June is National Homeowner Month. It’s a month when we celebrate the American dream of owning a home and reflect on the current challenges homeowners face today. Buying a home is one of life’s largest and most important investments, and it is important that homeowners are vigilant about protecting this investment.
Thank you for reading this post, don't forget to subscribe!Especially during this National Homeowner Month, homeowners should be wary of a new business practice that vulnerable homeowners – Non-Title Listing Agreements for Personal Service (NTRAPS), long-term listing agreements that trap consumers. In this business practice, real estate brokerage firms provide homeowners with a small upfront payment in exchange for the exclusive right to list and sell the property in the future. These complex contracts make it difficult for homeowners to sell, refinance or transfer real estate.
These companies know how to make their deals look good. The one-time cash award offered by NTRAPS – sometimes as little as $300 – is attracting homeowners in need of immediate financial assistance. These homeowners, who are not real estate professionals and do not have the benefit of consultation, often do not fully understand the long-term implications of what they are agreeing to.
After signing one of these listing agreements, the homeowner is locked into a contract that can be binding for up to 40 years. They risk facing a penalty of 3% of their property value if the property is transferred, or if they use another brokerage firm in the home sale.
american land title association (ALTA) is committed to protecting homeowners and their investments under all circumstances. When we first became aware of NTRAPS last summer, we immediately began developing strategies to stop these exploitative and predatory business practices.
We quickly realized that outright banning these unfair agreements was the best course of action to protect consumers, and we swung into action immediately. Along with industry partners, ALTA developed a model bill for state legislatures that would prevent enforcement of NTRAPS, prohibit the recording of these agreements in property records, and enable removal of NTRAPS from property records and recovery of damages.
Now states are taking action. At the beginning of the year, Utah became the first state to ban NTRAPS with the passage of HB 211. The success in Utah created a domino effect for regulatory and legislative victories in other states. To date, six state attorneys general have filed complaints against these agreements. Twenty-one states have introduced legislation and 11 have passed legislation that prohibits or severely limits the parameters of these agreements.
But while we have already seen great progress in our advocacy against NTRAPS, more needs to be done to best protect homeowners and their investments. We encourage our industry partners to join our advocacy efforts with state legislators and regulators and help us educate homeowners about the financial consequences of these agreements. Together, we can end this predatory business practice once and for all.
Elizabeth Blosser is Vice President of Government Affairs at ALTA, National trade association representing the land title insurance and settlement services industry, which employs more than 120,000 people, working in every county in the United States.
