Lawmakers target seller-financed homes

WASHINGTON – Oct. 6, 2017 – Seller-financed deals are coming under increased scrutiny.
The Consumer Financial Protection Bureau (CFPB) is investigating some larger investors that offer seller financing in real estate deals. It’s accusing them of abusing the practice by evicting buyers for missing just a single payment or selling homes at the end of the agreements that are in complete disrepair.
Legislators in three Midwestern states – Ohio, Illinois, and Michigan – are targeting abuse of seller-financing deals with new legislation that aims to better protect buyers in these contracts.
In Ohio, lawmakers introduced a bill that would require property owners to solve any housing code violations and pay outstanding fines before selling the homes to buyers in contract-for-deed transactions or in rent-to-own leases.
Illinois enacted a law that strengthens disclosure requirements in seller-financed deals that takes effect in January 2018. Under the new rules, for example, buyers get more time to come up with money for a missed payment to avoid the problem of quick evictions.
In Michigan, lawmakers are working on a bill that would address similar abuses with contracts for deeds. In Detroit, homes sold on contracts for deeds are outpacing the number of homes sold in the city with traditional mortgages.
Earlier this year, a New York Times series of investigative articles highlighted some dangers with contract-for-deed transactions. Reporters uncovered several national firms that sold homes under seller-financed deals without fully disclosing that some properties had housing violations or that some of the properties had thousands of dollars in unpaid taxes and other fees. Some homes sold had even been slated for demolition.
Source: “States Acting to Protect Buyers of Seller-Financed Homes,” The New York Times (Oct. 3, 2017)