When do two halves not make a whole? When you’re talking about Marketing Services Agreements – commonly called MSA’s.
MSA’s are contractual agreements commonly used between a mortgage lender and a Real Estate Broker. What they “say” is that the mortgage lender will pay a fee to said Real Estate Broker for “marketing” of their goods & services.
Theoretically, the payment has nothing to do with how many loans that lender gets – they’ll just pay that monthly fee regardless.
Now let’s talk reality!
In the case of most MSA’s, the Broker receives a monthly fee from that lender to “push” that mortgage company onto their agents. The Broker explains to their agents that they should ‘exclusively recommend’ that certain lender who pays them that monthly fee because: they’re the best or they have an office inside of their office or they’ve known them for a long time and they can rely on them. Once again, it has nothing to do with the monthly payment they receive!
All of that is well and good except the way the extra loan revenue to pay that monthly fee is generated. Typically what happens is that the lender increases your interest rate in order to offset that payment – so their bottom line profit is not affected.
The bottom line to you, the homebuyer, is that if you use a Real Estate Agent whose Broker has an MSA in effect, you will probably end up paying a higher rate of interest and/or higher fees.
When you are interviewing Real Estate Agents, besides questioning them about their experience, be sure to ask them, “do you work in an office where your Broker has an MSA in effect with a mortgage lender?”
If the answer is ‘yes’ and they are referring you to that ‘preferred lender’ – be sure to get a second quote from another lender that isn’t paying that monthly fee – more than likely you’ll save yourself a lot of money!