LEXINGTON, Ky. (WKYT) – Buying a house is part of the American dream, but experts continue to say it can be a tougher dream to achieve right now in Lexington – especially for first-time home buyers who find themselves in a competitive market with rising prices.
“It is a little bit harder for a first-time home buyer right now,” said Susie Basham, a Realtor with The Agency, “because they’re competing against a lot of other first-time home buyers, as well as investors.”
With home prices ticking up, analysts say investor demand is strong, allowing them to charge higher rents or to sell for higher prices homes they have renovated.
Investors bought more than 18 percent of U.S. homes purchased in the fourth quarter of 2021, according to another real estate brokerage, Redfin. Their analysis found the share of investor purchases in 40 large U.S. metropolitan areas ranged from 6% in Providence, Rhode Island to 32.7% in Atlanta.
Using Redfin’s methodology – which defines an investor as any buyer whose name includes at least one of the following keywords: LLC, Inc, Trust, Corp, Homes – a WKYT Investigates analysis of two-and-a-half years of Fayette County home sale records posted online shows investor demand remains strong in Lexington.
The share of homes purchased by investors in the fourth quarter of 2021 was roughly 30%, which would rank Lexington near the top of the metros analyzed by Redfin. A similar share also carried over into the first quarter of 2022.
(Note: This is an approximate calculation, as this methodology does not account for individuals purchasing real estate as an LLC for financial, legal or personal protection or for other purposes such as parents helping their children buy their first home.)
Basham says the large investor demand here in Lexington stems from the city itself, its proximity to other large cities and the quality of life here.
“That makes the housing market a little more competitive, a little bit harder for somebody to get into their first-time house,” Basham said of the impact of this, “but if you have a strong credit rating, you’re working with a lender, you’re working with a Realtor, you can combat that.”
Sales here leveled off in April, according to the Lexington-Bluegrass Association of Realtors. Analysts believe that some buyers have moved back to the sidelines with home prices and interest rates on the rise. LBAR says the median home price rose to $245,000 – up 16% from last year.
But all these factors leave an impact not just on those looking to buy, but also on those who rent. Amid months of rent increases, experts say renting is still not getting any easier.
“What we’ve noticed here at Community Action Council is that housing has become less affordable, and harder and harder to find,” said Patrice Muhammad, communications manager with Community Action Council, “especially for those who are low-income and extremely low-income.”
Fewer vacancies and not enough supply makes their searches more difficult and take longer, Muhammad explained. She said they have also seen that landlords have the luxury right now of being more selective, perhaps raising rent or requiring more income to qualify.
Lexington had the country’s largest month-over-month rent increase in May, according to Apartment List rent estimates – a nearly 18% jump.
Community Action Council’s efforts right now are focused on housing stabilization – helping people stay in the current homes by paying past-due rent and a few months going forward. It is a mission that, given the current market, may be more important than ever.
“Because, as we know, if you have to leave your current residence, it’s not going to get any better,” Muhammad said. “You’re going to have to find another place, hopefully comparable space, comparable rent; it’s almost impossible to find.”
Advocates continue to say the city needs more housing and more affordable housing, especially as inflation drives up prices on nearly everything. (Rent costs make up about a third of the Consumer Price Index used to measure inflation.)
Realtors say new construction has not been able to keep up with demand, and, despite a 3% increase in the number of listed homes compared to the same time last year (according to LBAR’s report), there are not enough existing houses to keep things affordable, Basham said.
Interest rates are rising, but experts say they still expect demand to outpace supply in Lexington – especially on the affordable housing front.
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TRAVERSE CITY — Local realtor Camille Campbell said the specifics of a new kind of right-to-list contract a Florida broker is offering some homeowners in northern Michigan has her feeling uneasy.
“My concern isn’t about getting a listing or not, it is about the choices people may be giving up when they sign one of these agreements,” Campbell said.
MV Realty of Delray Beach is offering contracts — called the Homeowner Benefit Program — that pay up front money to homeowners whether or not they have plans to sell their home, information on the company’s website states.
“MV spends substantial time and resources to ensure that it always operates in a way that is consistent with the law,” the company said in a statement provided Thursday.
“With regard to Grand Traverse County, MV has only entered into five Homeowner Benefit Agreements in the county, all of which were signed by the homeowners knowingly and voluntarily before a notary, and after those individuals had spoken to a licensed agent about the program.”
The contracts are not listing agreements, but rather a contract between two parties — a homeowner who makes a promise and MV Realty which pays the homeowner a set amount of money in exchange for that promise, the statement said.
The specifics are this: In exchange for between $300 and $5,000, homeowners sign an agreement stating if they decide to sell, MV Realty has the exclusive right to list their home on commission, generally six percent, as spelled out in the agreement.
Campbell and other local real estate professionals say what they find problematic is not the up-front money, but the length of the agreement, which company documents show lasts 40 years.
