A Washington state Senator is demanding answers from a real estate company that’s signing homeowners to decades-long list-and-sell contracts for as little as $500 dollars.
Last month we told you the story of Linda Hascall of Everett.
She was in need of cash and signed up with a company called HomeOptions last December.
The deal: the company would give her $1,350. In turn, HomeOptions would have exclusive rights to list and sell the home for 40 years.
“I didn’t read all the way through it. And that’s my mistake probably. And sometimes I think when people are at their - there’s a dire strait in anyone. It can happen unfortunately,” said Hascall.
To get out of the deal, according to the contract, she would have to pay three percent of her home’s value. For Linda, that’s estimated at more than $19,000.
Senator Mark Mullet of Issaquah saw the story.
“Looks pretty dodgy to me, is my first initial response,” says Mullet.
Mullet says he’s looking at writing legislation that would limit the number of years for an exclusive listing and selling agreement.
“I could see having something for two years or three years or something like that where you have a more limited window but forty years just clearly is something that people don’t want to tie up the sale of their house and the commission involved in that for that length of time. Just never seems like a great decision for Washington consumers to me,” says Mullet.
We asked industry leaders about the contracts that are popping up.
“It’s worrisome. For sure. It definitely is something that people need to be aware of. I’m glad you’re bringing this to light,” says Rachel Mehmedagic, President of Seattle King County Realtors.
“It’s a business model that’s out there. It’s not one we employ or anyone in the Realtor organization employs. And, you know, I just think it’s important to understand what you’re signing up for.”
Seattle University Law Professor Steven Bender, who specializes in real estate, also looked at the contract.
Bender had concerns about the death provision of the deal. If the homeowner dies and if the estate doesn’t assume the obligations of the agreement within 60 days of the owner’s death, they’ll be in breach of the contract and will have to pay six percent of the fair market price of their home to the company.
“The estate, which has to react within 60 days, may or may not be aware of this,” says Bender. “Let’s assume that, 20 or 30 years from now - if it goes on that long - who remembers what was signed?”
For Linda, that six percent would be $38,000-plus.
“And if you’ve done all that and reveal it - do you have the money?” says Bender.
Though Linda was signed to a 40 year deal, HomeOptions says its current contract terms are for 20. And if customers don’t sell, they can keep the cash.
The company sent a statement that reads, in part:
“Statistically, approximately 1/3 of homeowners will not sell their homes within 20 years… In those cases, HomeOptions will receive nothing in return for the cash payment it makes to the customer.”
Let’s say you’re able to get the top offer of $2,000 in your HomeOptions deal. Spread that out over 20 years and it’s around 27 cents a day.
And for Linda’s 40 year deal at $1,300 bucks, that’s around 9 cents a day.
Senator Mullet says he will invite executives from HomeOptions to a public hearing to hear what they have to say about their business practices.
“We’ll see. If they’re willing to show up in the open public hearing and explain themselves, I would view that as a positive. And if they decline that offer, well then I think our alarm bells are probably further raised. More questions. You know,” says Mullet.
In a response to the Washington Attorney General complaint filed on Linda’s behalf, HomeOptions says:
“Ms. Hascall’s contract with HomeOptions is a binding contract obtained and enforceable in violation of no laws, rules or ethics.”
HomeOptions says it welcomes the opportunity to meet with Senator Mullet or his staff to discuss its business.
Meanwhile, we’re still asking which specific agents the company works with. They haven’t answered.
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