Referral Fees Keep Real Estate Commissions High, Cpc Says

A report from the Consumer Policy Center (CPC) published Tuesday claims that referral fees reinforce high commission rates and jeopardize the quality of consumer service provided by agents. 

The “Commission-Based Home-Referral Services: Consumer Impacts and Proposed Reforms” authored by CPC fellows Stephen Brobeck and Wendy Gilch, focuses on all forms of referral fees, including agent-to-agent referrals, but it takes a deeper look at referral companies and platforms like Zillow and Realtor.com, which charge agents up to 40% of their commission for a referral that leads to a successful transaction. The report noted that sources estimate that 87% of all active agents are part of some sort of referral network. However, a survey cited in the report found that 42% of agents earn between $10,000 and $50,000 per year in referral fees from other agents.

According to the CPC, the popularity of these paid referral fee platforms reflects a surplus of real estate agents, leading many to be willing to sacrifice a large share of their commission in order to obtain more business. 

The report claims that consumers who use an agent they encounter via a referral source may have difficulty negotiating a commission below 3%, that the likelihood that they work with a less experienced member of a real estate team increases and that the likelihood they are subject to the marketing of ancillary services by their agent or the referral company increases. 

“Most agents are fiduciaries obligated to represent the interest of their clients, but when these agents work with a referral company, they are often under pressure to sell quickly and market ancillary products,” Gilch said in a statement.

The report notes that if an agent is required to pay nearly half of their commission in referral fees, they are less likely to be willing to negotiate a lower commission because they are already taking home a smaller paycheck than they would be if they didn’t have to pay the fee. The report cited a survey of 1,016 Americans conducted by Big Village in mid-January 2026, that found that 55% of respondents said that a 40 % “referral fee tends to increase the commission the buyer pays.”

“An agent required to pay 40% of their commission to a referral company, and another portion to their broker, has a strong incentive not to negotiate down a 3% commission,” Brobeck, a senior fellow at the CPC, said in a statement. 

Additionally, the CPC argues that referral services provided by listing portals may limit consumer choice, as when CPC Mystery Shoppers inquired about specific properties on Zillow, Realtor.com and Redfin, they were directed to an agent that had a “special relation to the company as a Zillow Premier agent, as a Realtor.com Concierge agent or as a Redfin employee or partner agent.” 

“Receiving the name of one buyer agent, in relation to either a search for an agent or for a specific property, limits meaningful consumer choice,” the report states. “Being presented with several agent options, which then can be researched and compared, helps ensure a more optimal choice.”

The report also noted the lawsuits Zillow is currently facing related to its ‘contact agent’ button and allegations of RESPA violations related to partner agents allegedly steering buyers to Zillow Home Loans to receive more or better quality leads. 

Despite these negative impacts, the report did note some positive things including that consumers are most likely to be referred to agents who have already successfully transacted and that the revenue generated by these programs have helped some of the portal companies make a broad array of property listings and information about individual agents available to buyers and sellers. 

The report noted that via a Mystery Shopper experiment that saw them apply to 10 referral agencies, they were recommended to 40 different buyers agents who were all local and the majority had recorded over five sales in the prior year. 

In an emailed statement a spokesperson from Zillow wrote that the report “has little to no evidence for its claims, often relying on comments posted anonymously on social media instead of verified sources.”

The spokesperson argued that there is no evidence in the report showing that the cost of referral fees actually impacts commissions.

“The vast majority of buyers and sellers (85%, out of nearly 30,000 surveyed) feel their agent’s commission was either fair or too low – not too high, as the report suggests. Where the authors get it right, they point to Zillow’s emphasis on providing potential homebuyers with connections to high-performing agents, and to the benefits of these referrals to agents themselves,” the spokesperson wrote. “Referral fees are a business and marketing expense agents pay in the same way they might otherwise have spent thousands on billboards, print ads, and other marketing tools. While we can’t speak to the referral practices of other companies, with Zillow’s Preferred program, agents get marketing and other benefits and don’t pay unless they’ve helped their clients succeed in buying or selling a home.” 

As a result of this report, the CPC recommends that state governments require all referral companies and referred agents to clearly disclose the fee and its amount at the start of the business relationship. Supporting this is data from the Big Village survey that found that 84% of the 1,016 respondents thought that referral fees should be disclosed upfront to home buyers. 

“Because of the risks and costs, consumers should think twice about contacting a referral company or choosing an agent working with that company,” Gilch said. “Consumers would likely get better value by working with a local agent that they had researched and interviewed.”