YOUNGSTOWN, Ohio (WKBN) – The American Land Title Association (ALTA) and AARP came together Wednesday with a warning about what they called predatory agreements aimed at homeowners.
The agreements are known as Non-Title Recorded Agreements for Personal Service (NTRAPS) and came into the groups’ radar last year when they were flagged by a number of title agents.
“We have identified at least 25,000. There are potentially quite a few more than that. We have identified them in 32 states — so impacting well over half of the country. So the scope is large, although I always say just one would be unacceptable when you’re talking about an unfair agreement that can have such a devastating financial impact on a consumer,” said Elizabeth Blosser, vice president of government affairs for ALTA.
NTRAPS have been recorded in property records since 2018. They offer homeowners a one-time cash payment in exchange for exclusive listing rights to the home.
“What’s happening is that real estate brokers are offering homeowners as little as $300 to sign listing agreements that will last up to 40 years,” Blosser said.
Blosser said a violation of the agreement can trigger a penalty worth 3% of the home’s property value.
These are being recorded in the property records in an attempt to create a lien.
“That does add costs and complications every time someone is looking to transfer or finance their real estate, and that includes accessing home equity,” Blosser said.
These agreements can cover not just the signers, but also their heirs, who may have no knowledge of the agreement. And according to Samar Jha, government affairs director at AARP, these companies often target people who aren’t in the process of selling their homes.
“They will reach out to you and say, ‘In the future, if you’re trying to sell the house, if you sign this agreement, you don’t have to look for a real estate agent, without disclosing once you sign the agreement what happens after that, and that’s where the issue comes up, typically,” Jha said.
Now, ALTA and AARP are trying to push legislation through each state to ban these types of agreements, and they’ve been pretty successful so far.
Ohio is among 16 states that have enacted NTRAPS legislation. Ohio Gov. Mike DeWine signed HB 33 on July 3 after 830 of these agreements had been recorded in the state.
The legislation follows a model bill that ALTA helped draft with input from AARP and national stakeholders. According to ALTA, it makes NTRAPS unenforceable by law, restricts and prohibits the recording of NTRAPS in property records, creates penalties if NTRAPS are recorded in property records and provides for the removal of NTRAPS from property records and recovery of damages.
There is currently no law banning NTRAPS in Pennsylvania, though the state legislature is considering HB 657 which would put restrictions on NTRAPS.
On its website, ALTA cited a lawsuit filed by then-Pennsylvania Attorney General Josh Shapiro against Florida-based MV Realty. The lawsuit alleges MV Realty misled Pennsylvanians about its Homeowner Benefit Program, which offers a one-time upfront payment in exchange for exclusive listing rights.
According to a news release from the Attorney General’s Office, the company’s sales pitch over the phone suggested no risk to the homeowners because they pay nothing unless they sell their homes. After signing the agreement, however, some learned that the program allowed MV Realty to obtain a mortgage on the homeowner’s real estate to enforce the contract’s term, the release stated.
Ohio Attorney General Dave Yost also sought injunctions against MV Realty of Ohio, alleging that the contracts omitted crucial information and language required by state law and that those at the company were practicing real estate without a license.
Both cases are still pending.
WKBN reached out to MV Realty, which provided the following statement Wednesday afternoon:
“MV Realty and our team of licensed real estate agents have proudly assisted over 35,000 homeowners across the country through our innovative Homeowner Benefit Agreement (HBA) program. The HBA program compensates homeowners for the future right to list the home if they choose to sell within the term of the agreement.
The HBA Program is an innovative option that is first and foremost designed to benefit homeowners by ensuring they are compensated for the exclusive right to list their home. A right that up until now was given away for free.
If a homeowner decides to sell their home during the term of the HBA, MV’s locally licensed real estate brokers serve the same role as any licensed real estate broker and receive a typical sales commission for its services. This fee aligns with the standard market rate for virtually all residential real estate transaction commissions.
Notably, there are no liens put on a customer’s property. MV files a memorandum that informs third parties of the existence of the agreement between the property owner and MV Realty.
MV Realty remains confident that the Homeowner Benefit Program fully complies with the law and benefits consumers who select MV Realty as their listing agent. MV Realty has voluntarily and temporarily paused entering into any new agreements.
We look forward to working with policymakers to address any concerns and continue this valuable program as an option to homeowners across the country.”MV Realty
Blosser said in general, homeowners should be careful when signing any sort of agreement regarding their properties. It’s always a good idea to seek legal advice before signing anything, she said.
If such an agreement is signed, Blosser recommended that homeowners reach out to their state’s Attorney General.
Blosser added that many county recorder’s offices offer a free service to alert people if something is recorded against their properties, so she recommended reaching out to see if signing up for such alerts is possible.