Have you ever talked to someone who got caught in the predatory practice of signing a contract that locked them into selling with a particular office with no clear way to get out of it? I've ran into it twice in my 8 years in real estate. The first time the family was threatened to be sued after they were attempting to sell their deceased son's home with me. Of course, I understood how they didn't have the emotional energy to figure out what to do and just used this agency, who was from across the state, didn't know the market and sold the home under market value for a fast sale. The second time, the seller was mad at being hoodwinked and we were able to negotiate out of the 6% fee (no matter who sold it) to a 25% commission referral fee, saving the client thousands of dollars.
What they do is show up to your door, offer you a small amount of cash upfront for a lifetime contract for right to sell. If you don't use them you owe them 6%. If you don't use them, then you'd have to pay THEIR fee, but the negotiated commission rate of for your agent and possibly the buyer's agent. It was a horribly predatory practice, usually aimed at the elderly and the mess left behind had to be sorted through by the grieving families.
Thankfully, we won't have to worry about this anymore. Attorney General Dana Nessel signed the order, stating “Many homeowners have faced predatory right-to-list agreements that lock them into unfavorable terms. This legislation provides much-needed clarity and protects both property owners and real estate professionals.”
The new law, (Senate Bill 602) indicates that the lifetime predatory contract would be void and unenforceable in several instances, including if any of the following apply to the agreement:
- 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.
The new law subjects real estate brokers who enter into void and unenforceable agreements to penalties, including license revocation, administrative fines up to $10,000, restitution, and probation.
This is exactly the change we need in order to allow homeowners to work with agents they know and trust. SB602 will give elderly home-owners a way out of confusing contracts that come out of shady practices. Thank you Michigan Realtors for working so hard to give people a way out of these contract entrapments.