Earlier this year, a new state law took effect that’s intended to protect homeowners from being taken in by what Arizona Attorney General Kris Mayes called “egregious and deceptive practices in the real estate industry.”
The law prohibits long-term property agreements between real estate businesses and homeowners that require the homeowner to pay them a percentage of their sale price if they don’t sell their home within a specified period or if they use another real estate firm to sell their home.
What led to the law?
The new law is largely in response to a real estate firm that was giving homeowners up to $3,000 to sign such an agreement. The company reportedly used robocalls to contact homeowners.
The agreement stated that the homeowner would owe the firm 3% of the sales price of their home if they sold it with another firm or if they didn’t sell it within 40 years. Since the firm was based in Florida, it wouldn’t be the logical choice for an Arizona homeowner to sell their property.
Further, as one housing analyst explains, “The agreements are problems for title companies and can hold up a homeowner’s refinance, line of credit and reverse mortgages. A sale can’t be done without clearing one of the agreements on a title.”
That firm has filed for bankruptcy, but not before facing numerous lawsuits and complaints here in Arizona and other states. The Arizona AG’s office is continuing to collect complaints and investigate the firm’s actions here.
What does the law do?
The new law limits the terms of an “exclusive property engagement agreement.” For example, they cannot:
- Be for a term longer than 12 months
- Be a “covenant that runs with the land”
- Create a “security interest or lien” on a property.
Further, the agreement is considered void if the “listing services” don’t begin within 12 months. The law also makes it illegal for a court to enforce an agreement that is in violation of the provisions of the law.
Arizona has many older homeowners who are especially vulnerable to scams of all kinds. However, it can be all too easy for anyone to be taken in by the promise of fast money – especially in an area estate that can be extremely daunting. That’s one reason it’s wise if you have any questions or concerns about your property or are considering any transaction involving it to get experienced legal guidance.