You made the introduction. The deal moved forward. But does your private money referral agreement say what happens after that?
Too many agents treat private-money referrals like a favor: "I know a guy." But a referral relationship can involve more than simply passing along a phone number. When money may change hands, a casual handshake can leave real questions unanswered.
Why "I Know a Guy" Isn't a Business Model
Knowing who to connect is valuable. But if you keep making introductions with no agreement, no clear terms, and no process, you're relying on goodwill to protect your time and your relationships. A written agreement turns a one-time favor into something you can repeat with confidence.
If you are still weighing how referring compares with originating, start with our breakdown of refer vs. originate.
What a Private Money Referral Agreement Should Answer
Before you accept or arrange compensation on a private-money referral, make sure you can answer these:
- What does the referral cover? Which deal, borrower, or type of transaction is the agreement actually about?
- How is compensation structured? How is it calculated, and when is it earned?
- Who needs to know about the arrangement? Disclosure to all parties is a practical and often a compliance concern.
- What happens if the deal changes or doesn't close? Terms can shift, and the agreement should say what that means for any compensation.
Compliance Pitfalls to Check First
What is allowed varies by state and by situation. Licensed real estate professionals often have additional obligations through their brokerage or employer. Before accepting any compensation for a referral, confirm what your brokerage or employer permits and what your state's requirements are. When in doubt, ask a qualified professional. This is not something to guess at.
It also helps to be clear on who you are referring to and why. Our guide to the 5 questions to ask before referring a client to a private-money lender covers the due diligence side.
How PMB Network Members Formalize Their Referral Relationships
PMB Network helps brokers understand the structure behind private-money referrals so they aren't figuring it out one deal at a time. Members get a vetted lender directory, live Scenario Desk calls to work through real deals, Support Desk Q&A, and the Brokering Fundamentals track. Membership is $79/month, cancel anytime, no contracts.
Key Takeaways
- A referral can be a one-time favor, or a repeatable part of your business if it is structured.
- A good agreement answers four things: what the referral covers, how compensation works, who needs to know, and what happens if the deal changes or doesn't close.
- What's permitted varies by state and by brokerage or employer, so confirm before accepting or arranging compensation.
- This article is educational and is not legal advice. Consult a qualified professional about your situation.
Frequently Asked Questions
What is a private money referral agreement?
It's a written arrangement that sets out the terms of a referral relationship, including what deal it covers, how any compensation is structured, who is included, and what happens if the deal changes or doesn't close.
Can a real estate agent accept compensation for a private money referral?
It depends on your state's requirements and on what your brokerage or employer permits. Confirm both before accepting or arranging compensation, and consult a qualified professional if you are unsure.
Who needs to be told about a referral arrangement?
Disclosure to all parties is a common practical and compliance consideration, and the rules vary by state and situation. Ask your brokerage or a qualified professional what applies to you.
Why put a referral arrangement in writing?
A written agreement reduces misunderstandings about scope, compensation, and timing, and turns an informal favor into a process you can repeat.
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Results are not guaranteed. Compensation for referrals or brokered deals is not guaranteed and depends on the transaction, the lender, your brokerage or employer, and applicable state requirements. This article is educational and is not legal advice.