The Racist Roots of a Way to Sell Homes
Contracts for deed are making a comeback. They are increasingly being used by investment firms that have bought thousands of foreclosed homes and want to sell them to lower-income buyers “as is,” according to a recent report in The Times by Alexandra Stevenson and Matthew Goldstein. Many of the homes are in Alabama, Georgia, Michigan, Missouri and Ohio. In one example in the article, investors who bought foreclosed homes at an average price of $8,000 issued a contract on one in Ohio in 2011 for $36,300 at 10 percent interest.
Contracts for deed make gouging possible, because unlike traditional mortgages, there is no appraisal or inspection to ensure that the loan amount is reasonable. They also let an investor swiftly evict buyers for missed payments, rather than giving them time to catch up, as required under a mortgage. And they usually require the buyer to pay hefty upfront fees. Unlike a rental security deposit, however, the fee is almost never refundable.