ATLANTA — Just days after we reported that members of the U.S. Senate were pressing a real estate company for answers about its 40-year listing agreements, Channel 2 Action News has learned that the company has now filed for bankruptcy.
Channel 2 consumer investigator Justin Gray has reported on MV Realty for more than a year now about its 40-year listing agreements.
This is what the company was doing: You would sign a contract with the company to get a small check now but a big penalty later – 3% of the value of your home -- if you don’t use them to sell your house.
On Friday, the company filed under Chapter 11 for bankruptcy.
“It certainly shows that they are in financial trouble because their business model has harmed people and they’ve gotten caught,” said Georgia Watch Executive Director Liz Coyle.
It’s unclear how the bankruptcy petition will impact customers locked into 40-year listing agreements. But the decision on the future of those contracts could eventually be decided by a bankruptcy judge.
“In a bankruptcy, you’re carving up assets. So are these contracts an asset that needs to be sold for the benefit of the estate, or can we convince a bankruptcy court that these contracts are not valid and they’re and they’re fraudulent?” said Sarah Mancini, an attorney with the National Consumer Law Center.
Since our series of Channel 2 Action News investigations first exposed the problems with MV Realty, six state attorneys general have taken legal action, and 16 states, including Georgia, have enacted new legislation targeting the company’s controversial contracts and liens.
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All of those AG lawsuits are paused, at least temporarily by the bankruptcy filing.
“By declaring bankruptcy, they may be trying to protect themselves from having to actually pay restitution to all the people they’ve harmed,” Coyle said.
Earlier this week, Florida’s Attorney General asked a judge to freeze the company’s assets, which could be what prompted the bankruptcy filing.
The petition states MV Realty has liabilities between $50 million and $100 million.
A law passed earlier this year in the General Assembly essentially put an end to controversial contracts in Georgia, but that’s not the end of the problems – the law only affects new contracts.
Just this month, three U.S. Senate committee chairmen sent MV Realty a letter, writing that although MV Realty “temporarily suspended” new enrollment, it continues to advertise the homeowner benefit program on its website.
“We are concerned by MV Realty’s practices for the homeowners already enrolled in the program and the potential for future harm if HBP enrollment resumes,” the letter said.
MV Realty said in a previous statement that they remain “confident the Homeowner Benefit Program fully complies with the law and benefits consumers who select MV Realty as their listing agent. We will fully cooperate with the committees involved and provide a fulsome response to each request the Senators outlined.”
MV Realty said it is not currently signing people up for 40-year listings.
We expect to learn more about the bankruptcy plan when the company provides the required filings in the coming weeks.
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