Bird Dog Fees & Referral Fees


7 minute read

February 27, 2019

Here’s an interesting tidbit: I rarely answer the office phone line.

In my experience, clients and agents always call my cell phone, and I’d estimate that at least half of all calls that come into the office are from salespeople.  Everything from duct-cleaning to search engine optimization – I get multiple calls every day from people looking to sell me something I don’t want or need.

I hate it.  And that’s why I have never cold-called in real estate.

Last week, I got a call from a mortgage broker who I think might have been reading off a script.  Either that, or he couldn’t take a polite hint.

He continued to bring up points, literally ordered (“The third point I would make is that…”), continuing to the inevitable salesperson conclusion: saying, “I’ll send you my contact information” after it was clear that our phone call was going nowhere.

But before he got to the end, he dropped a bomb on me:

“We give referrals to real estate agents.  Up to fifty basis points on every deal.”

Say what?

“That means if somebody takes on a million-dollar mortgage, you’d get a $5,000 referral fee from us.”

He went on to give me a mathematical breakdown, suggesting that if I were to provide him with thirty clients per year, I’d take home an extra $150,000.

So what did I say?

How did I respond to the offer?

Was I about to get rich?


Completely the opposite, in fact.

“I don’t take referral fees on mortgages,” I told him, to which he responded, “But this is approved by both RECO and OREA; it’s legal!”

A lot of things are legal that I don’t do, or don’t like, or don’t agree with.  “It’s legal” is not the start, or the end for me.

I explained to him that I run a very tight ship, and that my reputation and good-standing are everything to me.  My business is made up of repeat and referral buyers, and people who come to me after reading Toronto Realty Blog.  The latter folks respect what I have to say, and choose me to represent their interests during the biggest purchase or sale of their lives, presumably, because they trust me.

So why would I throw all of that away for a few extra bucks?

I know that a lot of agents are going to disagree with me here, but I really, really don’t like the idea of taking a referral fee when recommending a home inspector, mortgage broker, or lawyer to a buyer or seller client.

It just stinks, and it’s really difficult to do without some bias and conflict of interest.

The moment you look to secure $1 more for yourself, by having that influence who you would recommend to your buyer or seller client, you’re putting your own interests ahead of your clients’.

The mortgage broker on the phone went on to say, “I only deal with ABC Bank,” which simply hammered home just uneasy I felt about this situation.  After all, the entire purpose of hiring a mortgage broker is to have he or she shop fifty or sixty different lenders for the best rate, terms, and service.  Why would a broker work with only one bank, exclusively?

That stinks.

And the broker is looking to pay real estate agents for referrals?

I didn’t like it.

The mortgage broker continued to ply me with, “This is all legal!  The real estate boards are fine with it, people are doing it, people are happy,” but me thinks he doth protest too much.

Perhaps you’re wondering why I don’t like this?  Well it’s simple.  Buyers and sellers need choice in the decision-making process, be it a lawyer, mortgage broker, or home inspector.  For me to shove one person down their throat is an issue.  But for me to do so, AND profit from it, is a complete and utter conflict of interest.

To be fair to myself, I will say that I do have exactly one mortgage broker that I recommend to my clients, and I don’t give them three names just to say I did.  But I have two lawyers I refer, and two home inspectors.  I have all sorts of tradespeople in my Rolodex, but none of them pay me for introductions.

I believe that a good real estate agent surrounds him or herself with the best of the best in all related fields, and part of a good real estate agent’s service is ensuring the client has access to an experienced and capable mortgage broker, or lawyer, or home inspector.

That’s part of the job.

We already get paid to buy and sell real estate with our clients.  There’s absolutely no reason to look for yet another handout.

But just to entertain the idea, let’s go through the motions and I’ll describe exactly how an agent can “legally” receive a bird-dog fee, er, I mean “referral fee,” from a mortgage broker.

The RECO website has a section dealing with exactly this, which you can read HERE.

