Real Estate

Florida First State To Sue MV Realty Over 40-Year Homeowner Contracts

Florida has become the first state in the nation to file a lawsuit against MV Realty, a brokerage that offers impoverished homeowners cash in exchange for a 40-year contract to list their home and a lien on their property to secure MV Realty’s 3 percent commission.

In a Nov. 29 complaint filed in Hillsborough County Circuit Court, the Florida Attorney General’s office accused Florida-based MV Realty, its founder Amanda Zachman (formerly known as Amanda Zuckerman), its CEO Antony Mitchell, and its COO David Manchester of violating the Florida Deceptive and Unfair Trade Practices Act (FDUTPA).

“Defendants engage in a complex and deceptive scheme that attempts to skirt existing Florida law with the goal of swindling consumers out of their home equity,” the complaint said.

“The actions and related business practices of MV Realty as set forth in this complaint shock the conscience,” the complaint added.

In an emailed statement, MV Realty spokesperson Diana London told Inman, “We are confident that after a full airing of the facts, the Florida Attorney General will find that MV Realty’s business transactions are legal and ethical and that our team has operated in full compliance with the law.”

MV Realty, which operates in 33 states and has more than 500 licensed agents, is currently under investigation by several state regulators — including in North Carolina, Massachusetts, Maryland, and Pennsylvania — over its “homeowner benefit agreements,” which the brokerage has been offering since 2018. In September, the Tampa Bay Times reported that the Florida Attorney General’s office was investigating MV Realty after receiving 16 complaints about the brokerage since 2020.

London told Inman that Florida was the first state to sue MV Realty and that such suits “are not uncommon in fast-growing, innovative businesses.”

“We look forward to the positive discussions and reaching a resolution with the Florida Attorney General, as well as continuing to offer the Homeowner Benefit Program to the Florida residents who have overwhelmingly expressed appreciation for the Homeowner Benefit Program and MV Realty’s top-tier professionalism and real estate services,” she said.

MV Realty’s wish to continue its program will run squarely up against the Florida attorney general’s aims in its lawsuit against the company. The complaint seeks to ban enforcement of MV Realty’s current contracts with homeowners, to prevent MV Realty from offering homeowner benefit agreements “containing deceptive, unfair or unconscionable contract terms,” to return the money the brokerage took from homeowners, and to impose fines for alleged willful violations of the law, among other requests from the court.

“MV Realty is committing acts or practices in trade or commerce that offend established public policy and are unethical, oppressive, unscrupulous, or substantially injurious to consumers,” the complaint said.

‘Usurious’ agreement terms

Under MV Realty’s homeowner benefit agreements, the brokerage pays homeowners between $300 and $5,000 (depending on the value of the home) in cash up front for signing a deal in which they agree that if they decide to sell their home anytime in the next 40 years, they will list the home with MV Realty as a transaction broker.

If a buyer broker is involved in the transaction, the total commission must add up to at least 6 percent of the total sales price with MV Realty receiving at least 3 percent of the sales price or 3 percent of the property’s value at the time the agreement is signed, whichever is greater. MV Realty determines the property’s value.

If there is no buyer broker involved, MV Realty receives a minimum 6 percent of the total sales price or 3 percent of the property’s value at the time the agreement is signed, whichever is greater.

If the homeowner decides to list the home with another brokerage, the homeowner owes MV Realty 3 percent of the property’s value at the time the agreement is signed, which can add up to thousands of dollars.

The agreement binds any future heirs of a property and if a homeowner defaults, the agreement specifies that MV Realty will impose a lien on the property for the amounts owed. The agreement includes an arbitration clause and precludes the homeowner from participating in any class action litigation against MV Realty.

The complaint maintains that the terms of MV Realty’s homeowner benefits agreements, which the company markets as a loan alternative, amount to “a usurious demand for repayment” that does not reflect MV Realty’s damages for breach of contract.

