Homeowners Blindsided: ‘Free Money’ Trap

“I didn’t know there was a lien. I would never have of agreed to that had I known it was a lien,” Homeowner Georgette Snowden told 11 Investigates.

Hundreds of homeowners across the state signed up, but as 11 investigates discovered, the deal came with a troubling surprise. The company slapped a 40-year mortgage lien on their property that homeowners say they knew nothing about.

Read on to learn more about 11 Investigates Angie Moreschi’s investigation.

Troubling surprise

11 Investigates talked with multiple homeowners all over the Pittsburgh area who say they were blindsided by MV Realty mortgage liens on their property.

Verona homeowner 74-year-old Georgette Snowden was stunned when 11 Investigates told her about the lien on her property and that it will last for 40-years.

“No, I didn’t know there was a lien. I would never have agreed to that had I known it was a lien,” Snowden said.

MV Realty gave Snowden just $391, resulting in the 40-year mortgage lien on her property, which is valued at about $115,000 on Zillow.

“My head’s spinning right now,” said Snowden, who was baking Thanksgiving cookies for her grandson when we met her. “I needed the money at the time. Ooooh, boy. Hmmm, mmm.”

The company uses the offer of quick cash as a marketing technique to entice homeowners to use them as their listing agent later, but no one we talked with realized it was for so long or that the company would put a lien on their property.

“Free Money” not so free

MV Realty gave Shaler homeowner Keith, who asked us not to use his last name, $546 to sign their Homeowner Benefit Agreement. Keith said, had he known, he never would have signed the deal.

“Free money, that’s how they put it. It was free money to you,” Keith said. “Never said anything about a lien. Never said anything of the sort.”

But it’s not free. The contract and mortgage liens create a 40-year obligation for the homeowner to pay MV Realty 1000′s of dollars— even if they don’t use MV as a realtor. The only way to avoid it is if the house is never sold for all those decades.

It’s important to note the obligation lives on, even after the homeowner dies. The home can’t be sold, even by heirs, unless the lien with MV Realty is satisfied.

Tom, in Delmont, received $676 from MV Realty when he signed the contract. He also was too embarrassed to use his last name.

“I hate to be taken advantage of. I pride myself on being very thoughtful. For this to hit me like this, I’m totally taken,” Tom said.

Bold sales tactic under scrutiny

A search of online real estate records showed MV Realty put mortgage liens on at least 215 homes in the eight-county region here in Southwestern Pennsylvania. Allegheny County had the most with at least 144 liens.

MV Realty operates in 33 states nationwide. The Attorney General in Pennsylvania and those several other states are investigating complaints against the company.

As part of this Channel 11 investigation, we teamed up with our Cox sister stations around the country to gage the nationwide impact. In city after city, we found homeowners who say they did not understand what they signed and felt they were misled by MV Realty representatives.

“I felt like I was taking advantage of people. It’s horrible,” said this former MV Realty employee, who has come forward as a whistleblower.

The former employee, who asked to remain anonymous, worked for the company as a telemarketer in Seattle. She talked with our sister station there.

“We were to be aggressive in our approach, and it was all about getting them transferred to an agent so that agent could get them to say yes. It was a lot of high pressure,” she said.

Homeowner Benefit Agreement

To get the money, homeowners had to sign what the company calls a Homeowner Benefit Agreement. It’s a 17-page contract which says homeowners get a “promotion fee” in exchange for using MV Realty as their “listing agent.”

It explains in lengthy legalize that 40-years is the term of the contract, meaning how long the deal lasts.

It also says MV Realty will get a 6-percent commission if they sell the property; but even if they don’t and another broker is used, it says the company still gets a 3-percent commission, which would result in 1000′s of dollars, in exchange for the few hundred dollars homeowners received up front.

And the contract also says “for sale by owner” is prohibited.

“It’s a lot of money. It’s a lot of money you’re giving up,” said Pittsburgh area real estate agent Michael Scholler.

He told Channel 11 he thought it was “crazy” for homeowners to give up so much equity in their home for a few hundred dollars.

“I am surprised. I never heard of this company until you brought it to my attention, Scholler said. “As a realtor, I’m going to say it doesn’t feel ethical to me.”

11 Investigates wanted to talk with a representative of MV Realty on-camera, but the company declined to do an interview. Instead, they provided a statement saying in part:

The agreement is very clear and is in plain English. With respect to any filing in the county, any filing is specifically limited to protecting MV Realty’s rights under its agreement. It has no adverse effect on homeowners. The filing is not only accurately described in the agreement, but for the avoidance of any doubt, the filing itself is signed by the homeowner, and that document they signed is what is recorded with the county. –MV Realty Public Relations

You can read MV Realty’s full statement here:

Homeowners felt misled

Several homeowners we talked with admit they did not read the contract, saying they trusted the agent who signed them up.

