Real estate referral fees in NSW: what sellers and buyers should know
If you’ve ever wondered “why are they recommending that agent?” you’re asking the right question.
Referral fees are common in real estate. They’re also one of the least explained parts of the industry and, because the dollar amounts can be significant, it’s worth understanding how they work before you take anyone’s recommendation at face value.
If you’re trying to find the best real estate agent or best buyers’ agent, understanding referral fees matters. Some referrals are little more than paid introductions, even from an agent you know well. Others are thoughtful and client-focused. Knowing the difference can help you make better decisions when buying or selling property.
This is a plain-English guide to referral fees in NSW: what they are, who can pay them, how they’re usually calculated, and where conflicts can creep in.
What is a referral fee (in NSW)?
In NSW, a referral fee is a payment made by one appropriately licensed real estate professional to another appropriately licensed real estate professional for referring business.
That can include referrals such as:
a buyers’ agent referring to another buyers’ agent,
a sales agent referring to another sales agent,
a licensed auctioneer referring to a sales agent,
a licensed advocate referring to a sales agent, and
other combinations where both parties are appropriately licensed
In simple terms: licensed agents can pay referral fees to other licensed agents.
In NSW, and particularly within Sydney’s property market, referral relationships between selling agents, buyers’ agents and vendor advocates are extremely common.
Are referral fees legal in NSW real estate?
Yes. Referral fees between appropriately licensed real estate professionals are legal in NSW.
What matters is how the arrangement is handled, whether the parties are properly licensed, and whether the referral is genuinely designed to benefit the client rather than simply generate income for the referrer.
If you’re unsure, it’s reasonable to ask: “Are you receiving a referral fee for this recommendation, and what are you doing to earn it?”
The important thing to understand is this:
A recommendation is not the same thing as due diligence.
How are referral fees usually calculated?
In real estate, referral fees are generally calculated as a percentage of commission.
Standard industry practice
Sales / buying referrals: commonly 20% of the commission
Property management referrals: commonly 1 week’s rent
That doesn’t mean every referral fee in every situation is always exactly those amounts, but that’s the standard most people within the industry will recognise.
How Ralph & Ralph approaches referral fees
We believe referral arrangements should be simple, transparent and consistent.
Our standard structure is:
20% of the agent’s gross commission (including GST) for sales and buyers’ agent referrals
1 week’s rent for the rare rental referral
We don’t negotiate referral percentages up or down depending on the situation because we don’t believe recommendations should be influenced by who pays more.
At Ralph & Ralph, we don’t simply “send leads” to agents. Our role is to help clients make a better decision about who they appoint by doing due diligence, comparing approaches, pressure-testing advice and staying involved to support accountability throughout the process.
If you appoint an agent we’ve recommended, the agent pays us via that referral arrangement. You do not pay us.
A simple example (so the numbers make sense)
Let’s say a selling agent charges you 2% of the sale price as their commission.
A 20% referral fee means:
the agent’s commission = 2%
20% of that commission = 0.4% of the sale price
So if you sold for $2,000,000:
2% commission = $40,000
20% referral fee = $8,000 (paid by the agent)
(Figures shown for illustration only. Every sale and fee structure is different.)
When are referral fees paid?
Referral fees are usually paid after the agent is paid.
Selling agents are typically paid at settlement, so the referral fee is usually paid shortly afterwards once the agent has received their commission.
Buyers’ agents vary. Many are paid at exchange of contracts, while some are paid at settlement, so the referral fee timing usually follows that structure.
Where conflicts of interest can creep in (and why it matters)
Referral fees aren’t automatically “bad”. The issue is what, if anything, the referrer does to earn it and who the referral is actually designed to benefit.
Here are a few common scenarios where incentives can become messy.
1. “Name and number” referrals
In many cases, an agent (or sales associate) may receive a referral fee simply for passing on your name and number to someone else.
That can happen with little to no service provided to you. Just a handoff.
2. Referrals based on who sends the most work, not who’s best for you
Some agents supplement their income by referring buyers to buyers’ agents, but the referral relationship can become more about volume than fit.
In practice, that can mean the referral is weighted toward:
who buys the most property
who refers the most business back
who has a personal relationship
or who is simply the easiest option
None of those things automatically mean the client gets the best outcome.
For buyers using a buyers’ agent, it’s worth understanding whether referrals are based on expertise and fit or simply existing commercial relationships.
3. “Two-way” referral loops
It’s also common for buyers’ agents to pass their clients’ details to a sales agent to sell the client’s home.
Again, that can be done well or it can simply default to:
the agent who refers them the most work
a friend
or whoever is easiest
For sellers trying to find the best real estate agent, understanding how recommendations are made is important.
A simple way to sanity-check a recommendation
If someone recommends an agent, it’s reasonable to ask:
Are you being paid a referral fee for this?
Why this agent (specifically) for my situation?
What have you done to compare options or do due diligence?
What we believe should happen
When large sums of money are involved, our view is simple:
If someone is being paid, they should actually do something.
The service should be designed for the client, the person who owns or will own the asset, not for the agent who’s paying the fee.
Referring someone should mean looking out for the person being referred, not just the person receiving the referral or the referrer’s own income.
In other words, a referral should be more than a name, number or introduction. There should be real thought, real care and real accountability.
If you already have an agent in mind
If you already have an agent in mind, you can still be supported, but there’s an important practical detail.
If you want us to support you through an advocacy role and be paid via a referral fee, we need to make an official referral so the arrangement is transparent and properly documented.
What that can look like in practice:
we can pressure-test the agent’s strategy, pricing and approach
we can help you ask the right questions before you sign
if you decide they’re the right fit, we can then formally refer you so the arrangement is transparent and properly documented
we can stay involved to help keep the process on track and the advice honest as the campaign or negotiation unfolds
Final thought
Referral fees exist in real estate and they’re not going away.
The most important thing is that they’re handled transparently and that the person receiving the fee is genuinely adding value to the client, not simply benefiting from the transaction.
If you’re trying to work out which real estate agent or buyers’ agent is genuinely the right fit, we believe the process should be transparent from day one.
That includes:
how referrals work
how agents are selected
how we’re paid
and what role we actually play throughout the process
You can learn more here: