2024 Legislative Session Recap

Commissioner Steve Strode - March 2024

If you were following the 2024 Oregon Legislative Session, you noticed that housing issues continued to be a priority for our elected officials. Some legislation was to the Oregon Real Estate Agency’s (OREA’s) authority, while others may have an indirect effect—such as those focused on housing production or helping homebuyers.

The two bills that amended ORS Chapter 696, which is under the Agency’s purview, were House Bill 4058 and House Bill 4063.

House Bill 4058

House Bill 4058 was short-titled the Wholesaler Registration bill, which was reintroduced after 2023 session when it failed to move forward at that time. Considering other industry developments since last year, legislators expanded the bill's focus to cover two additional areas of regulatory concern. In its final form, it covered wholesaling registration, written buyer services agreements and future right-to-list contracts; the bill was signed into law by the governor on March 7, 2024.

RESIDENTIAL PROPERTY WHOLESALING

Wholesaling activity has received significant attention in Oregon, as well as nationwide. It is a business model that offers a service to home sellers that is different from the conventional listing and selling of their homes. Sellers are able to get their homes under contract quickly without further marketing and without further repairs as a condition of the sale. The issues that caused concern involve lack of transparency that a seller’s sale contract may be sold to another investor prior to closing - sometimes at a substantial profit to the wholesaler who entered into the original agreement with the homeowner. The Agency has received complaints from consumers who saw their homes marketed online for a higher price prior to closing, and who felt they were not fully informed.

This new law requires wholesalers to register with OREA as a residential property wholesaler. Registration requirements include: an application, fee, and background check. Moreover, the law will require wholesale registrants to provide consumers with plain language disclosure statements, and it gives the Agency regulatory authority to administer civil penalties and administrative actions.

WRITTEN SERVICE AGREEMENTS

Historically on homes listed for sale, the listing agreement dictated the offer of compensation to both the seller’s and buyer’s agent. For years, industry partners have considered it a best practice for their members to obtain a signed “Buyer Agency Agreement” when representing clients in the purchase of their homes. This written agreement outlines for the purchasing consumer how their agent is paid. It also offers the ability to negotiate their fee and better describes the fiduciary duties and responsibilities that an agent has to the consumer. This new requirement mirrors the longstanding requirement that all seller listing agreements must be in writing.

FUTURE RIGHT TO LIST CONTRACTS

The real estate industry is a highly competitive space, and OREA does not approve nor deny new business models. However, some new business models can lead to consumer complaints or be widely perceived as predatory.

An industry term to describe one newer business practice is Non-Title Record Agreements for Personal Service (NTRAPS), also commonly known as “40-year listings.” HB 4058 referred to the practice as a “Future Right-To-List” contract. In this scenario, a firm will pay a homeowner a nominal sum in exchange for signing a 40-year agreement. Should the homeowner decide to sell their home at any point for the next 40 years, the agreement requires the homeowner to promise to use that same firm named in the NTRAPS agreement. A lien is then placed on the property by said firm. If the homeowner fails to use that company, they must pay a termination fee to release the lien to sell their home. From what we have observed, that termination fee is comparable to the cost of an actual listing commission; in terms of sheer dollar amounts, the homeowner may be faced with paying the equivalent of two commissions. This practice costs sellers significantly if they forget about the agreement, their heirs are unaware the agreement existed, or if they decide to list their home with a brokerage other than the one named in NTRAPS agreement.

OREA had received complaints from consumers, but the business practice was not a violation of existing statute or rules. However, the new law modifies Agency authority, on enactment prohibiting the use of such Future Right-to-List contracts as well as prohibiting contracts which purport to create a lien, encumbrance, or other real property security interest.

House Bill 4063

House Bill 4063 covered a variety of topics related to housing, one of which falls under the agency’s authority. Upon the governor’s signature, it accomplishes the following:

• Requires Metro counties to plan for the housing needs of Metro urban unincorporated lands.
  
• Allows a housing developer with a pending application to opt in to amended local land use regulations.
• Allows middle housing land partitions of certain parcels in the year that the parcel was created.
• Allows a city to administratively approve or terminate the property tax exemption for single unit housing.
• Allows sellers’ real estate agents to accept irregular documents from buyers.