Do Realtors Have to Disclose Contractor Referral Fees to Clients?

Quick Answer: "Not every contractor payment automatically requires the same client disclosure. Disclosure is more likely required when a REALTOR® recommends a contractor and receives a financial benefit from that recommendation. Pure advertising, referrals outside a client relationship, and other arrangements can be different. State law, brokerage rules, and the exact referral structure still matter."

Do Realtors Always Have to Disclose Contractor Referral Fees?

No, not every payment involving a contractor and a real estate professional should automatically be treated the same way.

The important question is not simply:

“Did the contractor pay the realtor?”

The better questions are:

• Was the realtor actually recommending the contractor?
• Was the person receiving the recommendation a client or customer?
• Was the payment tied to the recommendation?
• Was it a genuine referral commission or simply payment for advertising?
• Was the contractor involved in the real estate settlement?
• Is the agent a REALTOR® subject to the NAR Code of Ethics?
• Does state law or brokerage policy impose additional requirements?

Those distinctions matter.

For example, the National Association of REALTORS® has addressed situations where a real estate professional was paid for advertising on a website. NAR's ethics guidance concluded that simply displaying paid advertisements did not necessarily amount to recommending those businesses.

But when providers were presented as “Preferred Providers,” the analysis changed because a reasonable consumer could interpret that wording as an endorsement.

So the answer is not:

“Every contractor payment must always be disclosed.”

It is:

The more closely the payment is connected to a recommendation made to your client, the stronger the disclosure obligation becomes.

That distinction is especially useful for agents building a digital vendor catalog for their clients. The catalog can organize trusted businesses without every vendor relationship necessarily being structured the same way.

When Is Disclosure Most Likely Required?

Disclosure becomes particularly important when three things happen together:

1. You recommend a business to your client.
2. You may financially benefit if the client uses that business.
3. The client could reasonably interpret your recommendation as professional guidance.

That is the situation Article 6 of the REALTOR® Code of Ethics is designed to address.

Article 6 says REALTORS® should not accept a commission, rebate, or profit on expenditures made for their client without the client's knowledge and consent.

It also requires disclosure of certain financial benefits received from recommending real estate-related products or services.

So imagine a homeowner asks:

“Do you know a good roofer?”

You say:

“Yes, call ABC Roofing. They are the company I recommend.”

ABC Roofing then pays you 5% if the homeowner hires them.

That is very different from a contractor simply purchasing generic advertising space on your website.

You made a specific recommendation.

The customer acted based partly on your relationship and judgment.

You may financially benefit from that decision.

That is the type of situation where disclosure deserves serious attention.

When Might Disclosure Not Be Required?

There are situations where the payment may not create the same disclosure obligation.

This is where the previous article was missing important nuance.

The contractor is simply buying advertising

Advertising and recommendations are not automatically the same thing.

NAR has considered a case involving businesses purchasing website advertising where the REALTOR® received money when visitors clicked those ads.

The ethics panel concluded that simply displaying the advertisements did not amount to recommending or endorsing the businesses.

That meant the advertising fee itself was not treated the same way as a financial benefit earned from a recommendation.

The distinction changed when similar businesses were presented as “Preferred Providers.”

Why?

Because the word preferred tells the consumer something.

It implies:

“I think this business is a good choice.”

So an ad labeled:

Sponsored Contractor

can be very different from:

My Preferred Contractor

even if the business pays in both cases.

The realtor is not recommending the business to a client or customer

Article 6 is focused on recommendations and expenditures involving clients or customers.

Suppose a realtor tells a personal friend:

“My neighbor owns a landscaping company. Here is his number.”

That situation is not necessarily identical to giving a paid professional recommendation to a buyer or seller you represent.

The exact relationship matters.

That does not mean no law or agreement could ever apply.

It simply means the Article 6 client-disclosure analysis may not fit every casual or non-client introduction in exactly the same way.

There is no financial benefit from the recommendation

If you recommend a contractor and receive nothing from that recommendation, there is no referral compensation to disclose.

That sounds obvious, but it matters when building a vendor catalog.

Not every contractor in your catalog needs to pay you.

You may have 20 professionals you recommend because they have taken good care of previous clients.

Some may offer referral commissions.

Others may not.

The catalog can still include both.

