Real Estate Marketing Agreement: What You Need to Know
A real estate marketing agreement is a strategic union between a real estate broker or a developer and a mortgage or title company.3 min read
2. Best Practices for Compliance of Marketing Services Agreements
3. Do's and Do Not's for Marketing Agreements
Updated November 17, 2020:
A real estate marketing agreement is a strategic union between a real estate broker or a developer and a mortgage or title company. The agreement is for the developer or real estate office to promote/market the services of the mortgage or title company for a fee.
Overview of a Marketing Agreement
With a marketing agreement in place, buyers will be the focus. This ensures a better home buying experience. The goal is to make the process of purchasing a home run smoothly and in a timely manner while remaining convenient for everyone involved.
A marketing service agreement (MSA) is regulated and scrutinized by several bureaus, including the Consumer Financial Protection Bureau. Regardless of this, an MSA can be created and structured to be in compliance with the Real Estate Settlement Procedures Act (RESPA), which prohibits the exchanging, giving, or receiving anything of value for referring a settlement service.
Payments for actual, distinct, and necessary services are allowed payments under RESPA Section 8(c) with the stipulation that it cannot be for more than the value of the services and that payment is not based on the number of referrals.
Marketing service agreements must also take into consideration the Truth in Lending Act, the Unfair, Deceptive or Abusive Acts and Practices Act, and any other state and federal requirements.
Best Practices for Compliance of Marketing Services Agreements
Marketing Services Document
Within the MSA document, there are several things to outline in the agreement.
- Make it clear there is no agreement or understanding in regard to referrals.
- Avoid the use of "exclusive" and "preferred" verbiage within the document.
- Do not pay for "access," and avoid any payments for direct sales pitches made to particular customers.
For marketing services, stay with those that are considered "public facing" advertising. These include:
- Signage located at sale offices and property listings.
- General email.
- Direct mail.
- Website banner ads.
- Links to social media.
- Keep the focus on public advertising and internal advertising as secondary.
Marketing Services Agreement Disclosure
- Inform the homebuyer of the marketing relationship.
- Let the home buyer know there is a fee being paid.
- Let them know they may choose another service provider.
- Label provider ads as "paid advertising" when listed on the marketer's web site and on other locations as necessary.
Marketing Services Agreement Program Administration
- Keep marketing results and analysis as a separate function of the company.
- Document all policies and procedures pertaining to the MSA.
- Provide RESPA training to employees.
- Request an independent evaluation of the services performed.
- When setting the marketing fees, set a flat rate that is lower than that of the services being performed.
- Implement a back-end verification and compensation process for the services.
- Dissolve agreements with marketers who are not providing proof of services rendered in a timely manner.
Do's and Do Not's for Marketing Agreements
Do be aware of RESPA's allowance of payments for services performed by a broker only when the actual services have been performed and only if the fee charged for the services is the fair market value.
Make sure the marketing services agreement clearly states in written form the details of the advertising and marketing services that are to be performed as well as the fee being charged for these services. Follow up to ensure that the services of the agreement were performed. This step may require evidence supplied by the service provider.
Document the process for arriving at the fair market value. You may hire an independent third party to determine the marketing and advertising services fair value amount.
Do not include in the agreement the services requiring a broker to incorporate marketing of a title company or lender directly to the buyer.
Avoid entering into exclusive marketing service agreements whereby the broker agrees to perform advertising and marketing services to only one title company or lender. It is recommended not pursuing marketing sales agreements with an individual real estate agent.
Since fair market value is part of the agreement, do not accept fees that exceed the value of the services performed. Also, fees are not to be accepted for conducting surveys, generating monthly reports, or allowing access to sales meetings.
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