Contract for What?
A contract is shorthand for “contract for deed,” also advertised as “rent to buy,” “seller financing,” or “installment land contracts.” These are not inherently predatory, as any northern Midwesterner will tell you. Land contracts are common ways to finance real estate, especially in rural areas without many banks.
In 2009, the last year such data was collected, the U.S. census reported that about 3.5 million people bought their homes through a land contract, more than 4.5 percent of all homeowners. This probably underestimates the number, as many buyers don’t understand the transaction well enough to report it to the census. Most states require that land contracts be recorded, but many sellers do not bother to do so.
Yet the opportunities for abuse are plentiful. Most contracts for deed (CFDs) are not subject to the Truth in Lending Act and other consumer protections that most traditional mortgage borrowers enjoy. Under a CFD arrangement, the buyer has all of the responsibilities and headaches of a homeowner, including repairs and paying property taxes and insurance, without actually owning anything. Yet buyers have fewer rights even than tenants, who can at least call the landlord to fix a busted toilet or broken lock.
“These contracts exist in a regulatory ‘no-man’s land’ between tenant protections and homeowner protections,” says Sarah Mancini, an attorney with the National Consumer Law Center and co-author of a 2016 report about contracts for deed, “Toxic Transactions: How Land Installment Contracts Once Again Threaten Communities of Color.” “These aspiring homeowners have neither,” she says.
In May, the ad hoc group calling themselves “Home Savers” reconvened in Detroit around a large wooden conference table at the United Auto Workers Local 600 offices. The UAW office sits across from the sprawling River Rouge Ford plant in Dearborn, surrounded by halal meat markets. On the wall is a portrait of John F. Kennedy and historical photos from 80 years of labor organizing, including the 1937 “Battle of the Overpass,” when Walter Reuther and other striking workers were beaten by thugs.
Over five days, the UAW office has served as a meeting place to orient volunteers before being dispatched for an afternoon and evening of door-knocking. Joining Jim Devanney and Mike Gallagher is veteran organizer Wade Rathke, who founded ACORN in 1970, and his daughter, Dine’ Butler, who adapted a smartphone app to enable canvassers to track properties and track data. “From what we can tell, Detroit appears to be ground zero for contract-for-deed abuse,” Gallagher tells me.
Don’t Evict—Organize: The “Home Savers” group (including veteran organizer Wade Rathke and his daughter Dine’ Butler on the left side of the table) use the UAW office in Detroit to orient volunteers for afternoon and evening door-knocking.
“There were more land contracts recorded in Detroit than conventional mortgages,” observes Rathke, citing Wayne County data showing 834 land contracts and 710 mortgages filed in 2016. This number greatly underestimates land contracts because there is no law requiring them to be filed with county officials.
The Home Savers team has spent several weeks combing through online data from the Wayne County Assessor’s Office, looking for properties convened by Harbour Portfolio, Vision Property, and a local group, Detroit Property Exchange. They now have addresses for 250 homes in Detroit and 250 homes in surrounding cities, including Inkster and Taylor