More States Pass Protections Against Predatory Real Estate Agreements

En español | Four more states have enacted AARP-backed laws that protect consumers from unfair real estate agreements, in which brokers trade a small up-front cash payment for the future right to sell a person’s home.

Arizona, Kentucky, West Virginia and Oregon are the latest states to prohibit these arrangements. Also known as homeowner benefit agreements, these contracts have been marketed to cash-strapped homeowners — particularly older adults — and can be binding for up to 40 years. They are being challenged by attorneys general in nine states.

Homeowners signing such agreements have complained that they were unaware the contracts would be recorded in their property records and could complicate future property transactions. The contracts also carry over to relatives who inherit the property after the homeowner dies.

If the homeowner or their heirs later sell the property using a different listing agent, they could be forced to pay penalties of up to 3 percent of the home price.

“For a company to prey on unsuspecting homeowners in a way that locks them into a 40-year obligation is disgraceful,” said Dana Marie Kennedy, AARP Arizona state director. “We applaud the Arizona legislature and Governor [Katie] Hobbs for taking action to protect vulnerable older adults from deceptive and abusive practices."

A total of 22 states have now passed legislation prohibiting homeowner benefit agreements. Indiana and West Virginia passed similar laws earlier this year. Utah, Maryland, North Dakota, Idaho, Georgia, Tennessee, Colorado, Alabama, Florida, Iowa, Maine, Nevada, Ohio, Washington state, North Carolina and California passed laws in 2023.

The laws align with a model law AARP crafted with the American Land Title Association, said Samar Jha, an AARP government affairs director.

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.

“We look forward to working on similar legislative solutions in other states to protect homeowners against predatory housing practices,” Jha said.

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

Natalie Missakian covers federal and state policy and writes AARP’s Fighting for You Every Day blog. She previously worked as a reporter for the New Haven Register and daily newspapers in Ohio. She has also written for the AARP Bulletin, the Hartford Business Journal and other publications.

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