Over the years, I’ve seen many real estate companies offer consumers alternatives to the traditional methods of buying and selling real estate. Some of these alternative business models are far from being consumer-centric and this latest one falls into that category, in my opinion.
There is a Florida-based real estate firm that now has an office in Washington State and they are targeting homeowners. I won’t name them here but their pitch is they offer homeowners a small sum of cash today ($300 to $5,000) in exchange for signing a listing agreement – but not just any listing agreement – the listing agreement is for forty years.
Would you agree to sign a listing agreement for 40 years?
When I go on a listing appointment, I am usually asking anywhere for a 3- to 12-month listing agreement period. My listing agreement is between me and my firm and the seller, not the property. This firm’s listing agreement, on the other hand, is a lien that is put on the property for 40 years.
This company does not call it a lien. They call it a memorandum however it is a document that is recorded at the county and runs with the land. This lien does not go away when the home is sold. It stays with the property for forty years.
Here are a few scenarios of how this would play out.
The property has this 40-year listing agreement/lien on the home. When the homeowner is ready to sell, they cannot choose their own agent and they cannot negotiate the listing fee. They are to use this firm and the agent assigned. If they do not use this company to list and sell their home, then the homeowner will be penalized 3% of the sales price.
If the homeowner decides to terminate this listing agreement, the firm will penalize the homeowner 3% of the value of the home. But who is going to determine what the home is worth? You guessed it, this firm will determine how much the home is worth and charge the homeowner 3% of that value.
If the homeowner dies, the heirs will have only ten days to transfer the deal otherise the lien stays in place. Most likely the heirs won’t know about this lien until well after the ten-day cancellation period.
If the homeowner lists with this company, this firm will have six months to sell the home. If they do not sell the home in six months, the seller can list their home themselves or with another company at the same listing price for 120 days. Then after that time period, the seller can change your list price.
I’m not sure what is more outlandish – the forty year listing agreement or penalizing the seller further by dictating the list price for the next listing firm.
If the property has not sold in six months, more than likely it is a pricing issue. If after six months, the seller has terminated this firm and is relisting with another firm, that seller should be able to list the home at a more competitive price to get the home sold. That is what is in the best interest for the seller. The policy of this firm could leave the seller on the market for ten months at a price that is too high for the market and the seller is left with very few options.
None of this sounds very customer-centric to me.
The firm says they do not telemarket homeowners, they are not targeting the elderly or certain homeowners, and they are only following up with people who inquire on their website. However that’s not what the whistleblower said in an interview on one of our local news stations recently.
The whistleblower said they were to be aggressive in their approach and that this program was targeted at the elderly and those at lower price points. For people who are financially struggling, these up-front dollars are not a bonus or a splurge but are used to pay for basic things like food and gas. On this firm’s website, one of the reviewers said, “today alone allowed me to fill the car with gas and make a monthly payment on our life insurance.”
This is not a traditional listing agreement but it is totally legal here in Washington.
This firm’s tactics and its contracts are facing scrutiny. Other states including Georgia, Florida and North Carolina are investigating this firm’s actions. I’m sure Washington will follow.
You may be asking why a company would offer this. This firm is offering an alternative to the traditional listing by offering up-front cash to homeowners. But the trade-off is too great to even justify the dollars up front, in my opinion. This firm will make money by capturing as many properties as possible and will have the contract to list these homes repeatedly for the next four decades. They will make money from these listings as well as cash in through the penalty fees for homeowners to get out of this contract.
Before getting talked into something from a telemarketer or anyone else, do your research and ask questions to make sure you are making the best decision regarding one of your largest assets – your home.