The payment is for a real service rather than the referral

A contractor could pay a brokerage for legitimate advertising, sponsorship, event participation, or another actual service.

That is different from paying:

“$250 every time you send us a client.”

The underlying purpose of the payment matters more than what the parties call it.

A genuine advertising agreement should actually provide advertising value.

Simply renaming a referral commission as a “marketing fee” does not automatically change what it is.

Does Calling Someone a “Preferred Vendor” Change Anything?

It can.

This is one of the most important lessons from NAR's ethics guidance.

If a business appears on your website simply as an advertisement, the consumer may understand that the business purchased placement.

But when you put the same business under a heading such as:

• Preferred Vendors
• Trusted Contractors
• Realtors' Choice
• Recommended Professionals
• Our Favorite Service Providers

you are communicating more than placement.

You are communicating endorsement.

That means the financial relationship becomes more relevant to the consumer.

This does not mean you cannot have a preferred vendor catalog.

You absolutely can.

The point is that your preferred list should genuinely represent businesses you are comfortable recommending.

Payment should not be the only thing that makes someone “preferred.”

Can Realtors Recommend Contractors and Get Paid?

In some circumstances, yes.

A referral commission involving an ordinary home service is not automatically the same thing as a prohibited mortgage, title, or settlement-service kickback.

For example:

A homeowner closes on a property.

Six months later, they ask their realtor for a painter.

The realtor recommends a painting contractor they trust.

The painter completes a $7,000 project.

Under a permitted referral arrangement, the contractor pays the realtor an agreed commission.

That is fundamentally different from a mortgage lender paying the agent to steer the buyer into a particular mortgage during the transaction.

However, the fact that a contractor is involved does not automatically settle every legal question.

You still need to consider:

• State law
• Brokerage rules
• Licensing requirements
• Whether the service is connected with an active transaction
• REALTOR® ethical obligations
• How the payment is structured

We explain the broader legal distinction in our guide on whether realtors can legally accept referral fees from contractors.

Why Are Post-Closing Contractor Referrals Different?

Timing can matter because RESPA focuses on settlement services connected with federally related mortgage transactions.

Consider two very different scenarios.

Scenario 1: The Client Needs a Painter Eight Months After Closing

Your previous buyer texts:

“Do you know somebody who can paint the house?”

You recommend a painter.

The painter completes the job and pays you under an existing referral arrangement.

That is an ordinary post-closing home-service referral.

Scenario 2: The Contractor Is Needed to Complete the Sale

A property is currently under contract.

A repair or inspection-related service is needed to satisfy a closing requirement.

The agent directs the client to a particular provider and receives compensation connected with that service.

Now the relationship is much closer to the transaction.

That deserves much more careful analysis.

The lesson is not that “after closing means automatically legal.”

The lesson is that the farther the service is from the real estate settlement itself, the less likely it is to look like a settlement-service referral under RESPA.

What Contractor Referrals Are Usually Easier to Understand?

Ordinary homeowner services are generally much easier to distinguish from mortgage and settlement services.

Examples include referrals for:

• Painters
• Landscapers
• General contractors
• Plumbers
• Electricians
• HVAC companies
• Roofers
• Movers
• Cleaning companies
• Handymen
• Pool services
• Garage door companies
• Appliance repair
• Home organizers
• Locksmiths

These businesses usually perform services because someone owns or occupies a home.

They are not necessarily part of obtaining a mortgage or completing the closing.

That is why they should not automatically be treated like lenders, mortgage brokers, or title companies.

Which Referrals Require Much More Caution?

Anything directly connected to settlement deserves more scrutiny.

That can include services involving:

• Mortgage lending
• Loan origination
• Mortgage brokerage
• Title insurance
• Settlement
• Escrow
• Appraisal
• Certain inspections
• Other providers involved directly in closing a federally related mortgage transaction

Federal RESPA rules prohibit payments for referrals of settlement-service business in covered transactions.

And this is crucial:

Disclosure does not make a prohibited RESPA payment legal.

If a payment is prohibited, saying:

“By the way, they pay me”

does not fix the problem.

That is why contractor referrals and settlement-service referrals should not be lumped together.

Does Article 6 Have an Exception for Real Estate Referral Fees?

Yes, but it needs to be understood correctly.

