A realty company that used small cash offers to lock homeowners from Maryland and other states into 40-year contracts granting it the exclusive right to list their homes for sale has temporarily stopped offering the contracts, a company spokesperson said Tuesday.
Since incorporating in Maryland in late 2021, MV Realty of Maryland LLC has enticed hundreds of homeowners across the state to enter into the agreements, with many likely not understanding what the contract’s fine print required of them in return, as The Baltimore Banner reported in October.
The decadeslong contracts — called “homeowner benefit agreements” — are breakable only by paying a “termination fee” equal to 3% of the home value as estimated by the company. If a homeowner, or any heir — on purpose or by accident — breaks the agreement, the termination fee is secured by a lien on the property.
The agreements, which number more than 30,000 across 33 states, have drawn criticism from lawyers, real estate professionals and consumer advocates, who’ve described them as “predatory”.
The suspension of new contracts comes as the Florida-based parent company works “to address the concerns raised by regulators and legislators,” a company spokesperson wrote in a statement to The Baltimore Banner. “The Company remains confident that the Homeowner Benefit Program fully complies with the law and benefits consumers who receive a cash incentive to select MV Realty as their listing agent.”
For Emma Beall, who was forced to sell her son’s Cecil County home with MV Realty after he died in February of last year, the company’s pause on agreements came as welcome news. Her son had received just $900 from the company when he signed a homeowner benefit agreement a few months before his death.
“I’m glad someone took it and was proactive with it,” said Beall. “I hope that it’s more than a pause, I hope that it’s permanent, because I just think they went around the law.”
Attorneys general in Florida, Pennsylvania, Massachusetts and Ohio have sued the company in recent months. The Federal Communications Commission in late January ordered phone service providers to block MV Realty calls in what it called “decisive actions to shut down an apparent homeowner-focused robocall scam campaign.” The company’s move was first reported Monday by Inman, a real estate news site.
Annie Milli, executive director of Live Baltimore, a nonprofit that spotted the agreements in an unrelated public records search, said she hopes the state will look at other states’ suits and consider whether it makes sense to file one here.
“Homeownership is the way that families build wealth in this country and it’s important that homeownership remain a wealth-building tool and that homeowners who make the choice to invest in Baltimore are protected,” Milli said. “If they do feel misled, I hope that there’s some recourse for that.”
In Maryland, state Del. Marlon Amprey and Sen. Antonio Hayes, both Baltimore Democrats, have introduced legislation that would prohibit exclusive listing agreements from lasting more than a year.
Amprey said Tuesday that the bill remains an important step to protect homeowners.
“MV Realty has been doing it but other companies can do it, too,” said Amprey. “We want to make sure that if other companies try to consider it, they know that they can’t.”
At a hearing for the bill Tuesday in Annapolis, Amprey testified that the legislation is needed “to regulate these highly pervasive agreements that are exploiting homeowners and misleading them into decadeslong agreements that could cost them a lot in the end, and their families.”
Meanwhile, a local measure drafted by Baltimore City Councilwoman Odette Ramos to crack down on MV Realty and similar businesses will be introduced in the coming weeks, Ramos said Tuesday. That bill would institute an additional yield tax on the recordation of contracts like MV Realty’s.
Homeowners unclear about what they’re signing away
In exchange for signing the agreements, many Maryland homeowners have received just a few hundred dollars. The average payment received by Baltimore homeowners in the 35 full agreements available in public land records as of mid-October was $662.26.
Brian Oliver, a Park Heights homeowner who spoke to The Banner in October, was strapped for cash over the summer as gas and food prices rose. So when he received an offer for $400 from MV Realty, it sounded like a pretty good deal. But he said he missed the terms of the agreement written in the fine print.
“If they would have told me, ‘You’re locked into this for 40 years,’ I would have said, ‘I’ll see you later,’” Oliver said at the time. “If they’d have told me, ‘In order to get out of this contract, you’ve got to pay me 3% of whatever the total home value is,’ I would have said” — he paused — “some nice words. But you didn’t tell me this up in the beginning.”
In a statement then, MV Realty spokeswoman Diana London wrote that “the terms are, in fact, written in plain English and always signed in the presence of a notary.”
London said the agreement that Oliver signed clearly disclosed its 40-year term and his obligation to use MV Realty as his agent and pay 3% of the sales price or home value if he failed to do so.
MV Realty was formed in 2004 in South Florida by real estate broker Amanda Zachman. But it wasn’t until 2017 that the company began executing its “right to list agreements,” according to London.
However, consumer advocates said the agreements were written in a deceptive and confusing manner, and that homeowners’ options are severely limited once they sign. The agreements require that disputes be settled by arbitration rather than in court, a process that, research shows, is more likely to resolve in a company’s favor. They also require homeowners to waive their right to participate in any class action lawsuit or any class relief.
And in Baltimore, the impacts of the agreements were racially disproportionate, with the vast majority of affected homes located in predominantly African American neighborhoods on the east and west sides of the city. The majority of homes with recorded MV Realty agreements in Baltimore city are valued at below $300,000 each, according to estimates from the real estate service Zillow, with nearly half valued below $200,000.
In surrounding counties, MV Realty’s estimated home values range from $200,000 to, in a couple of instances, over $1 million.
As of October, very few of the Maryland homeowners who signed agreements had actually completed sales with the company. The company told The Banner in mid-October that it had recorded 18 closed listings in Maryland at that time.
It appears that the company may have already begun pulling back its operations in Maryland in recent months: in October, the company had 34 agents registered in the state; they have about half that number registered now.
The company did not reply to an emailed question from The Banner about whether there would be any action by the company to nullify or amend agreements that have already been entered into.
MV Realty told Inman that it had paused entering into new contracts in all states and hired lawyers to “evaluate and redraft our HBA contract to ensure greater transparency for consumers.” It also said it was providing additional training to employees “to ensure they are scrupulous when dealing with consumers” and follow company policies.
At Tuesday’s hearing, Amprey said he would work with the Maryland Attorney General’s Office to consider possible action to assist homeowners who have already entered into agreements with MV Realty. Aleithea Warmack, a spokeswoman for the agency, said “the office does not confirm or deny the existence of any investigations.”
Beall said she hoped the current agreements would be voided.
“The legal system should be able to void those contracts based upon that they were not fully understood,” said Beall. “For a small mount of money that the people were taken advantage of in desperation for their situation.”