Right-to-List Agreements

Today, we’re looking at a practice you might not have even known was a problem: predatory right-to-list agreements. In July, Michigan addressed this budding issue by placing pretty tight restrictions on this practice.

Even though Michigan has taken steps to address this issue, I still want you to be aware of this practice. These types of schemes seem to be an evolution, so knowing the previous scheme can help you spot the next evolution of people trying to part you from your money.

The Background

I don’t know who originally came up with this idea of a right-to-list agreement, but I give some snaps to the evil genius behind it. Here’s an example of how it works:

Buddy’s Real Estate Brokerage approaches you with an offer. They will pay you $3,000 today. In exchange, you agree that if you sell your home at any time in the next 40 years, you will use Buddy’s Real Estate Brokerage as your listing agent at a pre-determined fee of X%. Cash for you now, pay later when you sell your house.

See how some people might be inclined to grab the cash? It seems straightforward, but the owners signing these agreements don’t always realize the implications of the agreement.

The Problems

First of all, forty years is a really long time. Anything could happen in 40 years. What if you want to sell your home to your child? Oh, yep, still paying that listing fee. What if in 30 years we’re all just buying homes off Amazon? You’re still on the hook for that listing fee. What if you went and got your real estate license and want to list your own house? What if you recently discovered my blog and realized there is no one better to sell your home?!?

Second, these companies are filing memorandums on your chain of title to notify the public this agreement is in place. Want to refinance? You’re going to have an issue because your title is now a little bit cloudy. If you violate the agreement, the company will now place a lien on your title to collect that listing fee regardless of who helped you sell the property.

Lack of an Exit Strategy

These agreements are written to strictly limit your ability to escape them. MVRealty, one of the players in this space, is very blunt with your lack of options to get out of this agreement.

What if I wish to cancel my participation in the agreement? Can I simply repay the fee you provided?

Our agreement is fully binding and you may not repay our cash incentive in order to exit the agreement. If you need to cancel the agreement, you will be required to pay a 3% fee (equal to the fee we would receive for successfully selling your home).

Source: https://homeownerbenefit.com/

or what about this one:

What if I die? Is my family obligated to using MV Realty as its real estate agency?

The agreement our clients sign has a 40-year term and remains in effect for the full-term – even if the original homeowner has passed away. Our commitment is to provide the best real estate services to you and your family throughout the contract term.

Source: https://homeownerbenefit.com/

Once this agreement is in place, the homeowner is locked in pretty tight. Even your heirs are supposedly bound by the agreement.

Michigan Takes Action

In July, Michigan took steps to severely restrict these types of agreements. The agreement is void if any of the following apply:

• It is not in writing;
• It is not signed by all persons that have an ownership interest in the residential real estate considered in the agreement;
• It is for a period of more than 2 years; or
• It does not include an option for the owner to terminate the agreement as specified in the new law.

Brokers who enter into void and unenforceable agreements face steep penalties, including license revocation, administrative fines up to $10,000, restitution and probation.

Many other states have taken similar action to limit these right-to-list agreements; however, if you have friends and family out of state, these schemes could still be operating in their state.

Thank you for joining me this week. As always, I’m here to help with all your real estate goals and dreams!