Julie Hall, CRS, began planting the seeds of her referral-based business in 2006 when the housing market was in decline. Fueled by her passion for food and wine, Hall decided to start a monthly wine-tasting group in her home as a way to meet new people.

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Referral Madness

Referrals and repeat business from past clients can pave the way to a thriving real estate career.

By Regina Ludes

Julie Hall, CRS, began planting the seeds of her referral-based business in 2006 when the housing market was in decline. Fueled by her passion for food and wine, Hall decided to start a monthly wine-tasting group in her home as a way to meet new people. “I went to culinary school and was an assistant winemaker, so I knew a lot about wine. First I invited a few friends from high school, then after several months, I encouraged them to invite their friends,” Hall recalls.

As she pours the wine, she chats with each guest and keeps an ear open for news about their lives, such as engagements or new jobs. She rarely discusses real estate at these events, but instead follows up with guests by email to offer assistance. “I built the majority of my sphere of influence through this wine group, one relationship at a time,” says Hall, who estimates that 95 percent of her business comes from repeat and referral clients.

“Real estate transactions happen because of life events, not the market,” says Hall, managing broker with Windermere Real Estate/Yarrow Bay in Kirkland, Washington. “If you engage with people, listen for changes in their lives and provide exceptional service, they will always come to you when they need you because you will be top of mind,” Hall says. 

REALTORS® who have built lucrative referral-based businesses say they started by creating meaningful connections with individuals in their sphere, including past clients, friends and allied professionals. To connect with these people, some agents rely on a system of frequent and consistent follow-up to share community news and local market data, while other agents host events to build goodwill and create memorable experiences. Although cultivating these relationships takes time, the effort can pay off in repeat and referral business for years to come.

Food, Wine and Real Estate

As Hall’s wine group became more popular over time, she asked guests who had recently bought a house to host the event in their home. “This showed their pride of ownership and excitement that homeownership is possible. Most people are scared to do their own events, so I help out by selecting the wines and playing host,” says Hall. About 100 people receive email invitations to each monthly tasting, which draws 20 to 30 people. “It’s a simple concept, but you have to be dedicated to making the event memorable and consistent.”

In addition to monthly wine groups, Hall plans a Thanksgiving potluck dinner, weekend getaways to fun destinations and small dinner parties that she hosts in her own home. Each event enables Hall to expand her social circle, while also showcasing her leadership ability and knowledge of the community, which furthers her credibility with clients, she says.

“It’s always enjoyable to work with a referred client because they already know who you are and there’s built-in trust. The relationship is more comfortable when we share a common interest or have a mutual friend,” Hall says. 

Making the Most of the Madness
Business REALTORS® earned through referrals from past consumers and clients, 2013.
None	14%
Less than 10%	16%
Up to 25%	28%
Up to 50%	19%
More than 50%	21%

Create Raving Fans

“It’s much more cost-effective to get business from a referral than to spend money on getting a new customer,” says Frank Serio, CRS, with RE/MAX by the Sea in Bethany Beach, Delaware, and a CRS-certified instructor who teaches the Referral Building course (CRS 210).

Serio says software programs such as Top Producer can help agents manage their client database and create a system to contact them regularly. “The key is to balance your personal contacts with good, relevant information they can use and pass on to people they know,” Serio says. “You don’t always have to sell real estate to them. The information could be about community events, how to prep their home for the winter or preparing their home for sale.”

Serio advises agents to focus on their core group of raving fans — clients who love your business and have given you referrals previously. When these primary supporters forward your information to other individuals in their sphere, the pool for potential referrals expands. “Individuals in your sphere may not refer someone directly, but someone else they know in their sphere may refer someone to you,” Serio says. Promoting more heavily to these core clients is one strategy agents can use to quickly revitalize their career after a market downturn, he adds.

Constant Contact

In Holland, Michigan, with approximately 50,000 residents, Larry Kleinheksel, CRS, of Coldwell Banker Woodland Schmidt, still uses the same client referral system that he learned from a top-producing agent at his firm more than 24 years ago. “He pulled me aside and said, if you follow this system and keep your name in front of people every month, you will be successful,” Kleinheksel recalls.

His client contact system entails sending either a postcard or newsletter each month to the 1,200 people in his database, which includes past and current clients, allied professionals and “anyone that I can call by their first name when I walk down the street,” he says. Each newsletter contains valuable news and tips, such as current interest rates, market trends, recipes and local events. “You have to make it personal or people will not read it,” Kleinheksel says.

Kleinheksel tracks clients using Top Producer, and keeps a stack of note cards in his desk drawer to dash off a brief message to those celebrating anniversaries and birthdays. For the core group of 25 clients who have consistently referred new business, he sends a gift certificate for their favorite restaurant each year.

The traditional approach works for Kleinheksel, who averages one to three referrals from every monthly mailing, and who has received 35 total leads through October 2014 that have all been converted to sales or listings. He has earned $13 million in total sales volume every year for the past three years, and is on track to reach that level in 2014.

Kleinheksel says when the housing market declined five years ago, he sent fewer mailings to cut expenses. But when he noticed his business starting to drop off, he returned to the monthly schedule. “It does cost money to send postcards, but you have to spend money to make money. And you have to provide good service,” he says.

A System for Success

At the advice of a colleague, Robert King, CRS, adopted a similar follow-up system six years ago that has helped him build his business through referrals. The REALTOR® with Tampa Bay Infinity Group at HomeXpress Realty stays in touch with clients every month using a combination of email, phone calls and handwritten notes. The materials and messages he uses are provided by Buffini & Company, which helps simplify the process. Individuals who regularly give referrals receive more frequent communication, King says, while those who haven’t responded in a while or provided referrals are weeded out every year.

Today, roughly 87 percent of King’s business comes from repeat and referral clients, and he averages 38 transactions per year from referrals. “By constantly staying in touch, I can keep people aware of my services so when they have a real estate need, they can contact me,” King says. While Facebook, Twitter and Google Plus have helped him keep his name in front of people, they have not generated new sources of business or referrals so far, he adds. 

The key to successfully building a referral-based business, King says, is “having a process in place to consistently follow up with your contacts. That will make your life a lot easier. Also, your overhead will be lower because you aren’t relying on advertising.”

Building a successful referral-based business does not happen overnight. But the time and energy agents put into cultivating their client relationships can be a wellspring of business for years to come.

 

Regina Ludes is a freelance writer based in Chicago.

Learn more by picking up the book, The Referral Engine: Teaching Your Business to Market Itself, by John Jantsch.