MSAs (Marketing Services Agreement) with Mortgage Companies or Title Companies

January 30, 2018 | By Charles Botensten

Q. Recently, I have heard the acronym “MSA” being used in connection with my real estate brokerage firm’s relationship with certain mortgage companies and title companies.  What is a MSA and why is it important?

A. "MSA” is an acronym for Marketing Services Agreement.  A MSA between a real estate brokerage firm and a mortgage company or title company is an agreement where a real estate brokerage firm agrees to perform specified marketing services on behalf of a mortgage company or title company in exchange for a marketing fee (paid by a mortgage company or title company to a real estate brokerage firm).  A MSA can serve as a valuable tool.  When set up between a real estate brokerage firm and a mortgage company or title company, a MSA provides a mortgage company or title company with marketing opportunities while creating a revenue source for a real estate brokerage firm.

Notwithstanding, there is a significant amount of regulatory scrutiny surrounding MSAs.  The Real Estate Settlement Procedures Act (“RESPA”) is a federal law which prohibits anyone from giving or accepting a fee, kickback or anything of value in exchange for referrals of settlement service business. While a mortgage company or title company (which are defined as settlement service providers under RESPA) may use a MSA for purposes of marketing to the customers of a real estate brokerage firm, a MSA cannot be used as a proxy for paying referral fees for business that a real estate brokerage company refers to a mortgage company or title company.  Accordingly, for a MSA to meet regulatory scrutiny, a MSA must: (i) be very specific as to what marketing services a real estate brokerage firm will provide, (ii) accurately value such marketing services (which fair market valuation should be confirmed by an independent third party expert), (iii) contain mechanisms to confirm that the marketing services are actually rendered by a real estate brokerage firm and (iv) not, in any way, be based upon referrals of business.


Important Tip: Federal regulators have been very active in monitoring MSA relationships and bringing enforcement actions where MSAs are used as a tool for giving kickbacks in exchange for referrals.  If a real estate brokerage firm wishes to enter into a MSA, it should seek the counsel of professionals who have very specific experience in creating compliant MSAs.

The Legal Line Question by:
Neil B. Garfinkel
REBNY Broker Counsel

Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP