure, maybe don’t broadcast that notion to the entire internet (aka the world).

Which leads me to the following request, on behalf of every supervising broker trying to keep their firm off the proverbial radar (or out of the bar where the consumer and regulator are having a drink):

• Be thoughtful about what you post.

• Don’t advertise your refusal to follow rules your state may already require.

• Don’t give plaintiffs’ attorneys free exhibits, because that’s exactly what your social media content becomes.

Think, and post, like your business and license depend on it. Because they do.

Agents have choices — to post or not post something problematic. More importantly, to abide by the law or break it, to serve their client or not. Choose wisely.

Ultimately, on the subject of choice, I can already hear another faction yelling saying, much more aggressively might I add, that if you don’t believe in disclosure, get out of the business. In other words, if referral-fee disclosure feels unnecessary or ridiculous, perhaps you need to rethink your master plan. After all, being an agent means being in the consumer trust business.

Perhaps the bigger picture of this piece—spawned by the bad aftertaste from Saturday night—is to ask yourself: Do you want to be in the trust business?

Because personally, I would never work with an agent who publicly declared that referral-fee disclosure is “over the top” or “ridiculous.” That doesn’t align with the pillars of agency and fiduciary duty, including utmost care, loyalty, honesty, and full disclosure of material information.

In fact, if I were a present client (not prospective) of an agent and witnessed this online display, I would be pretty disappointed, maybe even disenchanted, and then I would quickly find another agent.

Nevertheless, be ready for consumers not to agree with you, or to take their business elsewhere. Consumers have choices too.

I’ll leave you with this. Agents and brokers, I’m rooting for you. Please take thoughtful steps as you move forward in this trust business, lean into best practices, and embrace more compliant-minded business strategies. The future is watching.

NOTE: The opinions and recommendations expressed in this article are based on Summer Goralik’s experience as a real estate compliance consultant and former investigator for the California Department of Real Estate. They are provided for informational purposes only and should not be construed as legal advice. Readers should consult with their brokerage and/or qualified legal counsel in their jurisdiction for guidance on specific situations.

About Summer

Summer Goralik is a Real Estate Compliance Consultant and licensed Real Estate Broker (#02022805). Summer offers real estate brokers a variety of consulting services including assistance with California Department of Real Estate investigations and audit preparation, mock audits, brokerage compliance guidance, advertising review, and training. She helps licensees evaluate their regulatory compliance and correct any non-compliant activities. Summer has an extensive background in real estate which includes private sector, regulatory and law enforcement experience. Prior to opening her consulting business in 2016, she worked for the Orange County District Attorney's Office as a Civilian Economic Crimes Investigator in their Real Estate Fraud Unit. Before that, Summer was employed as a Special Investigator for the DRE for six years. Among many achievements, she wrote several articles for the DRE, which still live on the Department's website today. Prior to her career in government and law enforcement, Summer also worked in the escrow industry for nearly five years. For more information about Summer's background and services, please visit her website.