MV Realty files for bankruptcy amid legal turmoil
The brokerage, which offered homeowners cash in exchange for a 40-year right-to-list agreement, has been bogged down by lawsuits and investigations.
MV Realty filed for Chapter 11 bankruptcy protections on September 22 as the company faces multiple state lawsuits against its Homeowner Benefit Program, which has been characterized as "predatory" by some consumers and lawmakers.
What happened: Over the last year, MV Realty has amassed a portfolio of lawsuits from state Attorneys General in Florida, Ohio, Massachusetts, North Carolina, Pennsylvania and New Jersey, and has been the subject of an investigation by the FCC.
All of the lawsuits allege that MV Realty's Homeowner Benefit Program — which offers homeowners between $300 and $5,000 in cash in exchange for a 40-year right-to-list agreement — is deceptive and misleading. MV Realty has denied the allegations.
The Florida-based brokerage claims to have more than 30,000 customers across 33 states.
What is MV Realty's plan? The company seems to be looking for ways to continue operating its business, said Adam Stein-Sapir, a bankruptcy expert at Pioneer Funding Group. Filing Chapter 11 bankruptcy only allows MV Realty to reorganize, Stein-Sapir told Real Estate News. If the company had filed for Chapter 7 protections, they could have liquidated the business and avoided paying damages should the lawsuits.
"Obviously they have a, I'll call it a novel business model … that has come under fire from state agencies," Stein-Sapir said.
Why now? The move comes as MV Realty faces numerous lawsuits and complaints across the U.S. and has been forced to stop signing new contracts with homeowners. Stein-Sapir said these lawsuits could "push [MV Realty] over the edge" financially and limit the company's ability to originate new business in certain states.
What is MV Realty saying? Real Estate News reached out to MV Realty for comment about the bankruptcy filing but did not immediately receive a reply. They have previously defended their business model as "innovative."
More details should come to light within the next 45 days when MV Realty is legally required to submit supplemental information about its bankruptcy filing to the courts.