Can a REALTOR License be in Referral Only Status?

Real Estate License

I found this question in my site logs. Let’s clear up some terms.

Each state is responsible for licensing agents and brokers. Each has its own set of requirement and rules. For example, the Texas Real Estate Commission licenses and regulates salespersons (agents) and brokers within the State of Texas.

REALTORs® are members of the National Association of REALTORs® (NAR). NAR is a membership trade organization rather than a licensing agency.

A number of years ago NAR allowed Designated REALTORs® to establish Limited Function Referral Only (LFRO) Brokerages. LFROs have to be a separate business entity. NAR did not want brokers to commingle their “regular” agents with their LFRO agents. LFROs, like Referral Agents of Texas LLC, are established under NAR rules. Since it is also a licensed broker within the State of Texas, it can sponsor agents. Why is this important? Agents can only receive compensation through their sponsoring broker.

As far as the state is concerned LFRO agents are active agents sponsored by a Texas broker. What limits the agent’s activities is the Independent Contractor Agreement between the agent and the broker. This agreement specifically limits the agent’s actions to generating referrals.

A few states may have different “classes” of licenses with include referral-only agents. When in doubt check with your state regulatory agency for details.

Tom Branch

Originally posted at