One type of seller-financing called a contract for deed or a land contract, is a long-term, high-interest installment financing deal. Title to the property does not become the buyers until the final payment is made; some contracts run for up to 40 years. This arrangement is most prevalent in the Midwest and South where there is a plethora of homes priced under $100,000 as MHProNews has learned from nytimes.
The financial crisis resulted in many foreclosed homes, often inexpensive and dilapidated, that investors have purchased and then sold under contracts for deeds, often in “as is” condition, requiring the buyer to spend disposable income on repairs and renovations.
While sellers claim it is a way for people with damaged credit to return to the home ownership market, municipal officials across the U. S. say some out-of-state investors often do not maintain properties and ignore property taxes and utility bills. Said Jill Steele, city attorney for Battle Creek, Michigan, “They do not take care of the code violations with these properties, which is why they are trying to pass them off to other people.”
Because not every state requires contracts to be recorded with the county, statistics on the number of homes sold through contracts for deeds are in the shadows, often only coming to light if there are cases against the sellers, who often do not show up for a court hearing, causing the code violations to accumulate. Similarly, borrowers do not often contest an eviction proceeding, preferring to walk away from the home.
Heather K. Way, a law professor at the University of Texas, noting that unlike bank-financed deals where there is an outside third-party involved in the transaction, said, “This segment of the homeownership market cries out for greater federal oversight. It’s a toxic mix out there of sellers looking to make a quick and easy buck on the shoulders of vulnerable, unsophisticated buyers.”
The CFPB has allegedly assigned two enforcement officers to investigate seller-financed home transactions. While CFPB spokesman Sam Gilford would not confirm this, he did say, “We want all consumers to be treated fairly, and we monitor the marketplace to stay apprised of emerging developments in consumer finance.” ##
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