What’s the Right Way to Structure a Marketing Service Agreement?
All parties benefit from marketing service agreements involving lenders, settlement service providers, and real estate brokers. However, in order to prevent legal issues, these agreements should be properly drafted.
Some important characteristics
A marketing agreement usually gives a marketing agency or consultant exclusive rights to service a certain product in a defined region for a set length of time. The contract should explicitly identify the customer and the consultant. Advertising, press releases and media conferences, social media, promotional events, product launches, and any other marketing services are examples of marketing services. During the time period mentioned in the agreement, no other marketing business will be engaged, according to the agreement.
A marketing contract has a timeline. Contracts for marketing services often run one to two years, with an option to extend the contract for another year or terminate the agreement. The agreement should include the exact amount of payment as well as when payments will be made. If you agree to pay for services monthly, for example, state that in the agreement along with the due date for each instalment. A lump sum payment for a yearly contract is not uncommon.
If you just require a marketing agreement for one project, make it specific. You may only need to employ an outside consultant to create your company’s advertising and marketing plan or to execute a social media campaign, for example. Project-specific marketing contracts should have the same elements as standard marketing contracts, such as a price, a deadline, and project parameters. Most marketing consultants, according to Sharron Senter of Boston, consider pricing discussions as a routine part of the process before winning a signed deal.
How do you make sure a marketing agreement complies with federal anti-kickback laws?
The most critical thing is to have it reviewed by a lawyer who is familiar with RESPA, or the Real Estate Settlement Procedures Act. However, there are two tests you may use to get a rough idea:
- Is your marketing charge based on how many recommendations you provide to the firm, whether it’s a title company, a lender, or another service provider? If the price is proportional to the amount of referrals, you may be tempting the Consumer Financial Protection Bureau (CFPB), the federal body in charge of RESPA enforcement, to take a closer look.
- Is the cost split on a collaborative effort, such as a newspaper advertisement, representative of what each of you receives in return? For example, if the cost of the ad is shared evenly between you and the title business, half of the ad should go to the title company and half to you. If the title company covers 75% of the ad cost but only takes up 25% of the space, it appears that the firm is subsidising 50% of the ad cost. Again, you may be tempting the CFPB to investigate more.
The customer may utilise another marketing firm at the same time if there is no formal agreement. A contract, on the other hand, might specify that no other marketer consultant or business will be engaged for the duration of the signed agreement.
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