The Experts at CMG Financial

How to Make Sure Your Joint Venture Is RESPA Compliant

Commentary by the Experts at CMG Financial

If you are considering a marketing service agreement (MSA) or a joint venture, you need to be aware of one important factor, and that is compliance. You must iron this out prior to proceeding into any partnership. RESPA violations can be costly to both companies, impacting both your finances and your reputation, so it is vital to have the proper foundation before signing any agreements. MSAs or joint venture agreements and rolling documentation protect both partners and their new organization. Each type of partnership will have its pros and its cons, but as mentioned, compliance is the one thing they have in common, so let’s take a deeper dive into both.

In an MSA, the lender can only be paid for services rendered, not for any referrals. Rather than paying for access or opportunities, the brokerage can pay for general advertising. There must be a written agreement between the real estate brokerage and the lender with a third-party valuation done to protect both parties. A monthly validation of services must be documented to meet compliance guidelines. This documentation process is thorough to protect both partners and their organization.

With a joint venture, licenses for the new joint venture must be obtained in all states where the joint venture will be operating, and the business must also be registered with each state’s secretary of state. There must be a written document of the separation of duties to ensure each entity is fulfilling their expected roles. Compared to an MSA, there will also be more costs associated with starting and operating a joint venture, but with an ownership stake, it can bring higher returns.

Whether you are choosing an MSA or a joint venture for your forthcoming partnership, RESPA compliance is the responsibility of both the brokerage and the lender. To ensure that your new entity is compliant, both the brokerage and the lender should have on-site visits from compliance officers.

Here are some best practices you should follow to maintain compliance for your MSA or joint venture:

• Show regulators you have a successful Compliance Management System (CMS). Leverage your new lender partner to use their existing CMS, or choose a new system together. • Monitor policies and procedures. Appoint a compliance officer specific to your joint venture, or use your lender’s existing compliance team when possible. • Reasonable procedure to calculate marketing services. Use a third-party whenever possible. • Document your calculations and make sure they are consistent with all CMS policies. • Document services you are paying for and document that they were completed. This mostly applies to an MSA, but can be a good practice for a joint venture as well. • Monthly invoices, certifications and audits to serve as proof that services paid for were rendered. • Archive proof of advertising for reference in case of audit. • Never pay for access. For example, paying to attend real estate agent events. • No exclusive advertising relationships. Limiting the relationships could be a compliance violation. • Agreements should not be short-term. An MSA should be a minimum of six months to avoid the perception of paying for production.

One of the most important reasons to use an MSA or form a joint venture is to operate compliantly, long-term, with your mortgage partner. RE

For more information, please visit https://www.cmgfi.com/jv-partners.

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The Simple Daily Activity That Will Drive Your Business Forward

Commentary by Darryl Davis, CSP

Whether you’re a brand-new agent or a seasoned veteran in the real estate industry, moving your business forward boils down to doing one thing every single day: talking to one buyer and one seller.

Yes, this seems so simple and obvious. But I can’t tell you how many agents seem to have forgotten all about this, because in their minds, they spend a lot of time getting ready to talk to buyers and sellers, but fail to actually have those conversations.

Being Stuck

We busy ourselves with worrying about Zoom or worrying about listing appointments, our advertising, our logos, our slogans, and so on. We put all of our time and effort into preparing ourselves to talk about real estate, but when it comes down to it, we don’t do it. We aren’t doing our business when we aren’t talking about real estate to another human being.

Getting Unstuck

Let’s use a trip to the grocery store as an example. There you are, getting your food for the week, and the young lady at the checkout mentions that she’s been renting a small apartment and is thinking about buying her first home. You ask her a few questions and talk about real estate for the few minutes it takes her to ring through your groceries, and there you go. She counts as a lead.

Anyone you talk to who is thinking about making a physical move in their life is a lead, and you are there to coach them in regard to how to make that move and reach that next level in their life.

Tracking Your Conversations

It doesn’t matter how you do this every day. The important thing is that you’re doing it. I would suggest that you make yourself a chart for each day with two columns, one labeled “buyer” and the other “seller.” Then you can put a dot in the correct column after every conversation you have with someone about real estate. Whether it’s the waitress at your favorite diner or the manager at your favorite bookstore, the important thing is that it doesn’t have to be a big deal. You just need to have a conversation with someone. Even if you only have one dot, you’re still moving your business forward. RE

Moving your business forward boils down to doing one thing every single day: talking to one buyer and one seller.

Darryl Davis has spoken to, trained and coached more than 100,000 real estate professionals around the globe. He is a best-selling author for McGraw-Hill Publishing, and his book, “How to Become a Power Agent® in Real Estate” tops Amazon’s charts for most-sold book to real estate agents. He is the founder of the Next Level® real estate training system The Power Program®, which has proven to help agents double their production over their previous year. Davis is currently hosting free weekly webinars to help agents navigate the new real estate reality. To learn more, visit www.DarrylSpeaks.com/ Online-Training.