States Crack Down on Predatory Real Estate Deals

Often homeowners signing these agreements say they were not given time to review the paperwork or did not understand the terms before signing.

In Connecticut, for example, many learned about the terms of their agreement only when preparing to close on the sale or refinance of their home, Connecticut Attorney General William Tong said in testimony supporting that state’s legislation earlier this year.

He said about 400 of these deals have been recorded in Connecticut land records, and homeowners have been forced to pay “exorbitant amounts” to have them removed. 

AARP worked with the American Land Title Association (ALTA) to create model legislation for states to follow, with a goal of passing a law in all 50 states.

“Every time a state legislature makes clear that these types of unfair agreements are not welcome in their states, it is absolutely a win for consumer protection and it’s a win for people’s property rights,” Elizabeth Blosser, ALTA’s vice president for government affairs, said in an interview with AARP.

Protecting financial assets

Though the details vary by state, the laws generally limit the duration of these agreements and prevent them from being recorded in the property records or being enforced through liens. Some of the laws allow previous agreements to be removed from property records and let impacted homeowners recover damages.

Blosser said the organization’s members, who facilitate real estate closings around the country, have encountered countless consumers who have suffered financial losses because of these agreements, whether it’s a penalty for using a different real estate agent or legal fees from fighting to have an agreement removed from their deed.

“There shouldn’t be any unreasonable restraints on someone’s ability to either transfer or finance their property,” Blosser said.

Samar Jha, an AARP government affairs director who handles housing issues, noted that around the country, these laws have passed with overwhelming bipartisan support and minimal opposition.

“It’s clearly an issue that concerns every homeowner,” he said.

AARP has long worked to ensure older adults have the financial stability to age in their own homes and communities.

Jha said AARP hopes to push the law over the finish line in other states. Even if companies peddling these agreements aren’t operating in a particular state now, Jha added, “that doesn’t mean it cannot happen. It’s still a practice that needs to be prohibited.”

To hear from a homeowner who says he was misled into signing one of these agreements, listen to our podcast, The Perfect Scam.