What Is a RE Marketing Agreement?
A real estate marketing agreement is precisely what it sounds like: an agreement between a real estate agent or broker and an agent or a vendor that provides marketing services to the real estate industry. A vendor can be involved in the marketing process in several different ways, including providing open house signs, electronic flyers, postcards, social media advertising, and e-blast campaigns, among other things .
While the vendor benefits from guaranteed customers for a certain amount of time, the real estate agent or broker benefits by spurring potential buyers onto their properties. Such marketing agreements can offer set benefits for a certain designated number of months and can be provided to various agents in a brokerage or just one particular agent. All of this is designed to provide a win-win situation to each party involved.
Essential Elements of a RE Marketing Agreement
Real estate marketing agreements are composed of a number of different elements that work together to form a comprehensive understanding of the relationship between a broker and an agent. While the specifics of a real estate marketing agreement will vary from one individual to the next, some of the key components that you can expect to see present include:
Scope of services: The scope of services addresses the specific duties that the marketing agreement covers. This can include advertising through different media, the creation of marketing materials, managing communications with potential clients, assisting with open houses, and more. This component will also establish the responsibilities for the broker and the agent in carrying out these activities.
Duration: All real estate marketing agreements need to specify the duration of their terms. This helps protect the broker and the agent in regard to whether or not a particular agreement will be honored through the full term, and ensures there’s a clear starting point at which the terms of the agreement go into effect.
Compensation: A fundamental aspect of any agreement is the amount of compensation being provided to the agent by the broker. This will cover everything from commission amounts to bonuses for satisfactory or above-average performance. Keep in mind that some states have imposed minimum commission requirements brokers must adhere to if they hire independent contractors.
Termination: How and when either party can terminate the agreement is important for ensuring the relationship can remain flexible in case the need for change arises. The agreement should specify what type of notice is necessary to end the business relationship and what parties are held responsible for the consequences of termination.
While generally not included in the body of the agreement, an exhibit may be attached that provides a list of the specific services to be performed, types of personal service and fees charged.
The Necessity of Tailoring Your Agreement
A real estate marketing agreement is designed to facilitate the marketing of a specific property, development, or neighborhood. The terms of each agreement must be drafted to reflect the unique characteristics of the property or subject matter and the responsibilities of the parties involved. Too often, the same marketing agreement is used for multiple properties or purposes. A one-size-fits-all approach does not adequately consider the individual needs of a particular property or the obligations of the parties. A marketing agreement that is not properly tailored for the subject property can result in a loss of time and money as the parties grapple with the terms of the agreement, resulting in unanticipated costs. For example, the agreement must detail the scope of the work required by the marketing representative. If a home is located in an area where it is necessary to obtain a sign permit, the agreement needs to address who is responsible for applying for and paying for a permit. If another property is located in an area where commercial signs are permitted without a permit, the agreement should address the location, size, and design of a sign even if a permit is not technically required. Failure to include appropriate language in the agreement could create potential barriers to marketing the property. Likewise, an agreement that imposes additional and burdensome responsibilities on the marketing representative may deter such company from entering into a marketing agreement. Likewise, containing a poorly drafted agreement could prematurely terminate the relationship.
Legal Concerns in a Marketing Agreement
Marketing of real estate is as complex and as unique as the various types of properties being marketed. With that complexity comes the necessity of having a written marketing agreement with the client/seller of the real estate to be marketed. While that marketing agreement will typically focus on the ‘who’s doing what,’ and ‘how much will be paid for what’s done,’ it must also address the legal considerations attendant to a marketing agreement, and in particular, legal issues which can arise for real estate agents, related to unlicensed activity, and compensation for such activity.
When examining applicable laws and their potential applicability to any proposed real estate marketing agreement , an initial determination will be whether the proposed activities constitute ‘real estate activity’ subject to any licensing requirements; or are otherwise subject to regulations under the laws of applicable states. For real estate activity to require a license, it typically must be tied to the purchase or sale of real estate, and be done on an independent basis for consideration (or at risk of the license being revoked).
Applicable laws of each state should be consulted, or legal counsel sought, before the final version of any proposed real estate marketing agreement is presented to a client/seller for consideration.
Pitfalls to Avoid
Mistakes often happen in the rush to sign a real estate marketing agreement. Some come from brokers and agents, and some from owners. We’ll start with the most common mistakes on the owner side. You probably see one or more of these scenarios frequently, so be sure to look for them:
Clearly spelling out the level of service you are getting helps to avoid misunderstandings on the other side. Mistakes frequently occur on the agent side, as well. In both cases, it’s common to find that all parties are caught off guard when a demand or invoice comes in, and they realize the service promised or rendered is beyond what is allowed under the contract. Make sure you closely align what you are getting, or what you are promising to provide, with what is in the contract.
Tips for Effecting RE Marketing
Having the right contracts in place is no substitute for the right strategy, so once your commercial relationship has been established and the parties are on the same page with regard to their respective obligations, it is important to understand the best practices for executing successful real estate marketing campaigns. From the outset, both the broker and marketer must be clear about how they intend to work together, and communicate with each other clearly and often. It is recommended that the marketer provide a detailed marketing plan, identifying the plan’s goals and objectives, and including a target audience analysis. The broker should then consider and review the proposed plan, and the parties should jointly critique the plan for scope. This process should also include identifying the broker’s expectations of the marketer, including, how the marketer will adhere to the agreed plan and how often the marketer will update the broker with reports of the results and effectiveness of the plan. The parties also need to agree on the recommended budget for a marketing plan, as well as the anticipated return on investment (ROI) . ROI should be appropriate under the circumstances and provide a positive ROI in light of the advertiser’s expectations. The proposed budget should be in keeping with the forecasted market conditions and market cycles. The budget should identify what services (to be provided by the marketer) are included in the plan and possible supplemental services to be performed by the marketer if additional funds are devoted to the advertising campaign approved by the advertiser. The next step is to identify who will measure each element of success. The parties must agree on the appropriate metrics to measure effectiveness of the marketing campaign and determine which party is responsible for measuring success against those metrics. As with any other business development activity, the marketer and advertiser should agree to incentives for superior performance and penalties for nonperformance. Finally, the marketer and advertiser should jointly evaluate the success of the marketing campaign to identify opportunities for improvement and to lay the groundwork for future collaboration.