Tom in Delmont said he was enticed by a notary he used to sign paperwork for a separate Home Equity Loan.

“He says, ‘I have a friend who is in Florida who’s a realtor that would like to expand in this area and they’re willing to spend some money, if you’d like to become a client,’” Tom said explaining the pitch the notary gave him. “In return, if we sell our house, we gave them first shot at the listing.”

That notary, Kuzma Smoilov, connected Tom with a real estate agent, and then, came back later with the paperwork for him to sign. Tom said he didn’t read it all but insisted no one ever mentioned a 40-year obligation.

“They were deceitful. They didn’t tell the whole truth,” he said.

11 Investigates tracked down Samoilov, after finding his notary stamp on multiple mortgage liens filed on behalf of MV Realty, in addition to Tom’s.

Smoilov acknowledged he is an independent notary who’s worked with MV Realty in the Pittsburgh area and has referred multiple customers to the company.

“I mentioned the program to people, and they thought it was great, and I referred them. That’s all I can do. It’s not my responsibility to explain everything to them,” Smoilov said.

Samoilov said he didn’t have an opinion on whether the sales tactic was fair or misleading and did not think he bore any responsibility for homeowners ultimately signing the contract.

“When they talk to the real estate agent, that’s their job to be explained what’s going on. It’s really not my concern,” he said.

11 Investigates followed up Paige Bassett, the Real Estate agent who worked with Samoilov and talked with Tom by phone. She declined to do an interview and referred Channel 11 to MV Realty’s corporate PR office.

Deceptive Sales Practice?

Longtime Pittsburgh area real estate attorney Jim Herb says he thinks the company’s tactics violate Pennsylvania Unfair Trade Practices and Consumer Protection law.

“It’s an unfair trade practice for a business to engage in any confusing or deceptive methods,” Herb told Investigator Angie Moreschi. “In my opinion there should be plain language in here (in the contract).”

Moreschi: You find this confusing and deceptive?

Herb: Right. I think it’s reprehensible.

Complicating matters even further, state law says real estate listing agreements can be no longer than one year in Pennsylvania. So, that raises another question about the 40-year term on the contract homeowners signed.

MV Realty insists it follows all state laws and that its Homeowner Benefit Agreement is not a listing agreement, just a contract to potentially have a listing agreement for the next 40 years.

“Our agreement is compliant with all state laws, including those regarding real estate contracts. The HBA gives us the right to act as someone’s real estate agent only when they decide to sell. When they are ready to sell, we enter into a listing agreement that is compliant with the real estate laws of the state of Pennsylvania,” MV Realty said in its written statement to 11 Investigates.

Herb said it looks like the company created a loophole to try and get around the law.

“It doesn’t pass the smell test. In my opinion it’s not legal, because it’s deceptive,” Herb said.

“I think they’re getting away with it because no one has challenged them on it yet.”

The Pennsylvania Attorney General’s office tells 11 Investigates it is investigating 16 complaints against MV Realty in the state and released this statement:

The Office of Attorney General is aware of the alleged dishonest actions by MV Realty. The Homeowner Benefit Program offered by MV Realty entices consumers with payment in advance of the sale of their home for the exclusive opportunity to list the consumer’s home on the realty market. The OAG is committed to assisting consumers in order to address their concerns. Consumers with concerns about contracts they made with MV Realty are strongly encouraged to file a complaint with the Bureau of Consumer Protection online or contact BCP for more information at 717-787-9707. – Office of the Attorney General

Realization of lien hitting hard

Meanwhile for homeowners, the realization is hitting hard that they mortgaged their greatest assets for a few hundred dollars.

“It’s something I shouldn’t have done. I shouldn’t have done this,” said homeowner Georgette Snowden, shaking her head. “Let me ask you this, how do I get out of it?”

After Channel 11 contacted MV Realty about the other homeowners we talked with, the company says it reached out to them.

Specifically for Ms. Snowden, MV Realty says it has agreed to release her from the contract, if she pays back the $391 they gave her.

“With respect to one of the individuals identified who’s an elderly homeowner, the company has had a dialogue with her, she has expressed some confusion regarding her understanding of the terms of the agreement and expressed the desire to terminate her contract, and as a result, the company has agreed to accept the return of the money that she was paid and terminate her contract,” MV Realty wrote in its statement to Channel 11.

As for the other homeowners who talked with Channel 11, they say they have been contacted by a representative from MV Realty but had not received the same offer of terminating their agreements, at the time of this writing.

If you’ve signed a contract with MV Realty and have a concern, you can contact Investigator Angie Moreschi at amoreschi@wpxi.com.

You can also file a complaint with the Pennsylvania Attorney General by contacting the AG’s Bureau of Consumer Protection online or calling 717-787-9707 for more information.

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