Questionable 'cash deal' offered to homeowners in Illinois criticized by consumer advocates

CHICAGO (CBS) – It's a real estate listing agreement that pays homeowners for the right to sell their homes down the road. The firm behind it touts it as a win-win.

The homeowner gets a quick infusion of cash, and the real estate company gets a promised future payment.

But now that firm, MV Realty, faces several lawsuits from state attorneys general, a growing chorus of questions from consumer advocates, and complaints from people who took the deal without a full understanding of the terms.

A CBS 2 analysis of county deed records revealed hundreds of homeowners in the Chicago area who signed the same agreement.

THE DEAL

MV Realty's deal is called a "Homeowner Benefit Agreement."

Sunsiray Johnson learned about it, she said, when a well-dressed man going to door-to-door in her Montgomery, Illinois subdivision offered it to her. That was in May 2022.

"I'm thinking: 'My neighbors are probably doing this. Let me jump on board,'" Johnson said.

Johnson remembered the salesman's pitch. She said he told her, "It'll be 10 years we're in contract with you."

He also Johnson an incentive too big to turn down.

"$850. I was like, I'll take it," she said. " I got a Zelle transaction to my phone same day."

Soon after, Johnson began to doubt the deal and googled the company.

"It sounded good, but come to find out it wasn't good," she said.

Johnson said she emailed to cancel, but didn't hear back from the employee she reached.

MV Realty told CBS 2 it did respond to Johnson and offered her the chance to rescind within three days, which is required by state law. The company also said she refused to return the upfront payment.

Johnson denied that's the case.

DISCOVERING THE DETAILS

While Johnson and MV Realty dispute what happened during the pitch and the first few days after the contract got signed, they do agree on the details of the contract – details Johnson said were never explained to her by that door-to-door salesman.

"I found out about the situation when I looked up my property online -- and I seen a memo," she said.  "I'm like, what's a memo from MV Realty? So I click it."

The Memorandum of the Homeowner Benefit Agreement is a document MV Realty files with the County Recorder of Deeds. Sometimes that record isn't filed until months after it was signed, as in Johnson's case.

When Johnson noticed the filing and looked more closely at the contract, she discovered the deal she thought would end after a decade, would last for four decades.

"I feel like I signed my life away after I figured out what happened," she said.

One of the most surprising specifics, Johnson learned, is that when a homeowner dies before the 40 years is up, the listing agreement could live on.

"This doesn't sound like a benefit to me." she said. "It sounds like you're just trying to rob me."

CONTRACT CONCERNS

The 40-year contract length and the possibility it could extend to a homeowner's heirs are just two of the terms questioned in lawsuits filed by Attorneys General in several states.

Florida Attorney General Complaint Filed November 29, 2022

•   MV Realty requires 3% of value of home, regardless of whether company provides any real estate listing services
•  Complaint asks for court to terminate current contracts, prevent future contracts and return money to homeowners

Massachusetts Attorney General Complaint Filed December 2022

• "MV Realty uses unfair and deceptive marketing and sales tactics to hide true terms of the contract"
•  Massachusetts received preliminary injunction in March 2023 blocking company "from obtaining or recording additional mortgages" during pending litigation and "requires company to release existing mortgages."
• Complaint highlights terms buried in contract including "a clause that requires tenfold repayment of the advance if the owner loses the home to foreclosure"

Other states that have filed similar lawsuits seeking similar relief for consumers include Ohio, Pennsylvania, and North Carolina. Illinois has not yet filed a lawsuit and said it does not comment in potential future investigations.

Consumer advocates have concerns as well.

The Better Business Bureau has a current alert posted about MV Realty, which is based in Delray Beach, Florida.

The BBB first issued its alert in July 2022 after finding a consistent pattern among consumer complaints involving the company's business practices. MV Realty responded to the finding by promising to look at how it discloses contract terms.

Rod Davis, President and CEO of the BBB of Southeast Florida and the Caribbean, said the complaints escalated -- and when the BBB took another look in November, "We actually found the pattern still remained. If consumers are not hearing what the business is saying, they need to come up with a better way of telling them."

Julie Lawton, a law professor at DePaul University whose interests include real estate, looked over the Homeowner Benefit Agreement and asked, "Is the homeowner truly being given the opportunity to read the contract, to understand the terms of the contract …  and fully understand the consequences of violations of the contract?"

