As many of you have witnessed, marketing service agreement (MSAs) are being terminated by multiple lenders across the nation. Why is this important to the real estate community?
Whether you realize it or not, these agreements directly impact bottom-line profits for many top agents and brokers.
What are Marketing Service Agreements?
In a nutshell:
MSAs are agreements between mortgage or title companies and real estate agents or brokers. The mortgage or title company pays a fee monthly or annually to the agent or broker for marketing services. Examples of such services include things like website advertising, print advertising, email marketing and signage.
The fees are not intended to be compensation for business referrals or endorsements of the mortgage or title company. Instead, they are for genuine marketing services performed by the agent or broker.
What's the Problem?
The Consumer Financial Protection Bureau (CFPB) has been intensely focused on making sure consumers are protected in major financial transactions, including the purchase of a home.
The Great Recession and Subprime Mortgage Crisis were fueled in part by consumers entering into mortgages they could not afford. In many cases, these consumers were influenced by trusted real estate and mortgage advisers who benefited financially from the consumers' selection of one mortgage versus another.
The CFPB leads the enforcement of laws and regulations that prohibits mortgage and title companies, among others, from giving or receiving anything of value in exchange for the referral of business, including business referrals.
Is This Temporary?
Any time a mortgage or title company physically gives money to a agent or broker for any reason, the company runs the risk of appearing as though they are illegally compensating or disguising an attempt to illegally compensate that agent or broker for referrals.
The CFPB and other regulatory bodies take these offenses extremely seriously. So, it’s absolutely crucial that proper due diligence is performed and detailed records are maintained if you hope to have any chance of proving your unequivocal innocence in the event of an audit.
Is There a Solution?
Redirect money, that would normally go to MSAs, to actual marketing services that help grow mutual business between you and your partner. Part of that is leveraging technology.
The regulations do not prevent like-minded professionals from jointly investing in marketing to grow their mutual businesses, provided that it is done in compliance with state and federal laws.
In part, this means that neither party compensates the other party.
Real estate, mortgage and title professionals all have a common target customer: the home buyer. If the guidelines are followed and you each pay proportionately for your investment, you can market across different channels to target your ideal customer.
Think of compliantly co-marketing on a major highway with your partner. You are each trying to acquire a new customer and to do so, you must split cost proportionally.
The Big Win
You each lower your customer acquisition costs and business expands due to marketing being deployed, opposed to dollars merely changing hands.
Assuming you are using technology, the collaboration results in improving the customer’s experience from the first showing to the closing table.
Keys To Success
- Set up centralized tracking and record-keeping for all your co-marketing activities, including web, print and social.
- Do not pay each other directly, pay your own proportionate share directly to your vendors and keep your receipts.
- Develop a road map that spells out each marketing campaign and what the budget is.
- Always ensure you are each paying your proportional share of the campaign, and make sure neither of you is offsetting any costs for the other.
- Collaborate to improve the consumer experience throughout the entire transaction.
Of course, co-marketing changes are evident and need to be taken seriously. Don’t be afraid to adapt to them and thrive in your business partnerships and growth.