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If you’re currently in a marketing service agreement (MSA) and you’re evaluating when to make the flip to a joint venture model, you need to establish your goals first. Ask yourself, “What will a joint venture partnership give me that the MSA does not?” and “How will a joint venture partnership elevate the existing MSA?” A greater investment in the partnership will also come with a greater risk. Before you commit to any joint venture partnership, even if you are taking an existing partnership to the next level, you’ll need to determine if your investment is worth the return.

When you believe your current MSA lender would be a good candidate for a joint venture, consider the investment cost and potential profitability. You shouldn’t just position yourself to break even with the initial liquidity investment. Rather, you should be in a position for continued growth. An upward trajectory is necessary so that you are in a good position to earn additional revenue as your brokerage grows.

In addition to market conditions, the success of the joint venture depends on the ability to provide opportunity to the mortgage company. In every market, the volume needed to support a joint venture operation varies. The key is being able to provide consistent mortgagee volume to the mortgage partner on a monthly basis to make your investment pay off. Lenders usually use the term “capture rate” as a way to represent the buyers’ controlled sales and the percent that the lender closes. An often-overlooked area of opportunity is attracting quality loan officers who come with personal production, including the ability to capitalize in a refinance market. As a potential stake owner, it is important to calculate these figures prior to investing.

As any ownership model and business today, a joint venture brings risk along with its higher rewards. With an MSA, you are limited to the control you have over the customer experience. However, with a joint venture, you are creating a new customer experience with your mortgage partner. The integration of the referring partner company and the mortgage company is vital for the success of the company. It is important to find a partner with an agent-marketing centric mindset. The goal of the joint venture is to build a mortgage company around the specific needs and opportunity for the partnering company. It is a real opportunity to differentiate the partner company in their specific market space.

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