Illinois Legislature approves bill to prevent unfair real estate listing deals

Legislation banning expensive, long-term real estate listing deals — like those peddled in Illinois by MV Realty, a Florida company — has passed the House and Senate and now only needs the signed by Governor JB Pritzker to become law.

Bill SB3420, passed in May, would prohibit people or businesses from entering into unfair listing agreements with property owners. Real estate advertising contracts would be prohibited if they last more than a year. And no agreement could bind the future owners of a property.

Violators could be prosecuted under the Illinois Consumer Fraud and Deceptive Trade Practices Act.

For landlords who have already signed an agreement, the legislation would offer a way out. The owners could ask a judge to void the agreement, making it unenforceable.

AARP and land title insurance groups praised the legislation because it provides recourse for consumers while discouraging similar schemes.

State Rep. Terra Costa Howard, D-Glen Ellyn, an attorney who sponsored the legislation in the Illinois House, said many landlords who signed the long-term agreements did not understand the terms.

“We know that our most vulnerable populations are often preyed upon,” Howard said. “People don’t realize what’s happening.”

This measure is part of a series of actions taken at the state level across the country to protect consumers in the wake of the MV Realty controversy. The Boca Raton, Fla., company was accused of deceptively grabbing homeowners’ equity through real estate listing deals. Several lawsuits have been filed against MV Realty by state attorneys general, including those of Illinois and Indiana.

In a lawsuit filed in April in Cook County, Attorney General Kwame Raoul argued that the company deceptively targeted homeowners who had equity in their homes but needed the money. MV Realty paid people up front but locked them into 40-year exclusive listing agreements that had hidden fees and limited their ability to refinance or sell, the suit alleges.

MV Realty did not respond to a request for comment.

According to the lawsuit, the company’s rating system worked as follows:

• Financially distressed homeowners who signed the company’s MVR benefits agreement would receive a one-time cash payment of about 0.3 percent of the home’s value, or as little as a few hundred dollars.
• The contracts were filed as memorandums with county offices, obscuring ownership titles.
• The agreements lasted 40 years and extended to the owner’s heirs. If an owner dies, the heirs are often unaware of the contract. Some owners forgot that they had already signed an agreement.
• If a homeowner listed the home for sale through another real estate agent, it was considered a breach of contract and MV Realty was entitled to 3% of the home’s sale price.

MV Realty had more than 34,000 deals nationwide, including more than 750 in Illinois. It said it stopped signing new listing agreements in 2022.

Raoul’s lawsuit seeks civil penalties and cancellation of all Illinois contracts.

Among the MV Realty executives was Amanda Zachman, known as the “bad guy” on season 15 of CBS’ “Big Brother.”

Most of the company’s funding came from Monroe Capital Management Advisors of Chicago, which invested $40 million in July 2021.

MV Realty filed for Chapter 11 bankruptcy last year in Florida, but withdrew its petition last month. The US bankruptcy trustee had argued for dismissal or conversion to liquidation bankruptcy (Chapter 7).

The U.S. Department of Housing and Urban Development, which enforces civil rights laws against discriminatory housing practices, is investigating the company, as is the federal Consumer Financial Protection Bureau.