Utah becomes the first state to ban listing agreements
Utah has taken legal action against companies that use right to list agreements in their business models. However, unlike Florida, Massachusetts and Pennsylvania, this is not a lawsuit.
Utah state legislators passed H.B. 211, which prohibits right to list agreements. It is similar to those used by MV Realty and SellWhenever. Calvin R. Musselman (a republican representing the 9th District) sponsored the bill.
The law states that real estate service providers cannot allow services to be rendered under an agreement to commence more than one year after the date on which the residential property services agreement was signed by all parties.
The law also allows agreements to be made unenforceable by law. It restricts and prohibits their recording in property record, creates penalties for agreements of this nature being recorded in property record, and provides for the removal and recovery of damages.
According to the American Land Title Association, (ALTA), the bill is based on a model bill that the trade association helped draft with input from national stakeholders.
“Today, Utah’s legislature has affirmed that it is committed to protecting homeowners, and their largest financial investments,” Diane Tomb, CEO of ALTA, stated in a statement posted on ALTA’s website. “NTRAPS [NonTitle Record Agreements For Personal Service] is a predatory, deceitful practice. Utah homeowners can now take a sigh relief that real estate brokerage firms cannot continue these schemes. This will impact homeowners’ future ability sell or refinance properties.
Steve Murray, co-founder of RealTrends Consulting shares a different perspective.
Murray suggested that “My thought was, does the Utah state legislative think their citizens are stupid?” “Do they think their citizens don’t understand that when they sign an agreement they get money today in return for a promise to the source of the money in the future?” Murray asked. It is supposed to protect consumers. But do they think their citizens don’t understand this?
Murray believes that the cash payments these companies use to ensure future business are comparable in value to the hundreds of thousands or even millions of dollars a realty agent might spend on past or potential clients they hope to work with again or from whom they receive referrals.
Murray understands why legislators feel the need to regulate this, despite his reservations about the Utah law.
Murray asked, “What if someone signs an agreement and decides that they want to sell, but the service providers aren’t putting it on the MLS, holding open houses, or marketing the home? But the owner had to use that company because they were in an agreement?” Murray asked: “I see the problems, but instead of banning them all together, why not just regulate these practices?”
Ken Trepeta, executive director of Real Estate Services Providers Council did not agree with Murray’s dislike for the Utah law. However, he was not surprised that a state would take such action.
Trepeta wrote in an e-mail that “it isn’t clear whether right-to-list agreements run afoul any current laws and rules so it isn’t surprising that a legislature isn’t leaving the matter up to chance and taking steps to address the long-term consumer protection concerns raised through these agreements.” “I would not be surprised if other States followed suit.”
Trepeta is correct. Similar bills have been introduced in California and Colorado, Florida, Georgia. Iowa, Idaho. North Dakota, Tennessee, Tennessee, Washington, and California. ALTA also stated that it expected bills to address right-to-list agreements in five additional states later in the year.
Earlier this week, MV Realty faced lawsuits from four states attorneys-general alleging that it misleads or confuses homeowners through its Homeowner Benefit Program.
“MV Realty has voluntarily suspended entering into new customer contracts while we address the concerns raised regulators and legislators,” a spokesperson for the company wrote in an email.
At the time of publication, HomeOptions and SellWhenever did not return any comments.