Senate Bill Report — SB 5399, Future Listing Right Purchase Contracts (Washington, 2023)

Summary

Senate Bill Report on SB 5399, as of January 24, 2023, for the Senate Committee on Business, Financial Services, Gaming & Trade, with committee activity listed for 1/24/23. The bill is titled an act relating to future listing right purchase contracts, with Senators Mullet and Dozier as sponsors. The brief summary states that it limits the duration of future listing right purchase contracts to a term no longer than five years and allows them to act as liens that are subordinate to home financing, refinancing, or home equity line of credit. The report lists the effective date as immediate under an emergency clause and includes a staff summary of public testimony in PRO, CON and OTHER categories, with the persons testifying.

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Full text

                             SENATE BILL REPORT
                                   SB 5399

                                      As of January 24, 2023

Title: An act relating to future listing right purchase contracts.

Brief Description: Providing for future listing right purchase contracts.

Sponsors: Senators Mullet and Dozier.

Brief History:
     Committee Activity: Business, Financial Services, Gaming & Trade: 1/24/23.


                                      Brief Summary of Bill
           • Limits the duration of future listing right purchase contracts to a term no
             longer than five years.
           • Allows future listing right purchase contracts to act as liens that are
             subordinate to home financing, refinancing, or home equity line of
             credit.


SENATE COMMITTEE ON BUSINESS, FINANCIAL SERVICES, GAMING & TRADE

     Staff: Clinton McCarthy (786-7319)

     Background: Real Estate Brokers. The Department of Licensing is responsible for
     licensing and regulating real estate brokers, who must meet minimum age, education, and
     experience requirements to obtain a license to perform real estate brokerage services on
     behalf of a licensed real estate firm. Performing real estate brokerage services includes, but
     is not limited to, rendering the following services directly or indirectly on another's behalf
     for compensation:
         • listing, selling, purchasing, or renting real estate;
         • negotiating or offering to negotiate the purchase, sale, or lease of real estate;
         • advising buyers, sellers, landlords, or tenants in connection with real estate; and




     This analysis was prepared by non-partisan legislative staff for the use of legislative
     members in their deliberations. This analysis is not part of the legislation nor does it
     constitute a statement of legislative intent.

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         • advertising oneself to the public as engaging in such services.

     A broker is an agent when the broker enters into an agency relationship with a buyer or
     seller to perform real estate brokerage services, which relationship may be created by
     written agreement or statute. Regardless of whether a broker is an agent, a broker owes to
     all parties to whom the broker renders real estate brokerage services certain duties, which
     may not be waived, including:
         • exercising reasonable skill and care;
         • dealing honestly and in good faith;
         • presenting all written offers, notices, and other written communications to and from
            parties in a timely manner; and
         • disclosing existing material facts a broker knows and are not apparent or readily
            ascertainable to a party.

     Duration of Agency Relationship. "Agency relationship" means a written agreement
     between a real estate firm and a buyer or seller relating to the performance of real estate
     brokerage services.

     Under existing statute, the agency relationship between a broker and a buyer or seller is
     until the earliest of the following:
         • completion of performance by the broker;
         • expiration of the term agreed upon by the parties;
         • termination of relationship by mutual agreement between the parties; or
         • termination of the relationship by notice from either party to the other. Such a
            termination does not affect the contractual rights of either party.

     There is no limit under existing statute on how long an agency relationship can last. Nothing
     precludes an agent from providing a financial incentive in exchange for a future listing right
     purchase contract where a seller receives a financial incentive in exchange for providing an
     agent with the right to list their home at a future date.

     Summary of Bill: The term "future listing right purchase contract" is defined as a
     contractual right that obligates a seller to enter into a real estate listing agreement with a
     purchasing company in the future relating to the sale of a residential home, townhouse, or
     condominium. These contracts cannot last longer than five years from the purchase date,
     which is the date on which the prospective seller agrees with the purchasing company to
     give their future listing right to the purchasing company in exchange for moneys paid to the
     seller as consideration for entering into a future listing right contract.

     Listing right purchase contracts are permitted to act as a lien that is subordinate to a
     financing, refinancing or home equity line of credit.

     Appropriation: None.



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     Fiscal Note: Not requested.

     Creates Committee/Commission/Task Force that includes Legislative members: No.

     Effective Date: The bill contains an emergency clause and takes effect immediately.

     Staff Summary of Public Testimony: PRO: The general view of realtors in Washington is
     extremely positive. People figure out what the commission is up front and they buy their
     homes. Only recently have their been some bad actors in this space. No one should tie up
     their home for 40 years. This bill sets it up so that these agreements cannot last longer than
     5 years—some will think that even this is too long. This also makes it difficult to refinance
     or pull equity out of your home. Banks think it is too much of a headache to work through
     the liens that these agreements create. People don't know what they are giving up when
     entering into these purchase agreements. This acts as a lien that impairs the owner's ability
     to unlock capital from their home. This bill addresses the length of the agreement. The
     freedom of contracts is paramount, but there are times where the Legislature has to protect
     people from unfair contracts. The American Land Title Bill has model language that can
     attack unfair listing agreements. Washington State Realtors hadn't previously heard about
     this agreements and do not see how these could be to the benefit of the consumer. They
     have some technical agreements.

     CON: MV Realty recognizes that while their contracts are fully compliant with state law,
     but we have better language in model legislation that can improve the understanding of the
     how these contracts work. The average value for a Washington home participating in the
     MV Realty program is more than $440,000. The program will voluntarily come down from
     40 years to 30 years to match up with 30 year mortgages. There are appropriate steps to
     make these agreements better regulated. There should be appropriate limitations on the
     term of the agreement. As a consumer, we feel like we were robbed by this company.

     OTHER: Home Options is trying to bring innovation into the market. Real estate is
     spending $26 billion a year on advertising. Advertising is a major driving in the cost of real
     estate transactions. Home Options redirects that spending to the sellers. Let the home
     owner choose the length of an agreement that they want, and we can pay the home owner
     accordingly to have the choice of how long their term is.

     Persons Testifying: PRO: Senator Mark Mullet, Prime Sponsor; Dwight Bickel,
     Washington Land Title Association; Steven Bender; Nathan Gorton, Washington
     REALTORS; Allan McPherson.

     CON: Andrew Mathews, HomeOptions; Jack Kelly, MV Realty PBC LLC.

     OTHER: Kevin Li, CEO of HomeOptions.

     Persons Signed In To Testify But Not Testifying: No one.



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