In contrast, a standard listing agreement from a licensed realtor in Michigan typically lasts three, six or 12 months, said Chris Lambert, co-owner of Northern Title Agency.
Additionally, the Homeowner Benefit Program agreement states if the homeowner defaults on the agreement during that 40 years, whether by losing the home through foreclosure, listing the home with another realtor or listing it for sale by owner, the homeowner would owe MV Realty an early termination fee equal to three percent of the property’s fair market value.
Homeowners also waive their right to be party to a class action lawsuit, agree to allow MV Realty to use photographs of them in company marketing materials and agree MV Realty can delegate some or all of its obligations to others, a copy of the agreement states.
“If at any point during the next 40 years, they decide to sell, MV wants to work with its customers to successfully sell their home,” the MV Realty statement reads. “Once the property is sold under the terms of the MV agreement, the HBA terminates.”
Staff with Antrim, Benzie and Leelanau county Register of Deeds offices searched for MV Realty listing agreements and reportedly found none listed.
Grand Traverse County Register of Deeds Peggy Haines said as of early June, four such agreements have been filed with her office, three of which she recorded and one she rejected for a notary error.
“My concern with these documents is whether or not people fully understand what they are signing,” Haines said. “And, maybe they’re not worth the amount of money property owners would be getting up front.”
Calls to three of the four local homeowners who records show signed these agreements went unreturned.
The fourth, James Leurck, Sr., said he did recall signing a real estate agreement, though did not immediately recall it was with MV Realty.
His son and namesake, James Leurck, said his dad was approached by MV Realty, though he wasn’t sure how the company got his father’s name. Leurck said MV Realty offered Leurck Sr. approximately $1,500 up front, and in January sent a notary public to the family’s Peninsula Drive home.
MV Realty said in their statement, the company only reaches out to individuals who have submitted inquiries requesting information either to MV directly or through third party websites, which are then directed to MV from whom the consumers consent to receive information.
Leurck said the notary who met with them at their home explained the paperwork and notarized Leurck Sr.’s signature on a Homeowner Benefit Program agreement.
The home is not for sale and James Leurck said he and his father understood the terms of the agreement. His father signed it with that understanding.
“As far as I know, they have rights for whatever amount of time but only if we decide to sell the house,” James Leurck said. “It’s totally up to us if and when we decide to sell.”
The MV Realty agreement documents filed with the Register of Deeds office aren’t the full agreement, Haines said, but rather a referencing document called a “Memorandum of MVR Homeowner Benefit Agreement,” which alerts an interested party — say a bank, a mortgage company, a title company or a beneficiary — that an underlying agreement exists.
‘Runs with the land’ for 40 years
The two-page memorandum and the multi-page full agreement both include the 40-year timeframe, records show, and state obligations in the agreement “run with the land.”
That is a real estate contract term, Haines said, that means the homeowner’s obligation to list with MV Realty lives on with beneficiaries, in the event the homeowner who signed the agreement dies during that 40-year timeframe.
Traverse City real estate and municipal law attorney Scott Howard also pointed to the length of the agreement as unusual.
“Forty years is an extraordinarily long period of time for you to commit to a single realtor or real estate agency,” Howard said. “I have been doing this work since 1997 and I have yet to see an agreement like this one.”
Neither Howard, Lambert nor Campbell have worked with a client who signed a Homeowner Benefit Program agreement, they said.
“As realtors, the challenge is we wouldn’t know about these agreements until after the fact because my understanding is they go direct to the homeowner,” Campbell said.
Lambert said title companies, too, would likely first become aware of the agreement after they were signed by the homeowner.
“These are agreements that are being signed without title companies,” Lambert said. “We’re not involved until people go to refinance or sell. This is new. I’ve never seen anything like it before.”
Lambert said he cannot give advice on whether homeowners should or should not enter into such an agreement, though did say if a client asked his opinion, he might respond with some questions of his own.
Such as, whether or not the client had seen an MV Realty “For Sale” yard sign in northern Michigan — meaning, would the company have a presence here in the event the homeowner decided to sell, and MV Realty was responsible for marketing and selling the property.
MV Realty said if a homeowner under contract decided to sell, that’s when a more traditional listing agreement would be signed.
Transaction broker vs. seller’s agent
At least some Homeowner Benefit Agreements state MV Realty would be the property owner’s listing agent, but would act “strictly as a transaction broker” — a legally neutral third party who doesn’t work for the buyer or the seller but assists with coordinating details of a transaction.
The Michigan Realtors Association calls these brokers “transaction coordinators” and a policy document states transaction coordinators can introduce buyers and sellers, but cannot list a property for sale in the state’s Multiple Listing Service or be involved in price negotiations — only a seller’s agent can do that.
Michigan realtor Mary Doa, based in Howell, is listed on MV Realty’s website as the company’s Michigan agent. Doa declined comment on whether she would be the seller’s agent and referred a reporter’s questions back to the corporate office in Florida.
