AARP Supports Legislation to Stop Unfair Real Estate Agreements

STORY UPDATE 8/22/23:
In an important win for homeowners, the NC General Assembly passed legislation that will outlaw this predatory practice. AARP is especially thankful for the hard work of the NC Attorney General and the bill sponsors: K. Hall; Miller; Blackwell; Alston (Primary)
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Fighting Back Against Unscrupulous Brokerage Companies

RALEIGH -- Several real estate companies have been using a predatory business model to target seniors and financially insecure homeowners. These companies cold call people, even those on the Do Not Call Registry, providing cash payments, typically less than $1,000, to homeowners in exchange for agreeing to exclusively utilize that company’s services to list their property at any time in the next 40 years.

The property owner agrees by signing a contract which includes a memorandum that is filed with the county as a lien on the property’s title. The contract purports to be binding on current homeowners and property heirs and the lien complicates the homeowner’s ability to refinance, access home equity, or transfer their property. Property owners can terminate agreements early but must pay a penalty equal to 3% of the market value of the property (i.e., the commission the company would have earned for listing the home) and the company gets to determine the home’s value pursuant to the contract.

Problem’s Scope: These types of agreements have resulted in numerous complaints from misled consumers. A search of the 4 largest Multiple Listing Services (MLSs) in the state for the last 2.5 years reveals that more than 2,000 homeowners have an agreement with one of these firms with 86 listed properties. 

The Solution: The Protect NC Homeowners Act, HB 422 (sponsored by Representatives K. Hall, Miller, Blackwell, Alston) and SB 344 (sponsored by Senators Krawiec, Overcash, Lowe) prohibits the use of Real Estate Service Agreements that are unfair to owners of residential real estate and others who may become owners of real estate in the future, including heirs to the property, by doing the following:

• Prohibits unfair “Right to List” service agreements that exceed one year in duration, and which contain any of the following terms:
  
  • purport to run with the land/bind successors-in-interest;
    
  • provide for assignment of the agreement without notice or consent of the homeowner;
    
  • purport to create a lien, encumbrance, or other security interest.

• Provides that such Unfair Real Estate Service Agreements are unenforceable and may not be recorded, and that a violation of the proposed act is a violation of NC’s consumer protection laws. 
  
• Allows the Attorney General or a homeowner who has been damaged by any such an agreement to sue the violating persons or companies.
  
• Is limited in scope so as not to affect legitimate real estate agreements and liens, such as home warranties, insurance contracts, HOA agreements, utilities agreements, or Mechanic’s or Commercial Broker’s liens.

According to the American Land Title Association (ALTA), Attorney General Stein is the fifth attorney general to sue MV Realty over its right-to-list agreements. Four other attorneys general filed lawsuits, including Florida Attorney General Ashley Moody, Massachusetts Attorney General Maura Healey, Ohio Attorney General Dave Yost and Pennsylvania Attorney General Josh Shapiro. The lawsuits allege MV Realty misled consumers regarding the terms of the company’s “Homeowner Benefit Program.” Earlier this month, Utah became the first state to pass legislation protecting homeowners from the predatory practice of filing of unfair real estate fee agreements in property records.

“A home often represents a consumer’s largest financial investment, and their property rights must be protected,” said ALTA CEO Diane Tomb. “Good public policy should support the certainty of landownership by ensuring there are no unreasonable restraints on future ability to sell or refinance property due to unwarranted transactional costs.”

North Carolina Supporters: AARP, NC Association of Registers of Deeds, NC REALTORS, The NC Department of Justice, The NC Land Title Association, The NC Real Estate Commission, and Zillow

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