Wednesday, November 14, 2012

Use Of 'Contracts For Deed' As Way To Skirt Regulations Raises Concerns For Minneapolis Housing Officials

In Minneapolis, Minnesota, Minnesota Public Radio reports:

  • Minneapolis officials and housing advocates are concerned about a trend in the housing market. They say more property owners are striking up informal "contract for deed" deals as a way to sell homes to people who don't qualify for loans.

    Some of these sellers are landlords the city says are using the arrangement to skirt safety and housing laws.(1)
  • The problem is that many buyers don't understand what they're getting into, according to Legal Aid attorney Luke Grundman. As credit continues to be tight, he said unregulated contracts for deed are fueling housing fraud in areas like north Minneapolis, where foreclosed homes come cheap.
  • As the number of contracts for deed rise, Acting Director of Regulatory Services Henry Reimer is concerned that landlords are using these deals to avoid regulations and rent without a license.

    "Then that means that we have people that are living in properties that might not be safe and folks that truly don't have the ability to control their environment not being provided with protections for which we require rental licenses," Reimer said.

    "They're not deals, they are steals," said north Minneapolis resident Nekia Tetter.

    Tetter and her fiance recently turned down their landlord's offer of a contract for deed. Tetter, 38, said her landlord lost his rental license and the house was in terrible condition. The city posted a red sticker warning of unpaid assessments on the property. Tetter worries that her neighbor, who accepted a contract for deed with the landlord, got a bad deal.

    "If you're poor and you feel like your landlord is saying 'oh my god I'm giving you a good deal and this is your home, now you own this, this is not mine anymore.' And a lot of people take this small garbage that they say instead of looking at the big picture," she said.

    To prevent more people from entering into contracts they don't understand, Minneapolis officials are surveying neighborhoods to find out how many contracts for deed are out there. Meanwhile, housing advocates are crafting legislation for next session they say would give more protection to contract for deed buyers.
For the story, see Beware of 'contract for deed' housing schemes, Mpls. officials warn.

(1) Contracts for deed can also provide a handy way for unscrupulous real estate investors to unload, onto unwitting novice home buyers, the burdens of owning crappy property that cannot be sold through conventional means due to a variety of problems (structural defects, title defects, environmental hazards (mold, methamphetamine contamination, lead-based paint, etc.)). The victims of these home-buys typically are too unsophisticated to appreciate the need for:
  • having a professional home inspection (structural & termite) conducted,
  • having a professional title search and property survey conducted, and
  • obtaining title insurance.

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