You may or may not have heard the term, but chances are you have been involved in a transaction subject to an MSA and had no idea.
What is it?
MSA is short for Marketing Service Agreement and is an attempt at a legal work-around for an arrangement that is otherwise generally illegal in the real estate industry.
The RESPA (Real Estate Settlement Procedures Act) states that it is illegal to exchange something of value for the referral of services by real estate professionals. ie - We can't offer brokers a new Ferrari for sending transactions to us.
A Marketing Services Agreement is essentially one company promoting the services of another company in exchange for a sum of money. This includes the opportunity to to market to (sometimes exclusively) their brokers, loan officers, employees, affiliates, customers and more.
Who's Doing It?
Many of the big-box title insurance companies have MSA agreements in place with real estate brokerages.
Some more "legal" than others, depending on perspective.
Other examples of arrangements can be between:
Title Insurance
Escrow
Real Estate Brokerages
Inspectors
Lenders
Home Warranty Companies
Insurance Agents
Marketing Service Agreements can exist between any combination real estate service providers.
This means that a real estate brokerage could be receiving a payment in exchange for the opportunity to sell services to Buyers and Sellers by way of their brokers and ultimately to other brokers and their clients.
How Do I Know? Unfortunately, there is no regulated requirement for disclosing an MSA, the way there is for businesses with common ownerships (Affiliated Business Arrangement Disclosures).
Many will tout the language of "preferred partner" or similar term.
Sometimes this means that the brokerage has ownership in the service provider or there could be an MSA in place.
Listen For Phases Like...
Preferred Partner
Relationship (sometimes innocent, sometimes not)
Affiliate
In-House
Go-To
Arrangement
Why is this a problem for escrow and closings?
If the escrow/title company is providing compensation to a real estate brokerage by way of an MSA, escrow is no longer a neutral third party.
An escrow/title agent that has a financial interest in the transaction, other than for the fee for their services rendered or is influenced by a third party agreement, creates a conflict of interest for all parties involved and could cause unintended consequences for the Buyer and Sellers' transaction.
Can one rely on services to be properly provided when the business model is driven on compensation for "marketing", not on the level of service being provided?
A business that can't self-sustain based on knowledge, experience, and stellar service and instead focuses on other arrangements is perhaps not an expert in their field.
What about Prestige?
When we say, truly neutral, truly independent escrow, we mean it.
No MSA's or or hidden agenda's.
Only escrow, infinitely.