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Referrals as a Bonus, not as a Business

December 10, 2021

Every year I go through my database and recall the transactions, write down birthdays, loan closing dates, update my database and track who referred. After I completed the list, I looked at all of the people who referred loans to me and feel so grateful to have so many partners in business and even more grateful that many have become such good friends.

As I moved through the list, client after client was tied to someone who referred them. At first blush I saw nothing wrong with that, but quickly I began to realize something disturbing. 95% of the loans I closed where because I received a referral from a friend or partner. In the mortgage Industry this relationship is called “Referral Partners” and in the Real Estate industry it’s called a “Sphere of Influence”.

Many Real Estate Agents and Loan officers strive to build strong relationships with people so that they can grow their Sphere of Influence.  As they say, “The more people that know you’re in business, the more business you will do.”  It’s a numbers game … so grow your sphere and watch your business grow; right?  From day one in this business my mentors would preach  “If you want to be successful in the mortgage business you need to know a lot of people and spend ALL of your time and energy growing your referral database (“Sphere”). 

That’s when the problem hit me like a ton of bricks. I have operated my business on 1 platform; get referral partners who know, like and trust that you will do a good job for their clients and these partners will refer your business. It’s easy to get sucked into this strategy and it does work … but there is one MAJOR problem with it.

Problem: Your income depends on these referrals you are to receive from past clients and partners.  If they don’t have referrals, or do not refer you, who does it hurt? 

You leave your business future in the hands of someone else with little to no real incentive to pass your name along. After all, there were tons loan officers even in my own office just as qualified to close a loan as I was.  As a matter of fact, my very best and closest referral partners have sent loans to other loan officers just because it was perceived to be “MORE CONVENIENT” at the time …. Hard to believe, but it’s true. Even my own mother and father in law obtained loans recently through other loan officers …. It was more convenient, kinda (I live in Oregon, they are in California). To be quite honest, when this would happen it pissed me off and was embarrassing.  Perhaps in your business you have experienced something like this as well?


It’s become clear that you cannot count on anyone to provide you referrals, just because they know what you do for work. As author Ryan Fletcher says. “Your business, your income, your family, your bills, your life, cannot depend on whether or not someone else (outside your control) "feels" like referring your name that day.”

You can’t compensate for referrals, so that eliminates direct monetary incentive …

You can’t be everywhere when there is an opportunity to refer, that defies physics …

You can’t be sure that some other salesperson does not swoop in and grab my client or referral partner out from under you… 

So if like me, you are “Referral based” perhaps it’s time to seek out  additional pillars in your business.  That does not mean moving away from working with referral partners … on the contrary, your goal should be to create your own NEW clients and refer them out.  See just how much we can give back! I can only hope that my partners take this information and decide to work “outside” of their spheres.  It’s time for all of us to start thinking of referrals as a bonus, not a business.

From how many different sources are you generating leads?

Michael Neef

CEO - Pre-Approve Me

Michael is a Broker Owner/Loan Officer with 16 years experience. He originally developed Pre-Approve Me in order to solve problems he was experiencing in his own business and is committed to making the Home Loan Process as smooth and easy as possible.

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