What’s the proper way to Structure a Marketing Service Agreement?

20 Feb

What’s the proper way to Structure a Marketing Service Agreement?

Real estate practitioners getting into marketing service agreements with lenders, title companies, along with other settlement providers is really a well-established practice, but a recently available court decision shows why you must structure these agreements the proper way.

An appellate court just ruled that it’s okay for a home loan lender to refer business to mortgage insurers that are buying reinsurance from a joint venture partner of the lending company, as the reinsurance is really a real service and the insurers are paying fair market rates for this. Put simply, the arrangement doesn’t total a kickback.

Although the entire case involves a lender, insurance firms, and a reinsurer, the structure of the agreement is a thing that applies to the type of marketing service agreements you could be involved with being an agent or broker. Any agreement you enter with a lender or title company should be for actual services rendered and coming in at fair market rates and not an arrangement for referrals.

How can you ensure a marketing agreement is suitable under federal anti-kickback rules? It is important is to own it viewed by a lawyer who’s acquainted with the true Estate Settlement Procedures Act, or RESPA. For an over-all idea, though, you can find two tests it is possible to apply:

1.Is the marketing fee you receive based on the true number of referrals you make to the company, whether it’s a title company, a lender, or another company? If the fee corresponds to the real amount of referrals, you will be inviting a detailed look by the buyer Financial Protection Bureau (CFPB), that is the federal agency that enforces RESPA.

2. If an arrangement is had by one to split costs on a joint project, such as a newspaper ad, may be the split reflective of what each one of you enter return? For instance, if you and the title company are splitting the expense of the ad down the center, then half the ad is going to the title half and company is going to you. If the title company is covering 75 percent of the expense of the ad but only taking on 25 % of the area, that split helps it be appear to be the ongoing company is subsidizing 50 percent of the ad cost. Again, you will be inviting a detailed look by the CFPB.

Learn more concerning the recent court decision in the most recent Voice for Real Estate news video from NAR. The video also talks about that which was in the budget agreement enacted into law about fourteen days ago. Among other activities, the brand new law extends the tax deduction for mortgage insurance costs and retains the prohibition on taxing forgiven mortgage debt as income. In addition, it talks about why a recently available Supreme Court decision on the regulation of bodies of water is essential to your inbdustry.

Watch video now.