There is a wide variety of opinions on what is allowed and what is not when it comes to marketing agreements, so be careful what you sign.
By Dave Hershman
Special to MPA
I am being asked by a team of real estate agents that I know to become a marketing partner by signing a marketing agreement. I am not sure whether this is even legal. Is this something I should consider doing?
I can't give you legal advice on marketing agreements, but I can say that it is done throughout the industry and there is a wide variety of opinions on what is allowed and what is not. It is my understanding that these opinions vary because of the absence of specific guidance previously issued by HUD and more recently by the CFPB. My guess is that there will be more guidance coming from the CFPB in the future.
The major legal issue is compliance with RESPA which forbids "kickbacks" to pay for referrals. You can see how if a lender paid a monthly fee to an agent, a team or an office and did not receive any value back besides referrals, it is a clear RESPA violation. On the other hand, it becomes pretty complex to determine what the agent can provide of value. Paying for a desk rental is a pretty simple example. The lender pays for a desk in the realty office. Paying more than the "value" of that desk would be a violation. When you get into more complex issues such as the value of putting the lender's information on the real estate company's website, you can see where the issues lie.
Beyond the legal issues which are very complex, there is the business decision. The first question I would ask is-- are you presently obtaining business from these agents? Even the answer is complex. If you are not and are setting up this agreement, you would expect that they would be using your services in some way, including recommending you.
If you are already doing business with them, then you may be protecting yourself from competition as the agents could sign an agreement with another company. This brings up another question--is there going to be one marketing agreement with you, or more than one with other lenders? That should factor into your decision. I will cover more about the business decision and value you could receive next week
Dave Hershman
Do you have a reaction to this commentary or another question you would like answered? Email Dave at [email protected].
Dave Hershman has been the leading author and a top speaker for the industry for decades with six books authored and hundreds of articles published. His website is www.originationpro.com. If you have a reaction to this commentary or another question you would like answered in this column? Email Dave directly at [email protected].
Special to MPA
I am being asked by a team of real estate agents that I know to become a marketing partner by signing a marketing agreement. I am not sure whether this is even legal. Is this something I should consider doing?
Tyler from California
I can't give you legal advice on marketing agreements, but I can say that it is done throughout the industry and there is a wide variety of opinions on what is allowed and what is not. It is my understanding that these opinions vary because of the absence of specific guidance previously issued by HUD and more recently by the CFPB. My guess is that there will be more guidance coming from the CFPB in the future.
The major legal issue is compliance with RESPA which forbids "kickbacks" to pay for referrals. You can see how if a lender paid a monthly fee to an agent, a team or an office and did not receive any value back besides referrals, it is a clear RESPA violation. On the other hand, it becomes pretty complex to determine what the agent can provide of value. Paying for a desk rental is a pretty simple example. The lender pays for a desk in the realty office. Paying more than the "value" of that desk would be a violation. When you get into more complex issues such as the value of putting the lender's information on the real estate company's website, you can see where the issues lie.
Beyond the legal issues which are very complex, there is the business decision. The first question I would ask is-- are you presently obtaining business from these agents? Even the answer is complex. If you are not and are setting up this agreement, you would expect that they would be using your services in some way, including recommending you.
If you are already doing business with them, then you may be protecting yourself from competition as the agents could sign an agreement with another company. This brings up another question--is there going to be one marketing agreement with you, or more than one with other lenders? That should factor into your decision. I will cover more about the business decision and value you could receive next week
Dave Hershman
Do you have a reaction to this commentary or another question you would like answered? Email Dave at [email protected].
Dave Hershman has been the leading author and a top speaker for the industry for decades with six books authored and hundreds of articles published. His website is www.originationpro.com. If you have a reaction to this commentary or another question you would like answered in this column? Email Dave directly at [email protected].
