Marketing Services Agreement: Everything You Need to Know
A marketing services agreement helps define the terms on which business can refer homebuyers to a particulate settlement service provider. 3 min read
A marketing services agreement helps define the terms on which business can refer homebuyers to a particulate settlement service provider.
Settlement Service Providers Must Market to Home Buyers
Residential settlement service providers get a lot of their business from the home purchase market. It is an endless stream of revenue for those who excel at working with real estate brokers and builder associates, while providing a high level of service to homebuyers. Settlement service providers, including mortgage lenders and title agencies, need to continually market their businesses in order to keep attracting clients.
Some of these businesses focus their marketing dollars on third-party media channels, such as radio, magazine, or television. Some go through Marketing Service Agreements, where they work with service providers who market their services to a pool of prospective buyers. This can be very cost-effective. When settlement service providers can market their services in a more cost-effective manner, that cost reduction can trickle down to buyers in the form of reduced-price services.
Marketing Services Agreements Can Lead to a Better Home Buying Process
Strong strategic relationships between settlement service providers is an important part of any business process that puts the buyer first. That is because, by working together, these service providers can make the process smoother and more predictable for buyers. Settlement service providers can market this better user experience to potential clients.
A Marketing Service Agreement (MSA) is designed to provide branding and differentiators for a particular service provider. It helps cement what the business does, and how, in the minds of real estate agents and buyers.
Marketing Services Agreements Can Still Be Compliant
The Real Estate Settlement Procedures Act (RESPA) states that value must not be exchanged for a referral to a specific settlement service provider. The Consumer Financial Protection Bureau (CFPB) also regulates these transactions. Within RESPA, Section 8 (c) 2 allows money to be exchanged between these businesses for services provided. The amounts paid cannot be contingent upon referral volume. In 2010, HUD declared that direct sales pitches for certain service providers are not allowed. The CFPB has said that:
- Business may not have an agreement about referrals
- An agreement of this nature can be considered a "thing of value", which may not be exchanged
- Service providers may not pay for endorsements
- Companies may not direct the bulk of their marketing at other service providers with the goal of establishing MSAs
- Discounts cannot be selectively provider to homebuyers based on which settlement service providers they choose
Be sure your MSA takes into account state, federal, and local regulations on these types of transactions and marketing practices. Also note the Unfair, Deceptive or Abusive Acts and Practices Act (UDAAP) and the Truth in Lending Act (TILA), which have a bearing on marketing service agreements.
Industry Best Practices for Marketing Services Agreement Compliance
Many settlement service providers have created a list of best practices to help service providers understand all of these regulations on marketing service agreements. For example, one best practice is to state that there is no explicit agreement about referrals between the two parties creating the MSA. Another best practice is to avoid pitch language that presents a certain service provider as "preferred" or in any way "exclusive". Neither company should pay for direct pitches to the other company's clients, and this should be clearly stated in the marketing service agreement. Also, include language that forbids either company from paying for access to the other's clients.
Instead, marketing services contracted between two companies should relate mainly to public-facing advertising or marketing strategies. These could include signs and marketing collateral posted in public locations, such as at sales offices or on property listings. General informational emails that include information about service providers are allowable, because they are not a direct pitch to a single customer. Social media ads or website banners are also fair game for marketing service agreements. Kiosks or video loops are permissible, as long as they are posted in a public place or available to all website visitors, rather than targeting a single buyer.
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