This is the third article I’ve read in as many weeks about the abuses of contracts for deed (a.k.a. land contracts, agreements for deed). When the media focuses on a subject like this, calls for harsh regulations are not far behind. I predict that the CFPB, if not Congress, will soon come down hard on contracts for deed, thanks to a few crooks. What is worse is that some in the media (such as housingwire.com) think all seller installment sales (“seller financing”) are done with contracts for deed. That encourages the government to further regulate ALL seller installment sales, even the vast majority that are not contracts for deed.
“Buyers need guidance in understanding that, under a contract for deed, they don’t accrue equity or obtain the property deed until they’ve paid off the loan. Meanwhile, sellers have the authority to evict buyers, typically in 30 to 60 days, if they miss even a single payment.
“Contract-for-deed financing has been around since the 1960s and gained traction in the 1980s when sky-high interest rates were a barrier to home ownership. Some investors who bought foreclosures in bulk during the housing crisis are using contracts for deed to sell off inventory now that prices have widely rebounded.
“Critics say the terms are often written to exploit naive buyers. In recent months, companies such as Harbour Portfolio Advisors in Dallas have come under fire for allegedly selling properties in poor condition to buyers who couldn’t afford the repair costs on top of installment payments—which carried an interest rate as high as 10 percent—and evicting the buyers soon after they defaulted. Buyers in several states, including Ohio and Michigan, have filed lawsuits against Harbour, and such cases have prompted the Consumer Financial Protection Bureau to begin investigating the practice. READ MORE: http://realtormag.realtor.org/news-and-commentary/feature/article/2016/07/rise-in-seller-financing-trapping-buyers
