by: Jason Stoogenke Updated:
It's the American dream: owning your own home. But many people don't qualify for traditional mortgages, so some sign-- what's called a "contract for deed."
It's perfectly legal. People sign the papers and think they’re a homeowner, but they’re not.
Action 9 investigator Jason Stoogenke teamed up with WSOC's sister stations in six other states and found people can lose everything they put into a home.
Marvin Finger wanted a house.
"I got it for my kids, something I could leave them after I'm gone," he said.
Finger found one in Salisbury, and it was crawling with problems: a leaky roof, holes in the foundation, missing gas pipes and a floor that was sinking.
Jermaine Massey, in Pittsburgh, Pennsylvania, was even more desperate.
"My wife and I, we were homeless, so we were kind of like going house to house, and this house fell into our lap," Massey said. "There was no electricity. The house was broken into through the basement. People... stripped the wires."
Massey wired his house himself until he ran out of money, and seven years later, he still doesn't have power in every room.
Faheema Veal felt very lucky when she came across a house in Jacksonville, Florida.
"Oh wow, this really has to be a gift from God," Veal recalled thinking.
But there was no ceiling in the kitchen. At 79 years old, Veal admits she'll probably never live to see her name on the deed.
"It is what it is. I don't know where I will go from here,” Veal said.
DeMarkus Horne never bought a house before. Five years ago, he found one in Atlanta, Georgia.
"I was looking forward to working on the home, building it, improving the home, something to pass on to my kids," Horne said.
Then a major pipe burst and he, his wife and their kids had to leave.
"I wish that I did not have my family in this situation,” Horne said.
They've been living in hotels ever since and falling behind on house payments.
They all signed a contract for deed. They thought they bought themselves a house. They took pride of ownership and made repairs. Finger said he spent $4,000 on repairs. Veal said she spent $22,000.
"Just like my wife calls it, she calls it a money pit because every time you turn around, you got to fix something," Finger said.
"My little nest egg was gone," Veal said.
But they're not homeowners. Their names aren't even on the deeds. And many of them had no idea. If they miss a payment, the company that owns their houses can kick them out and put the homes back on the market, even though they paid for repairs.
Jackie Brown, Jr. also lives in Atlanta and signed a contract for deed.
"Why have a dream and you're seeing it come true and then, all of a sudden, it's just wiped away," Brown said. "You can't get any money back. You can't get your sweat and tears back, all you're labor you've done, can't get back. It's just not fair."
Ann Carpenter studied contracts for deed for the Federal Reserve.
"Interest rates tend to be incredibly high -- much, much higher than a prime mortgage interest rate. The terms in general are unfavorable and it's sort of built to fail," Carpenter said.
Stoogenke and the other stations found all of the residents in this news report signed contracts for deed with the same company, Harbour Portfolio, which may be the largest in the industry.
They asked Harbour's president, Chad Vose, for comment multiple times. But they didn't get a response.
So news crews tried to track him down at his multi-million dollar home in Dallas, Texas. No one answered.
But the next day, news crews caught up with him in the parking deck of his office building. Vose ran from the camera, but the crew caught up with him in the elevator.
"I have not received any phone calls, nor any emails from you," Vose said. The crew was quickly ushered out of the building.
The City of Cincinnati, Ohio, is suing Harbour. It said the company owes the city hundreds of thousands of dollars in fees and fines, that the company failed to maintain properties, and that a child living in one of the company's homes tested positive for lead poisoning.
In Atlanta, Brown and Horne are also suing Harbour.
"It is a product that convinces people that they are a homeowner and requires them to take on all of the obligations of a homeownership when they have none of the rights and none of the protections of home ownership," said their lawyer, Sarah Mancini.
The lawsuit also accuses Harbour of targeting minorities. The Federal Reserve -- which studies housing issues -- came to a similar conclusion in a report earlier this year. It looked at Harbour and 13 other companies that also use contracts for deed.
"They tended to be concentrated, the sales themselves, in majority African-American neighborhoods, which is a huge concern," Carpenter said.
The Consumer Financial Protection Bureau is also investigating the company. The reason is not in public records. But Stoogenke and the other stations found a court transcript that suggests the Bureau is concerned that customers can pay month after month for years and, if they miss a payment "in the last month before the final payment is due, they lose all the money that they've paid up until that time and have nothing to show for it."
Many states don't have consumer protection laws dealing with contracts for deed specifically. South Carolina doesn't, but North Carolina does.
"You have a three-day right to cancel ... the contract for deed needs to be recorded. There's a 30-day right to cure," said Leah Kane, with the Charlotte Center for Legal Advocacy.
The right to cure means the owner can't kick you out right then and there. Also, the owner can't charge more than 4 percent in late fees.
Kane said, if you plan on signing a contract for deed:
- Have a lawyer review the contract. It's worth the extra money.
- Keep good records of anything you spend on the house -- deposit, payments, and repairs -- in case you end up in a legal battle with the owner.
Some people defend contracts for deed, saying they're a path to homeownership people wouldn't have otherwise.
Just remember, contracts for deed and rent-to-own seem like homeownership, but people don't have the rights and protections a homeowner has. Multiple experts told Stoogenke the better way to buy a home is to keep renting, save up for a down payment, work on your credit, work on your income and get a mortgage from a traditional bank or credit union.
© 2017 Cox Media Group.
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