The Companies Placing 40-Year Listing Rights on Deeds
A listing agreement is the document the seller signs so a real estate pro can start marketing a home. It commits the homeowner to work with the broker.
Would you feel comfortable committing to one particular real estate broker for 40 years? Some homeowners are doing just that. Recently, the agreements made the news in Michigan.
The New “Right to List” Practice Raises Eyebrows in Michigan, Because It Ties Up Deeds for Decades.
In northern Michigan, unusual right-to-list home sale agreements are showing up. In recent weeks, notices of several such agreements have been filed with the register of deeds in Grand Traverse County, Michigan. The filings are so unusual that Traverse City, Michigan’s Record-Eagle.com reported on their appearance.
The document that’s turning up to be recorded with the county is titled the Memorandum of MVR Homeowner Benefit Agreement.
What is going on here?
It’s a cash-for-listing deal, formally known as a forward right to list arrangement. Through right-to-list contracts, homeowners agree to sell exclusively through one company. They don’t need to be ready to sell right away. The agreement means the company deploys its transaction service whenever they owner might sell their homes in the future.
In exchange for giving up the prerogative to select an agent, the homeowner gets a payment. The amount of money available to the homeowner depends on how much the real estate is worth.
The money is the homeowner’s to keep, whether or not the house gets listed during the life of the contract.
Recently, a Florida broker named MV Realty has started executing its Homeowner Benefit Program contracts with northern Michigan residents. The agreements, signed, notarized, and recorded, pay between $300 and $5,000 upfront to homeowners, who are then on the hook with the Florida-headquartered company for 40 years. Essentially, these legal instruments represent the owner’s promise to enter into a listing agreement with MV if and when they decide to sell their houses.
Death Doesn’t End the Deal. The Company’s Right Runs With the Land for 40 Years.
Forty years means forty years. Should the homeowner die before the period is up, the agreement to list the home through MV Realty’s brokerage survives. Whoever receives the home after the owner’s death is tied to the plan until the 40-year agreement runs its course.
Meanwhile, over that 40-year period, the homeowner had better not lose the home to foreclosure. MV will put a lien on it. The homeowner had better not list the home with an actual agent, or for sale by owner. The penalty for breach? Three percent of the home’s market value. For a modest home worth $200,000, that’s $6K the owner would have to pay MV Realty.
Once the right-to-list agreement is signed, notarized, and recorded with the county, this instrument will inform real estate professionals, banks, or others doing a title search that a binding right-to-list agreement exists. Real estate agents and title companies are unlikely to find out that the documents exist until they have a title search done.
What happens when a homeowner gets around to selling and is ready to work with one of MV Realty brokers? At that time, MV Realty expects its commission. It could be six percent, according to the Record-Eagle.com report.
How does the MV Realty company deal compare to the norm? Michigan agents’ listing agreements might bind sellers for three, six, or twelve months. The normal commission, amounting to 5% or 6% of the sale price, is split between the buyer’s agent and the seller’s agent. And this brings us to another concerning aspect of the right-to-list deal…
With This Right-to-List Company, There Is No Agent Advocating for the Seller’s Best Interests.
The report published in Record-Eagle.com notes key parts of the Homeowner Benefit Agreements from MV Realty. One part says the company will act as the homeowner’s listing agent, but as a “transaction broker” — a party who owes no fiduciary duties to the client.
This is very important to understand. When sellers enter into agreements with regular real estate agents who represent them in the transaction, those real estate agents agree to abide by a set of fiduciary duties. A real estate agent is not just a transaction broker. An agent must act in the client’s best interest.
So let’s be clear. If you and the agent sign an agency agreement, then you become the agent’s client, and the agency relationship carries a special duty to represent you.
☛ A transaction broker is not the same as a real estate agent! Read up on why and how Your Real Estate Agent’s Fiduciary Duties empower you as a seller or buyer.
MV Realty’s brokers can connect sellers with potential buyers. But they are not permitted to list homes with the Multiple Listing Service (MLS). Nor can they represent the seller in negotiations with the buyer over the price of the home. An agent does that — not a broker.
Is signing such an agreement worth it? Granted, some sellers might never need to sell or pass the home to anyone else in the next few decades. But many will.
The homeowners also give up certain judicial rights and allow the company to use photos of them in advertising campaigns. What will these sellers actually gain, other than the upfront payment? Is that enough to cover what they could lose by giving a right-to-list company full control over a sales transaction?
Like the Offer of Money Up Front? You’re Free to Accept It. It’s Legal.
Exclusive contracts for a brokerage’s listing rights are not rare. Many real estate brokerages issue them.
But these upfront money payments and 40-year terms are unusual.
Nothing in the law prevents these unusual arrangements from being offered. Nothing prevents homeowners from accepting them. But homeowners do need to understand what the companies are taking.
Can owners get out of these contracts if they have second thoughts? Yes, but the cancellation fees run into the thousands of dollars. The owner who refuses to pay the fee will hear from a collections company. And at that point, a lien could burden the home.
And so we keep coming back to the fundamentals. The best broker a seller can have is… an agent. Usually that means a local agent who’s highly recommended by people in the community.
As for the listing agreement, it starts with a standard template. Do read it over with the agent. If you have some changes to request, ask! Your agent will likely agree to reasonable modifications, initial the changes, and give you a copy of your final document.
After all, the best agents care about the success and satisfaction of their clients. And they market homes with that same kind of care.
Supporting References
Mardi Link for Traverse City, Michigan’s Record-Eagle.com: 40-Year Right-to-List Contracts Concern Pros in Real Estate Deeds (Jun. 12, 2022).
Justin Gray for WSB-TV: Metro Homeowners Locked Into 40-Year Contracts With Real Estate Company (May 26, 2021).
Deeds.com: Selling Your Home? A Few Things to Know About Listing Agreements (Jun. 18, 2021).
Photo credits: Cytonn Photography and Any Lane, via Pexels.