As of May 2023, the Illinois Attorney General had received three other complaints concerning MV Realty.

     Complaint from 2021  filed on behalf of an elderly homeowner includes letter dated November 2, 2021 sent to MV Realty stating:

• "[redacted] is a senior citizen and your company has engaged in deceptive business practices against her."
• "We have requested that you remove the lien against her property, but as of the date of this letter, you have not done so."

     Complaint involving a contract signed March 1, 2022  by a homeowner given $620 upfront:

• "I was misinformed about the agreement."
• "I was told … that I could cancel the agreement at any time."
• "After reviewing the email with the actual contract that was sent to me, it was a 40-year contract for the right to list my home."
• "I believe I was defrauded and deceived into signing this agreement.

     Complaint involving a contract signed July 10, 2022:

• "I was told by Morgan that I would be able to refinance and this has completely prevented me from doing so because of this lien."
• "Terrible company. Morgan lied to me multiple times."

A spokesperson for the Attorney General said the office is engaged in mediation with MV Realty involving those three complaints.

MV REALTY'S REACH IN ILLINOIS

How extensive is MV Realty's reach in Illinois? It's unclear. While other Attorneys General have identified the number of properties linked to Homeowner Benefit Agreements in their states and documented those in lawsuits, Illinois has not.

A CBS 2 Investigators deep dive into deed records in the Chicago area revealed a piece of the puzzle.

The analysis found 658 homes and condominiums linked to the contracts in seven counties, with the majority in Cook County.

Those records were filed between September 2020 and March 2023. The properties are located in 157 different municipalities. Chicago has the most with 191 agreements recorded.

Within Chicago about one-third are in south and west side communities.

From the analysis, it appears MV Realty did let a couple of dozen homeowners out of their contracts, by filing a "Termination of the Homeowner Benefit Agreement" with county offices.

WHAT'S NEXT?

MV Realty disputes filing the Memo of the Homeowner Benefit Agreement equals a lien on anyone's property, but it has paused signing up any new agreements until the legal matters it faces are resolved.

Johnson plans to file complaints with the BBB and the Illinois Attorney General.

Lawton would like to see more scrutiny at the state level.

"I am very hopeful that the Illinois Attorney General does investigate to make sure that Illinois consumers are protected," she said.

Revisions to Illinois' Real Estate License Act, were recently made and take effect in January 2024.

Those changes do not end 40-year listing agreements altogether but prohibit the filing of certain liens and require an annual right to terminate with 30 days' notice.

Johnson regrets signing up for the deal.

"It's a scam," she said. "It's definitely a scam."

If you have a tip to report involving MV Realty or any similar listing agreements click here.

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MV REALTY RESPONSE:

Re: Ms. Johnson.

"The HBA Program compensates homeowners for the exclusive right to list their home, a right that until now homeowners gave away for free. Ms. Johnson signed up for the program and was given $950 in compensation. Ms. Jonson then elected to rescind the agreement within the three day grace period. MV acknowledged her right to do so and asked for the funds to be returned to void the contract. Ms. Johnson refused to return the funds allowing the contract to go into effect."

Re: Possible AG/lawmaker action in IL. 

"MV Realty and our team of licensed real estate agents have proudly assisted over 35,000 homeowners across the country through our innovative Homeowner Benefit Agreement (HBA) program. In fact, in Illinois alone MV has thousandssatisfied customers. 

"The HBA program compensates homeowners for the future right to list the home if they choose to sell within the term of the agreement.

"The HBA Program is an innovative option that is first and foremost designed to benefit homeowners by ensuring they are compensated for the exclusive right to list their home, a right that until now homeowners gave away for free.

"If a homeowner decides to sell their home during the term of the HBA, MV's locally licensed real estate brokers serve the same role as any licensed real estate broker and receive a typical sales commission for its services. This fee aligns with the standard market rate for virtually all residential real estate transaction commissions in Illinois. 

"Notably, there are no liens put on a customer's property in Illinois. Consistent with the law, MV files a memorandum that informs third parties of the existence of the agreement between the property owner and MV Realty.

"MV Realty remains confident that the Homeowner Benefit Program fully complies with the law and benefits consumers who select MV Realty as their listing agent. MV Realty has voluntarily and temporarily paused entering into any new agreements.

"We look forward to working with policy makers in Illinois to address any concerns and continue this valuable program as an option to homeowners across the state"

--MV Realty Spokesperson