It comes complete with this snazzy graphic too:


Permitted with written disclosure

Registrants may receive compensation for referring a client to other professionals or businesses, such as a lawyer, mortgage broker or contractor. However, section 18(4) of the Code of Ethics requires registrants to make written disclosure to their client at the earliest practicable opportunity, and before they receive any compensation or benefit. The obligation for written disclosure is the same no matter what form the compensation takes: cash, a gift or any other form of direct or indirect financial benefit.

In keeping with section 18(4) and (5) of the Code of Ethics, the disclosure must explain:

    • that compensation may or will be received,
    • the conditions under which the payment will be received,
    • the amount or range of compensation the registrant will receive and where it is a range, the exact amount when it becomes known, and
    • if a person related to the registrant receives the compensation, the disclosure obligations still apply. For greater clarity, if the registrant benefits from a third party receiving compensation, the disclosure obligations still apply.

In addition, any referral fees must be received through the employing brokerage. The brokerage is responsible for ensuring compliance with the legal requirements arising from receipt of referral fees, including REBBA 2002, tax laws, and any other applicable legislation.

Further, brokerages may establish their own additional policies and rules for their employees regarding the receipt of referral fees.



So now let’s continue with my example.

I have clients, Jane and John.  They’ve read my blog for three years, and were finally ready to jump into the real estate market.

When I first met them, I told them they should speak to my mortgage broker, and trusting my guidance, they did.

They obtained a mortgage for $800,000, and were ready to go out and start shopping.

The next time we met, however, I explained a little something-something to them.

You see, my mortgage broker was in the habit of paying me for referrals.  And I love money, so that’s why I use him!  In fact, I specifically asked them to contact him so I could get paid.  Then, I take out a homemade disclosure form, with their names already filled in, and asked them to sign it so that I could receive a referral of $4,000.

In who’s best interest am I working?

These folks trusted me to represent their best interests, and yet here I am, asking them to help me get paid?

It stinks!

It absolutely stinks!

I can’t imagine anybody out there willingly, gleefully, and knowingly agreeing to this.

I know that my critics will pile on here and say, “Well you’re already paid too much to do your job,” or something to that effect.  And so too are teachers, and doctors, and lawyers, and baseball players, and everybody else that gets criticized when it’s their turn.  But take the fee for service out of the discussion just for a moment, and return to the notion of referral fees.  Because in case you couldn’t already tell, I don’t like them.

And I never did, as my blog history will attest.

Wow, here’s a throwback!  Have I really been blogging for this long?

December 5th, 2008: “Referral Fees”

I actually remember the conversation I described in my blog.

A gentleman sitting in my office telling me, “An envelope full of green is prettier than the Christmas tree in Time Square.”

Who talks like that, seriously?  It’s like something out of a movie.

Now I mentioned in the title of today’s blog something called “Bird Dog Fees,” and this is something a little different.

Again, many people out there, be it agents, or the general public, may not have a problem with this.  And it does exist, even though it’s prohibited.

I recall the first time I was introduced to this topic, back in a 2006 RECO bulletin:

March 31st, 2006 Registrar’s Bulletin: Bird Dog Fees

The takeaway from that bulletin is simple:

Paying any form of compensation to an unregistered person for activities that would be defined as “in furtherance of a trade” is prohibited.

Essentially this means that if Bob introduces you to Jim, and you sell Jim a house or a condo, you can’t give money to Bob unless he is registered as a salesperson or broker under RECO.

How does this differ from the referral fee?

It depends on who is giving and who is getting.

Referral Fee: The licensed Realtor receives a referral from a mortgage broker, provided the Realtor discloses this to the client at the earliest opportunity.

Bird Dog Fee: The licensed Realtor pays an unlicensed individual “in furtherance of a trade.”

As you can see, RECO believes it is okay for the real estate agent to get money, but not okay for them to give it.

And this is where the public turns on us, as they should.

On their own, each of those scenarios make sense.

But together?  Held up against one another in the light of day?  It looks as though RECO wants agents to receive, but not give.

In the end, I don’t like ANY of it.