The current wording of Article 6 says REALTORS® should disclose financial benefits or fees received from recommendations other than real estate referral fees.

That phrase can be confusing.

It does not mean:

“All referral fees involving a realtor are exempt from disclosure.”

Traditional real estate referral fees generally refer to referral arrangements within the real estate industry, such as one real estate broker referring a buyer or seller to another broker.

Those are different from a contractor paying an agent because the agent's client hired the contractor.

In fact, NAR considered expanding Article 6's disclosure requirements for real estate referral fees in 2025, but that proposal did not ultimately become part of the Code.

So it is important not to use the “real estate referral fee” exception as a blanket justification for unrelated contractor commissions.

What About a Contractor Paying to Advertise in a Vendor Catalog?

This can be structured differently from a referral commission.

Imagine your vendor catalog contains a section labeled:

Sponsored Local Businesses

A contractor pays a fixed monthly amount to appear there.

The contractor pays the same amount whether zero clients or 50 clients hire them.

There is no agreement requiring you to recommend the business.

There is no increased payment when referrals increase.

That starts looking much more like advertising.

Now compare it with:

“Pay $500 per month and I'll personally recommend you whenever one of my clients needs a roofer.”

That sounds much more like payment tied to referrals.

The structure matters.

So does the way it is presented to the consumer.

Agents considering sponsored vendor placements should check their brokerage policies and state requirements before launching them.

Can Realtors Share Contractors Without Making a Formal Recommendation?

Yes, depending on how the information is presented.

There is a difference between:

“Here is a directory of contractors serving your area.”

and:

“This is the contractor I personally recommend.”

A neutral directory can provide information without necessarily endorsing every business in it.

A curated preferred vendor catalog is different because the agent has intentionally selected which professionals are shown.

That is not a bad thing.

In fact, curation is what makes a realtor's vendor catalog valuable.

It simply means the agent should understand that consumers may view inclusion as a recommendation.

ReferToday allows agents to maintain businesses in My Vendors while choosing which professionals appear publicly in their client-facing catalog.

That means your private network can be larger than the list you actively showcase.

You decide who gets your endorsement.

Should Realtors Avoid Referral Commissions Entirely?

No.

That would ignore a potentially valuable relationship between real estate professionals and home service businesses.

Realtors already generate contractor business every day.

Clients ask them:

“Who should I call?”

Agents make the introduction.

Contractors get paying customers.

There is nothing inherently strange about businesses wanting to reward valuable referrals where those arrangements are permitted.

The better approach is to make the relationship structured.

Know:

• Who you are referring
• What they offer
• Why you recommend them
• Whether a commission exists
• What causes the commission to become payable
• Whether disclosure is required
• Whether the arrangement is permitted by your brokerage and state

Informal referral arrangements create confusion.

Clear ones are much easier to manage.

How Can Realtors Keep Recommendations and Commissions Separate?

This is one of the most important practices for protecting trust.

Start with:

Would I recommend this contractor if they paid me nothing?

If the answer is yes, you probably have a real vendor relationship.

If the answer is no, the commission may be driving the recommendation.

That is not where you want your catalog to go.

A good vendor catalog might contain:

• A plumber who pays a permitted referral commission
• A roofer who does not
• A painter who pays a commission
• An electrician you have known for five years who pays nothing
• A cleaner your clients consistently love
• A mover you recently added

The client-facing catalog is about trusted recommendations.

Compensation is a separate layer.

How Can Realtors Manage Paid Contractor Referrals Without Spreadsheets?

A referral program becomes difficult when everything lives in text messages.

You introduce a homeowner to a contractor.

The contractor responds.

The homeowner gets an estimate.

Three weeks pass.

The job closes.

You may not know anything happened unless somebody remembers to tell you.

That makes it difficult for both sides.

ReferToday gives professionals and businesses a more structured workflow.

Agents can maintain a vendor catalog, share individual professionals with clients, submit requests, and follow referral activity.

Businesses can list referral offers and update what happens with the lead.

That makes it easier to distinguish:

• Businesses you recommend
• Referrals you actually send
• Referral commissions that may be earned
• Jobs that never close

You do not need to treat every recommendation like an informal handshake.

When Is Disclosure Still the Smart Choice Even If You Are Unsure It Is Required?

When the financial relationship could reasonably affect how the client interprets your recommendation.