In a press release, Florida Attorney General Ashley Moody accused MV Realty and its principals of “deceptive, unfair and unconscionable business practices that result in homeowners signing away home equity for a paltry upfront payment.”

Moody pointed out that under the agreements, MV Realty demands to be paid 3 percent of the value of a home “regardless of whether the company ever provides any real estate listing services” — if the home is foreclosed upon, transferred to heirs, or sold through another broker, for instance.

‘Deceptive and abusive’

The complaint also alleges MV Realty uses “deceptive and abusive telemarketing and advertising practices to advertise” the homeowner benefit program, including 4.5 million calls to people on the National Do-Not-Call Registry and leaving 6.8 million unwanted, pre-recorded voicemails.

“[M]any of the consumers who have entered into the HBA are seniors and some have limited cognitive capacity; others speak English as a second language,” the complaint said.

“Consumer complaints reviewed by Plaintiff include allegations of Defendants’ aggressive marketing; insufficient disclosures or misrepresentations concerning the terms and conditions of the HBA; dishonest sales practices including misrepresentations of what documents consumers were signing; inability to refinance or transfer their homes without facing exorbitant penalties; and general confusion as to what they were signing and why.

“Some homeowner complaints allege that Defendants have forged signatures or procured the signatures of vulnerable or mentally incompetent individuals who were solicited in their homes.”

A 40-year lien

Moreover, the 40-year memoranda that MV Realty files on homes make it difficult or impossible for a homeowner to refinance or otherwise tap their home equity, according to Moody. MV Realty has made more than 9,123 public record filings that cloud homeowners’ titles in Florida alone, according to the complaint.

“For many Floridians, their home is their most important asset and the cornerstone of their financial stability,” Moody said in a statement.

“For a company to prey on unsuspecting homeowners in a way that locks them into a 40-year obligation designed to siphon away equity from the property is disgraceful. I filed legal action to end this deceitful practice and protect Florida homeowners from further harm.”

The complaint emphasized that many consumers complained that they were unaware that MV Realty would be recording a memorandum on their property that acts as a lien — a lien the complaint said had “no legal basis in Florida law.”

Moreover, the complaint pointed out that it is a crime for a real estate broker or agent “to place or cause to be placed upon the public records of any county [any document] ‘which purports to affect the title of, or encumber, any real property … for the purpose of collecting a commission, or to coerce the payment of money to the broker or sales associate or other person, or for any unlawful purpose.’”

MV Realty’s website expressly states that no lien is being placed on the homeowner’s property. However, the complaint pointed out that the brokerage only recently changed that language. According to the complaint, MV Realty did not disclose that it places liens on homes before early fall 2022, but that at that time, the brokerage added a disclosure to its FAQ on its website admitting that it did and that in some states that lien is called a memorandum.

Screenshot from Florida Attorney general complaint against MV Realty, November 2022

The complaint alleged that MV Realty changed that language in late fall 2022 to say it does not file a lien on homes.

“The current language falsely suggests that the memorandum is something other than a lien,” the complaint said.

“But the fact that the Memorandum does operate as a lien is revealed in the very next FAQ … The Defendants seek to confuse and mislead consumers about the full impact of entering the HBA and the fact that the Defendants do place liens on the consumer’s home for 40 years.”

That next FAQ is a question about refinancing that reveals that in order for a homeowner who has signed a homeowner benefit agreement with MV Realty to refinance, MV Realty will have to lift its “memorandum or lien.”

Screenshot from MV Realty website on Dec. 6, 2022

“[M]any lenders consider the liens filed under the HBA to be an outright disqualification when consumers attempt to refinance their homes or otherwise tap into their home equity through a financial product like a line of credit or a reverse mortgage,” the complaint said.

“Defendants do not disclose the impact of recording the Memoranda of HBA on consumers’ ability to access their home equity,” the complaint added.

