Pat Hune, Broker 1st Southwest Realty and Various Sources, January 2023
Latest Real Estate Scam – 40 year lien. In 2018 a real estate brokerage* started offering property owners money ($500-$1500) in exchange for signing an agreement. What the owners don’t know is the agreement puts a lien on the property that lasts for 40 years. The brokerage targets people who are seniors, people who speak English as a second language, people behind on their payments or people who have limited cognitive capacity. The brokerage has the owner sign the agreement in front of a notary. The agreement is recorded. If the owner tries to sell the brokerage will request 3% of the selling price as commission even if they are not the brokerage selling the property. This applies even if the property owner has died and the property is being transferred to the heirs.
Many people forget about this agreement as it might be years later when they decide to sell their property. Another issue is these liens don’t show up until the title company runs a title search. The title search typically is not done until the property is under contract. This means the property may already be listed with a different brokerage and the seller may end up owing commission to two brokerages instead of one.
The brokerage doing this operates in several states including Arizona where 769 of these liens have been filed. Recently Florida was the first state to sue a Real Estate Brokerage over 40-year homeowner contracts. Following the launch of an investigation by regulators in North Carolina last month, Florida’s attorney general’s office says this brokerages business practices ‘shock the conscience’. The attorney generals in many states are investigating but as of January 2023 there have been no decisions on whether or not this is legal.
Typically real estate agents do not offer to pay a potential seller for the listing. What typically happens is the realtor takes the listing and does the marketing and advertising for free in exchange for a commission when the property sells. The listing agreement is a legally binding document but it is not notarized or recorded. If a real estate agent does offer money and you are not selling immediately then this is a red flag.
The bottom line is if someone calls and offers you money in exchange for signing a document in front of a notary that is related to a future sale of your property don’t do it. If you have already signed one of these agreements contact the Arizona Attorney General’s office to see if they are investigating this brokerage.
*The name of the brokerage has been omitted as realtors are not supposed to talk about other brokerages business practices even if we don’t like them.