Ohioans need protection from predatory land contracts
Posted May 21, 2019 in Press Releases
Policy Matters and ACTION testify in support of House Bill 103
Today Policy Matters Ohio and ACTION, a faith-based membership organization composed of 26 churches and civic groups in Youngstown and Mahoning County, appeared before the Ohio House Civil Justice Committee to express their support of House Bill 103, which would improve protections for consumers who enter into land contracts as a means to buy a home.
Since the late 1960s, land contracts have helped Ohioans become homeowners, even when they may otherwise be unable to secure financing for a mortgage due to spotty credit histories or racial discrimination from lenders. Under land contracts, the buyer and seller agree on a price to be paid off over time. When the buyer completes the payments or pays the full purchase price, the seller transfers the legal title to the buyer.
In the wake of the 2008 housing crisis, unscrupulous investors took advantage of prospective homebuyers in states with weak land contracts provisions, like Ohio. Many people who dreamed of buying a home entered into contracts for properties that needed extensive repairs — properties that wouldn’t pass inspection if they were rentals. Land contracts allow companies and individuals to sell these properties with no repairs and at prices well above their values, Policy Matters project director Kalitha Williams said.
“Between 2008 and 2018, there were over 47,000 land contracts recorded in Ohio,” she said. “After spending thousands of dollars on down payments, monthly payments and repair costs, buyers learned they were stuck in overpriced, uninhabitable properties they could not afford. Some buyers had to vacate their homes, despite making their payments, because the seller did not keep up with property taxes or mortgage and the property was foreclosed.”
Youngstown, one of Ohio’s cities hit hardest by the foreclosure crisis, implemented local laws to protect consumers from predatory land contracts, but Ian Beniston, Executive Director of the Youngstown Neighborhood Development Corporation (YNDC) and Vice President of ACTION, says the state needs to do more.
“We continue to find companies and individuals using these predatory land contracts to create confusion and the illusion of homeownership knowing full well that most buyers will never achieve homeownership and predicating their business model on cycling multiple individuals through the property to collect multiple ‘down payments’ and never making repairs to the property,” he said.
Williams said House Bill 103 contains important protections for prospective Ohio homebuyers, including many of Policy Matters’ recommendations, such as:
- A property must be independently inspected and must meet local building codes before a land contract is executed, and must remain habitable throughout the life of the contract.
- A property must receive an independent appraisal that is shared with the buyer before a land contract is executed.
- Liens and other encumbrances must be paid in full before a land contract is executed.
- A land contract must be recorded soon after it is executed.
- Deviation from land contract laws are only permittable when both buyer and seller have their own attorneys.
Policy Matters Ohio is a nonprofit, nonpartisan state policy research institute
with offices in Cleveland and Columbus.