There is a difference between:

legally required

and:

worth disclosing anyway.

Sometimes a short disclosure eliminates a much bigger trust problem later.

Imagine your client finds out after the job that the contractor paid you $500.

They might not care.

But they may ask:

“Why didn't you tell me?”

That question is avoidable.

If you are unsure whether disclosure is required, your broker can usually help determine what policy applies.

A transparent referral relationship is rarely harder to defend than a hidden one.

What Should Realtors Do Before Starting a Paid Contractor Referral Program?

Before accepting contractor commissions, answer a few practical questions.

• Is this an ordinary home service or something connected with settlement?
• Does my brokerage allow contractor referral commissions?
• Does my state restrict this type of payment?
• Am I recommending the business directly to clients?
• Does the contractor pay per lead, per closed job, or another way?
• Is disclosure required?
• Is client consent required?
• How will the referral be tracked?
• Would I recommend this contractor without the commission?

You do not need to make referral relationships unnecessarily complicated.

But you should understand the structure before money starts changing hands.

Build Contractor Referral Relationships Around Trust First

Realtors can create enormous value for local service businesses.

A trusted recommendation can bring a roofer, painter, plumber, contractor, mover, landscaper, or cleaner a customer they might never have reached otherwise.

That value can support legitimate referral relationships.

The important thing is understanding what kind of relationship you actually have.

A paid advertisement is not automatically the same thing as a recommendation.

A neutral directory is not automatically the same thing as a preferred-vendor endorsement.

A post-closing painter referral is not automatically the same thing as a mortgage referral.

And not every payment creates identical disclosure requirements.

Start with businesses you genuinely trust. Understand how compensation works. Follow your brokerage and state requirements. Disclose financial relationships when the rules or circumstances call for it.

Then make the referral easy for everyone involved.

With ReferToday, realtors can build a branded vendor catalog, showcase the professionals they actually trust, share vendors directly with clients, track referrals, and keep contractor relationships organized without relying on spreadsheets and text threads.

Create your free vendor catalog with ReferToday and start with the contractors and professionals you already recommend.

Realtor Referral Fee Disclosure FAQs

Do realtors always have to disclose contractor referral fees?

Not necessarily in every possible arrangement. Whether disclosure is required can depend on whether a recommendation was made to a client or customer, whether the realtor receives a financial benefit because of that recommendation, the realtor's professional status, state law, and brokerage policy.

Can a contractor pay a realtor without the client knowing?

There can be situations where a contractor payment is not tied to a client recommendation, such as certain genuine advertising arrangements. But when a REALTOR® recommends a contractor to a client and may financially benefit from that recommendation, Article 6 can create a disclosure obligation.

Does a paid advertisement need the same disclosure as a recommendation?

Not necessarily. NAR ethics interpretations have distinguished ordinary paid advertising from recommendations. However, presenting an advertiser as a “preferred” provider can cause consumers to reasonably view the placement as an endorsement.

Can a realtor receive a referral commission from a contractor after closing?

Potentially, depending on state law, brokerage rules, the service involved, and the structure of the arrangement. Ordinary post-closing home services can differ significantly from settlement-service referrals governed by RESPA.

Does RESPA apply to plumbers, painters, or landscapers?

Not automatically. RESPA Section 8 focuses on settlement services connected with federally related mortgage transactions. Ordinary home maintenance performed outside the settlement process may fall outside that scope, although other laws and rules may still apply.

Is a broker-to-broker real estate referral fee treated the same as a contractor referral fee?

No. Article 6 specifically refers to “real estate referral fees,” and traditional broker-to-broker referral arrangements are a distinct category from commissions paid by home service contractors.

If a realtor gives the client several contractors, is that still a recommendation?

It can be. NAR guidance has explained that providing a curated vendor list may still reasonably be interpreted by a client as a recommendation, especially when businesses are described as preferred or trusted.

Does disclosure make every referral payment legal?

No. Disclosure and legality are separate questions. A payment prohibited under RESPA or another law does not become legal simply because the client was informed about it.

Can a realtor recommend a contractor who does not pay a commission?

Absolutely. In fact, a strong vendor catalog should be based on trust and quality rather than compensation. Businesses that do not offer commissions can still be some of the most valuable professionals in an agent's network.