Pa. homeowners are getting scammed by a Florida-based real estate firm, the attorney general and advocates say

Timothy Calhoun spotted a real estate company’s ad on his social media feed in January that promised him cash. He called the number and discovered he could get $640 for agreeing to use MV Realty if he decided to sell his North Philadelphia home. He signed the agreement.

Then he got a notice from the City of Philadelphia that a mortgage had been recorded on his home.

“I was shocked,” he testified before City Council members at a hearing Wednesday. “They never told me that I was signing a mortgage. If I had known that I was gonna put a mortgage on my house, I would have never had signed the agreement.”

He said he returned the money MV Realty gave him in hopes of canceling the agreement. But the only way out of the 40-year contract is to pay a fee — more than $6,000.

On Wednesday, the Pennsylvania Attorney General’s Office announced it has sued Florida-based MV Realty for misleading homeowners and obtaining mortgages on their homes without their knowing. The Attorney General’s Office alleges that the company’s sales pitch to homeowners is very different from the agreement they end up signing and that these practices violate consumer protection law. Massachusetts Attorney General Maura Healey also announced a suit against MV Realty on Wednesday.

In exchange for a few hundred dollars in most cases, owners sign agreements that give the real estate company the right to be the listing agent if they choose to sell their homes.

Under these contracts, which last 40 years, MV Realty receives thousands of dollars in fees — a percentage of the home’s value as determined by the company — if the company sells the property, if the homeowner cancels the agreement, and for any transaction in which the property changes hands. That includes losing a home through foreclosure or transferring a home when the owner dies.

Homeowners who sign with MV Realty are at risk of losing equity in their homes and can’t always control what happens to their properties. The contracts allow the company to obtain a mortgage on homes to enforce the terms. Homeowners said they were rushed into signing and didn’t know what they were getting into.

“MV Realty is a scam that exploits Pennsylvanians in vulnerable financial situations,” Attorney General Josh Shapiro said in a statement. Florida’s attorney general also has sued MV Realty, which operates in 33 states.

”For anyone to suggest that MV Realty has engaged in unfair practices is simply false,” the real estate firm said in a statement. It said it looks forward “to an airing of all the facts and, as always, MV Realty remains committed to full transparency in all of our business transactions.”

The Pennsylvania Attorney General’s Office knows of about 1,000 mortgages in the state tied to MV Realty. More than 500 Philadelphia homeowners have signed agreements with the company, and mortgages were recorded within the last two years.

“This seems to be a relatively new scheme,” said Kerry Smith, supervising attorney in the home ownership and consumer rights unit at the nonprofit Community Legal Services of Philadelphia. “And a flourishing one in Philly.”

The mortgages are concentrated in Philadelphia neighborhoods with large populations of Black and brown residents, according to an analysis by Reinvestment Fund, the Philadelphia-based community investment nonprofit.

At a City Council hearing Wednesday about MV Realty, Ira Goldstein, president of policy solutions at Reinvestment Fund, said the way the company operates ”shares many of the same features of the predatory lending practices of over a decade ago.”

“The business offers a product that is attractive, particularly attractive to people who have financial needs and limited access to other financial alternatives,” Goldstein said. “There’s an element of pressure. There’s an element of deception.”

In a statement, a company spokesperson said, “MV Realty has helped more than 30,000 satisfied clients nationwide through our Homeowner Benefit Agreement (HBA) by providing up to $5,000 that can be used to pay their mortgage, utility bills or improve their financial standing. The only thing we ask for in return is to be their realtor if and when they sell their house.”

Philadelphia homeowners say they didn’t realize a lien would be placed on their property. When some received notices from Philadelphia’s Department of Records that a document had been recorded against their property, they feared they were victims of deed fraud, which is a big problem in the city. Homeowners who experience deed fraud have their properties stolen by people who forge documents.

Over the last year, worried homeowners have gone to Community Legal Services seeking help to protect their properties. When the nonprofit investigated, it found what Smith called a “predatory home equity stripping scheme.” Clients said they received telemarketing calls, social media advertisements, or knocks on the door from MV Realty representatives promoting a way they could get cash immediately in exchange for agreeing to eventually use the company as their real estate agent.

“There’s no doubt in my mind that this is an unfair and deceptive predatory scheme that’s designed to extract as much wealth from Philadelphia homeowners as possible,” Smith said in an interview. “We need to act swiftly to shut it down.”

In a statement, MV Realty said: “New business models that bring innovations to any longtime industry, like the real estate establishment, can sometimes draw questions from critics. We are happy to address them. That’s why it’s both surprising and disappointing that the City Council has never reached out for information about our company, to notify us that this hearing was taking place Wednesday or to ask us to participate.”

Community Legal Services helped clients file complaints with the Pennsylvania Attorney General’s Office. The agreements that homeowners sign prohibit them from suing MV Realty or joining class-action lawsuits against the company. MV Realty can sue to enforce the contract.

That’s what happened to Rodney Thomas of West Philadelphia. He said he saw a check in the mail for $365 with instructions to call a number to activate it. He got the check in exchange for giving MV Realty first rights to sell his home, which his mother had left him.

Then congestive heart failure put him in the hospital for two months, and he decided to sell. He said he wasn’t thinking about his deal with MV Realty when he accepted a nurse’s recommendation for a real estate agent. Soon after his home hit the market, MV Realty sued him. So he canceled a $120,000 deal with a buyer.

“I’m a poor Black man who’s trying to survive,” he told Council members. He said he “would like to get my home back.”

MV Realty briefly addresses the issue of complaints on its website, saying that “on occasion, some homeowners have forgotten they signed an agreement requiring them to list their home with our agency should they decide to sell. It’s very important that you understand the terms of our agreement before signing.”

In a statement, MV Realty said it “remains committed to full transparency in all of our business transactions. We also look forward to working with policymaker[s] to ensure that our [Homeowner Benefit Agreements] continue to benefit home buyers and home sellers in meaningful ways.”

The city is hosting a virtual information session Monday at 6 p.m. for homeowners who have signed agreements or who may be approached. Homeowners can file complaints with the Attorney General’s Office online or by phone at 800-441-2555.