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Trust This. The Trouble with 40-year Listing Agreements

July 8, 2022

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Trust This.

By Joseph E. Seagle, Esq. ● Jul 08, 2022

Smart Brevity^® count: 2.5 mins...644 words

👋 Hi, Joe here again. Wading through 🥵 steamy mornings, ☔ rainy afternoons, and 💧 soggy evenings reminds me of why so many friends and colleagues escape to their 🏔️ mountain homes up north this time of year.

1. Big thing: 40 year listing agreements

A South Florida real estate brokerage pays homeowners sums between $500 and $1,500. The homeowners sign a listing agreement, giving the brokerage the right to list the property for sale for the next 40 years.

Why it matters: The real estate brokerage is suing new owners of the properties that were subjected to these agreements if the former owner breached the agreement.

What we're seeing: We first saw these agreements in title searches starting a couple of years ago.

The recorded documents refer to an unrecorded agreement between the brokerage and the current owner.
The recorded document states that it is a covenant that runs with the land for 40 years, much like a declaration of an easement or restrictive covenant.
It doesn’t specifically state that the brokerage is entitled to any particular sum of money.
The agreements may be listed as an exception to coverage under the title policy, meaning the title insurance provides no protection to the buyer for the unrecorded agreement or its recorded “memorandum of homeowner benefit.”

So what happens if the owner gives away the property instead of selling it? Is a commission still due? Are they required to always list your property for sale? What if they die? Are the heirs required to list it with the brokerage?

The bottom line: If you see a “Memorandum of Homeowner Benefit” listed as a requirement to be cleared (Schedule B-1) or as an exception to coverage (Schedule B-2) on a title commitment for a property you’re buying or selling, ask a lot of questions before closing. It could cost you later if you don’t.

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2. Bidding wars - renter style

Bidding wars for rentals are heating up while multiple offers from buyers are declining.

Why it matters: It’s another sign that demand for rentals still exceeds the supply. While listings of new homes for sale are rising each week, there aren’t enough rentals to go around.

By the numbers: The average rent for a 1-bedroom apartment in Orlando, is $1,699. This is a 21% increase compared to the previous year. Over half (55%) of Orlando housing units are rentals. Go deeper @ Zumper

Our thought bubble: If now is not a great time to sell, it may be a great time to lease out the property to a tenant instead. Many of our investor customers who typically buy-fix-and-flip are turning to buy-fix-and-rent instead. Those who are looking to stop renting and buy their own home are stuck, worried: Buy while prices are falling and rates are increasing? Or wait for the bottom, continuing to rent with the risk that their rents will increase at the next renewal?

Read more @ NPR

3. What you missed

Does anybody still want to buy a vacation home? Redfin
If they do, it’s often located in a flood zone. National Mortgage News
Remote work could slash office valuations by $500 billion by the end of the decade. Orlando Business Journal
Price appreciation slows as downshift is expected. DS News
The job market is still red-hot, though, as people continue to quit more than being laid off. CNBC
Dying Boomers won’t affect the housing supply as much as we would think. National Mortgage Professional