“MV will only operate its business if it is complying with all applicable laws, at all times,” the company said in its statement. Records show the HBA includes a three-day right-to-rescind option.
Haines in Grand Traverse County said she is alarmed enough by the lengthy term of the agreements to send a letter to homeowners whenever an MV Realty agreement is filed with her office.
“It appears that this document may be placing a 40-year lien on your property,” Haines’ letter states. “If you were not aware of this being recorded and have any questions regarding this document, please contact me.”
The Better Business Bureau has logged 25 complaints against the company in the past three years, records show, with complainants expressing concerns about what they called deceptive practices, among other issues. The BBB also gave the business an “A” rating, though notes customer reviews are not used when calculating the rating.
MV Realty representatives have responded to most if not all of these complaints in writing, sometimes at length, with details on how potential clients are identified and contacted.
Records in various state courts show civil lawsuits have been filed in relation to the Homeowner Benefit Program, either by homeowners seeking to vacate the agreement or by MV Realty seeking to enforce its terms or attach a lien to a foreclosed property.
Nationwide plan to ‘securitize’
A federal lawsuit between MV Realty and an investment firm, however, show plans for a grander purpose beyond real estate sales, was part of the company’s initial foray into right-to-list contracts.
U.S. District Court filings show Innovatus Capital Partners, a New York-based investment advisor and portfolio management firm, approached a shareholder of MV Realty in 2017, with what one attorney described as a new and novel business opportunity.
“The opportunity was to join with Innovatus to be the first in the market in the United States to sign forward right-to-list contracts with real estate owners and to then, if a sufficient number of these contracts were signed, securitize them,” said attorney Leo George Kailas.
Kailas was arguing on behalf of Innovatus, during a 2019 oral argument in front of the U.S. Court of Appeals for the Second Circuit.
In a nutshell, MV Realty would produce right-to-list contracts and Innovatus would securitize them, court filings show. Federal court filings by MV Realty state as of 2018 or 2019, the company had generated “well over” 10,000 right-to-list contracts in the U.S.
Innovatus, according to court filings, spearheaded the idea that bundling large numbers of listing contracts could closely mirror residential real estate appreciation and be attractive to investors.
The relationship between the two entities was short-lived, however, and in 2018 Innovatus filed a federal lawsuit against some MV Realty shareholders and officers for breach of non-disclosure agreements, court records show.
MV Realty disputed these claims, as well as the relief sought by Innovatus, and counter-sued.
A federal district court judge dismissed some of Innovatus’ claims, Innovatus appealed, a U.S. Appeals Court panel heard arguments and remanded portions of the case back to the U.S. District Court for the Southern District of New York.
MV Realty attorneys have repeatedly argued the relief sought by Innovatus — that MV Realty be prohibited from pursuing right to list contracts of any kind, anywhere, for six years — is a boundless and unenforceable restriction.
The company stopped executing the original right-to-list agreements in 2018, court records show, and subsequently trademarked its Homeowner Benefit Program.
This action was not a breach of non-disclosure agreements, MV Realty stated in court filings, as these kind of agreements have long been in the public domain.
Court filings do not state plans by the company to securitize the Homeowner Benefit program agreements, records show.
Local realtors polled informally said exclusive right-to-list agreements are common, and that many realtors use them frequently, though payment of up-front money to a seller by a realtor or real estate company is unusual or even non-existent — as is the 40-year timeframe — at least in Michigan.
The Homeowner Benefit Program agreement is something new in the state, said Haines, who added she will continue to record the documents if legally in order, and will then respond with her letter to homeowners.
On Wednesday, a fifth Homeowner Benefit Program agreement memorandum was submitted to her office, Haines said.
A Zirakpur-based realtor was grievously injured after eight men attacked him with sharp-edged weapons, and vandalised his car near a hotel on the Chandigarh-Ambala road on Wednesday.
Identified as Naveen Kumar, a resident of Garden Homes, Zirakpur, the victim was admitted to the Dhakoli government hospital with severe injuries on the head, neck and arm.
In his statement to the police, Naveen stated that he had a property consultancy office at Chandigarh City Centre, Zirakpur.
Around 10 am on Wednesday, he was on his way in his car, when he was waylaid by around eight men riding multiple two-wheelers near Hotel Holiday Inn on the Ambala-Chandigarh road.
Without any provocation, the men vandalised his car and attacked him with swords, sticks and stones, before fleeing the scene. Passers-by rushed him to the Government Hospital in Dhakoli, where he remains in critical condition.
Meanwhile, his son, Vijay Kumar, alleged that the attack was carried out by one Daljit Singh, with whom his father had an altercation before.
Vijay said Daljit had also smashed the windshield of his father’s car and issued him death threats. A complaint in this regard was submitted to the Mohali SSP and Zirakpur police station, but police did not act on it.
Zirakpur SHO inspector Deepinder Singh Brar said they had initiated investigation after recording the victim’s statement and a manhunt had been launched to arrest the assailants.