Leveraging Subordination Agreements in Real Estate to Propel Your Marketing Strategies
We are marketers and revenue professionals, which means that we’re always looking for new ideas that can help us to improve revenues. One of these ideas that has proved valuable has come from a legal concept that we have been studying. We’re going to put this out there and see if anyone else can use it. The concept of a subordination agreement in real property transactions has helped us to better understand the differences between priorities and tactics, and it can help you too.
A subordination agreement in real estate provides contractual concessions among lenders or between a lender and a seller that reduces the rights of one party in respect to another. While the law of this concept usually only applies to title and property issues, the general concept can be applied to marketers and revenue professionals in general by discerning best practices from financial hierarchies.
We’ve found that understanding financial hierarchies can be a similar benefit to marketing and revenue professionals. Like a mortgage on a piece of property, marketers have collateral roles and responsibilities within the corporation such that they also have the potential for a subordination agreement. Such an agreement such as this can help to facilitate the completion of projects. Because marketing has the tendency to be a cost center, there can be resistance from corporate finance for new marketing investments unless it is learned that these investments can lead to firm revenue improvement.
However, we have found that subordination agreements in real estate can be useful to marketers and revenue leaders, particularly because they allow one debt over another, priority over an asset, with the second being disadvantaged. As a result, the former has its own form of agreement with an asset that is known as a first position lien, which is then subordinate to a secondary position. There are many financial agreements providing the former with benefits over the later. A subordination agreement gives collateral to a lender with a prior claim on an asset (such as a mortgage) that does not otherwise interfere with or govern the relationship between the loan parties. Subordination agreements do not affect the relationship between lenders.
We have found that engaging in subordination agreements can provide marketing and revenue professionals with better ways to prioritize projects, can help for alleviating certain tensions within a corporation, and can also help for improving the outcomes of specific strategies. There are many real-world examples of how prioritization works when it is used in financial contexts, and we will ensure that we’re sharing them here.
Getting in ahead of the curve for prioritization of new projects can be helpful from an implementation standpoint. We’ve found that the best way to do this is to simply compare one set of goals to another. The comparison can be in the form of the costs associated with completing each project, and marketers should consider how much time is needed for completion as well.
We’ve found that the impact of proper prioritization is important factors into increasing revenues through succeeding with eliminating wasteful spending. Often, we have found that one opportunity might not be as impactful as anticipated, and those investments should be followed. Other opportunities, which might not have been pursued otherwise, are much more impactful and can help to turn the company into the right direction. At the end of the day, successful marketing is about making the most of your opportunities.
Unlike in business scenarios where marketing and finance can bicker over certain projects, we have found that it helps to always have a contractual agreement for who is going to be responsible for what work. It’s really all about leverage, with the one with the most leverage being the one who gets the spoils. Marketers must be aware of this when working with financial leaders in corporate settings, and ensure that projects are executed without interference.
One of the things that we’ve found to be altering about the way that we have approached some of our marketing initiatives is that we have learned that we can work proactively and without pushing a budget through regards once we get buy-in from all of the stakeholders.
We’ve found from our legal studies of subordination agreements in real estate that one of the benefits to success has come from the ability to leverage these agreements in negotiations with internal teams. When other team members know that they are going to have to cooperate for the deal to go through, compliance is inevitable. There might be some negotiations and buy-ins needs, but that’s just part of the processes.
Many companies make the mistake of thinking that there is going to be a big one deal that moves the needle on revenues when, in fact, it is a number of smaller deals that keep the machines grinding and the money rolling in. You can deal with this reality, instead of trying to hit a single home run, when you remove the emotions and use the dollars and cents cost equation.