“This omission of material information is deceptive and prevents consumers from making an informed decision about whether to enter into the HBA with MV Realty. Moreover, the HBA requires the homeowner’s heirs and devisees, who often have no knowledge of the HBA, to enter an assumption of the HBA in a form satisfactory to the company within 10 days of the homeowner’s death (this is impracticable in many instances) or pay the early termination fee.”

MV Realty’s full comment

Recently, our Company became aware of a complaint filed by the Florida Attorney General. Our attorneys are currently reviewing it. We are confident that after a full airing of the facts, the Florida Attorney General will find that MV Realty’s business transactions are legal and ethical and that our team has operated in full compliance with the law. We look forward to and are fully committed to working with the FL Attorney General’s office to regulate these transactions.

Some background information is important to have.

The Homeowner Benefit Agreement (the “HBA”) is a straightforward agreement under which we pay homeowners a fee up-front for the right to be their real estate agent and earn an industry standard commission if they decide to sell their home in the future. The point of the Homeowner Benefit Program is for a homeowner to give our firm the opportunity to list their home for sale in exchange for a cash payment today. The HBA is NOT a real estate listing agreement. A standard approved form of real estate listing agreement will be executed in the future if the homeowner decides to sell their home. While the HBA term is 40 years, our opportunity to represent the seller is for only 6 months. That is the standard term of a residential real estate listing agreement. If we are unable to sell the home within that time (6 months) the owner can sell their home on the same or better terms with a different agent, or by themselves, in which case they do not owe anything to MV[i]. We do exactly the same job as any other residential real estate agent, we just charge less in virtually every instance because we pay the homeowner a fee up-front. A few additional points, the homeowner never has to sell their home in which case MV gets nothing and the homeowner keeps the up-front payment that was made to them. Also, MV cannot set the price for a home – this is solely up to the homeowner. Lastly, MV ONLY calls and contacts people who have “opted in” in writing seeking information or have been referred to the Company specifically.

The memorandum MV files is not a lien. Rather, recording the memorandum simply serves as a public notice of the homeowners’ commitment to give MV the opportunity to represent them in the sale of their home. This is to protect MV in the event a homeowner forgets about or overlooks the HBA and attempts to sell their home without allowing MV the opportunity to be their agent. A better analogy would be to the recording of an easement. Which are routine and ubiquitous.

It is clearly disclosed in 12 point bolded type in the HBA[ii]. When requested to facilitate a refinancing or home equity loan, MV has almost ALWAYS[iii] removed the filing if requested at no cost to the homeowner. Indeed, MV is in the process of amending all of its existing HBA’s to make it an obligation of MV to do so in every case.

The company has a strong and ongoing commitment to consumer disclosures and is constantly adding to them. Our current disclosures include, but are not limited to, clear unambiguous language of the contract itself in a large font that includes the description of the 40-year term, the filing of the memorandum, and the termination fees all in 12 point bolded text. As the Homeowner Benefit Program has evolved, MV has added to its disclosures and altered its practices to be even more consumer friendly. As an example of this, MV recently introduced a recorded phone call requirement with each homeowner wherein they verbally acknowledge the key terms of the HBA before we will close. MV has consistently enhanced consumer friendly features of our contract, leave-behind document, and on our web site.

Many of the disclosures set forth in the agreement are again emphasized in a single page “leave-behind” document signed by the customer.

Additionally, the company’s website has been enhanced to prominently displays these same key program features, as well as an extensive FAQ section.

We are proud to have employed hundreds of locally licensed real estate agents who are passionate about helping clients navigate the stressful process of buying and selling a home.

[i] The homeowner gets 60 days to sell and 60 days to close. However, the Company is in the process of extending these time frames.

[ii] MV has been expensing its disclosures as the HBP has evolved current contracts are as specified but not all historical agreements will be so formatted.

What do you think of MV Realty’s homeowner benefit agreements and of the allegations in this lawsuit? Please let us know in the comments below.

Email Andrea V. Brambila.

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