A good real estate agent doesn’t “need” a referral fee from their mortgage broker, lawyer, or home inspector.  They don’t even want it.  They care about the client, and the client’s best interests.  And I’m sorry if this all sounds so damn cheezy, but on a long enough time horizon, the good agents who really, truly work for the clients, will last.  And the agents who are pushing their buyers to use a particular individual, solely because the agent gets paid, will not be around for very long.

Perhaps that’s a bit too theoretical, because these agents do find people to work with them.  But every day I see these agents out there – the same ones who list properties with no photos, spelling mistakes in the description, and mistakes in the listings that go without updates for weeks, and I wonder, “Who the hell hires these people?”

For both the buyers and sellers out there, I’ll leave you with this: it is absolutely okay for you to ask your Realtor if he or she is being compensated for an introduction to a mortgage broker, lawyer, or home inspector.

The question is, if the Realtor says “yes,” what do you do?

Is it a problem that the Realtor didn’t disclose this before you asked them?

Or is it a problem that they’re taking a referral fee altogether?

I’m all ears…

Written By David Fleming

David Fleming is the author of Toronto Realty Blog, founded in 2007. He combined his passion for writing and real estate to create a space for honest information and two-way communication in a complex and dynamic market. David is a licensed Broker and the Broker of Record for Bosley – Toronto Realty Group

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  1. Verbal Kint

    at 9:06 am

    “After all, the entire purpose of hiring a mortgage broker is to have he or she shop fifty or sixty different lenders for the best rate, terms, and service.”

    It would be nice if it worked that way. But because of their compensation (tiered commissions based on volume done with a lender), many have one or two lenders which get substantially all of their vanilla deals.

    1. Andy

      at 9:35 am

      I disagree. In the case of a Triple-A borrower then sure, because RBC doesn’t work with brokers and Scotia and TD are the most outgoing. But when a borrower receives commission as income, or is a stated income individual, self-employed, on a contract, etc., you need a mortgage broker because the bank will not deal with you fairly.

      1. Verbal Kint

        at 10:43 am

        Let me clarify. I’m not saying you’ll get a better deal from the bank than from a mortgage broker. In fact, I believe the opposite is almost always true, if you have your wits about you.

        But, given the way lenders structure their commission payouts to brokers, you may well only get a mortgage that’s CLOSE to the best rate, and CLOSE to the best terms. Lenders offer brokers extra bps (and other perquisites) for deal volume, because it works. If brokers religiously shopped 60 lenders and steered each borrower to the best lender based on rate and other terms, lenders wouldn’t pay brokers the way they do.

    2. Joel

      at 7:55 pm

      As a broker I can tell you that is not true. There are a couple of the highest volume brokerages that have volume deals and pump most of their volume through one or two lenders, but your average broker they are using multiple lenders.

  2. Ed

    at 10:41 am

    Fun fact.
    A ‘bird dog’ on the down low in the car business was also known as a ‘ham sandwich’

  3. Joel

    at 7:53 pm

    I am a mortgage broker and for realtors that offer me a referral fee I tell them to give that money to the client as an incentive. I would much rather the client get the money to help furnish their home. If you do that consistently you will end up with repeat business and more happy referrals.

  4. Gord McCormick

    at 9:00 pm

    agree with your position on referral fees for the 3rd party inspectors or mortgage brokers that you mention…but how then does this jibe with a Realtor getting a 25% referral fee from another Realtor? By the same logic, should not a Realtor, acting in their client’s best interests, refer them to another Realtor (when necessary) without anticipation of a referral fee?
    Gord McCormick, Broker of Record
    Oasis Realty Brokerage

  5. craijiji

    at 11:17 am

    I get what you’re saying, but you’re assuming that the clients best interests are not getting looked after here. If you take referral fees from a broker that consistently gets his clients the best mortgage for their situation, no one loses.

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  11. m

    at 7:14 pm

    sheesh, take the pickle out. I’ve had million dollar years from cold calling, its how you make it happen.

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