The California attorney general has sued a Florida-based real estate firm, alleging it ran a predatory scheme that limited homeowners’ ability to sell and left them vulnerable to owing thousands of dollars.
The company, MV Realty, has been sued over similar allegations by multiple states. In September, the firm filed for bankruptcy.
In its lawsuit announced Thursday, the California attorney general’s office alleged MV Realty targeted financially vulnerable California homeowners with deceptive marketing, promising them $300 to $5,000 as long as they gave MV Realty the “opportunity” to be their real estate agent if they sold their house.
In reality, MV Realty’s Homeowner Benefit Agreement was far more complicated and the company trained its representatives to give misleading responses to consumer questions and to try to provide the full agreement only at the time of signing, which limited the ability of homeowners to review confusing fine print, the lawsuit alleged.
“MV Realty is a financial predator,” Atty. Gen. Rob Bonta said in a statement. “Through its one-sided agreements, the company lined its own pockets at the expense of vulnerable homeowners in California, holding their most valuable assets hostage.”
MV Realty did not immediately return requests for comment by email and phone.
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According to the attorney general, the MV Realty agreement mandated homeowners use the brokerage if they sell their home in the next 40 years — far longer than typical exclusive listing agreements that last several months, the lawsuit says.
When a homeowner sells within the four decades, the lawsuit says, MV Realty gets six months to list the property, per the agreement. If the company completes the sale, the homeowner is required to pay MV Realty the greater of 3% of the sales price or 3% of the home’s value at the time the owner signed the benefit agreement, authorities said.
If MV Realty can’t sell the home within six months, the agreement says homeowners get 60 days to try to sell the home on their own or with another brokerage and must do so at the same price and terms MV Realty offered, according to the lawsuit.
If homeowners can sell, they owe MV Realty nothing. But if they cannot — which authorities said is likely — homeowners must use MV Realty to sell or pay a fee of 3% of the home’s value to terminate the 40-year agreement, according to the lawsuit. On an average home in L.A. County today, that would be over $25,000.
That termination fee is typically more than 10 times the upfront fee the homeowner received from MV Realty, the lawsuit says.
In its lawsuit, the attorney general alleged that the agreement reduces the incentive for MV Realty to provide quality service and that the company violated California law in several ways, including unlicensed activity and improper disclosures.
According to the attorney general, since early 2022 at least 1,443 California homeowners signed the company’s Homeowner Benefit Agreement. The company “supposedly stopped” signing up California homeowners by November 2022 but still enforces existing agreements, as well as liens that limit the homeowner’s ability to refinance, the lawsuit alleges.
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This story originally appeared in Los Angeles Times.
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