Vision Rent-to-Own “Buyers” Meet and Find Out Every Deal is Different

San Francisco  The first organizing meeting in Detroit of the Home Savers Campaign had spirited discussion when families discovered that they only had one thing in common in the contracts they had signed with Vision Property Management or its subsidiaries: the contract itself. When it came to the terms, to everyone’s shock and anger, everyone had a different deal!

The differences were not simply where we might expect to find them in the price of the houses they were hoping to buy or the number of years to term. In fact the prices were all very close to each other. As the campaign has come to expect from visiting so many families in Pittsburgh, Philadelphia, Akron, Youngstown, and now Detroit, some families attending the meeting were still shocked to find out that in seven years they would not own the home as they expected, but simply face wrenching choices between balloon payments, long term agreements, or walking away from extensive investments in money and labor in repairs.

The differences in the contracts were huge. Excitedly talking about their contracts, they found for example that in some contracts as little as $14 of their monthly payment was going to principle on the purchase while in others as much as $150 was being applied. That was often the case when the payments were virtually identical. In several cases, they discovered they had not been clearly told how much of their payment was going to principle at all. Even when the purchase price of the houses were roughly equivalent, families were finding that the amount of their monthly payment being applied for insurance was often different.

Looking at the question of tax payment which is especially freighted with concern, since nonpayment of taxes to the county could lead to loss of the property on tax delinquency sales. Only one family could determine from their payment the amount that was supposedly being paid to taxes, while the other families at this first organizing meeting became worried that since there was no indication, Vision might not be paying their taxes at all. Even in the one case where the tax level was stated at $150 per month or $1800 per year, there was skepticism that the house valued so modestly really was sustaining such a relatively high cost compared to true value.

Many of the people at the meeting were also on their second contract with Vision. The first had given them up to 45 days to make good on their payments, while the more recent gave Vision the right to void their option to purchase if they were late on the payments at all, making the contracts essentially no more than rental agreements, despite the fact that this was a triple-net lease with the “buyer” paying everything including thousands and thousands in repairs. One family was livid having invested over $50,000 in repairs, yet still debating whether or not they should walk away. Everyone at the meeting shared stories of about the “fishing” Vision’s representatives did with them over the phone to try and suss out the amount families had invested themselves in repairs, presumably for the company to guess whether the property might have been fixed off enough for them to seize the first opportunity to evict and flip.

People were happy to meet, but that was the only happiness in the room once the members and organizers cleared the fog away that hung over the legalese of the agreements. There was anger and plans for quick action. On the question of fight or flight, people were ready to fight. Powered by people, the campaign now begins in earnest.

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Assembling the Facts on the Ground about Land Contracts in Detroit

Oakland   The back of the envelope figures from three days on the doors, based on reports logged into the database by our teams in Detroit, indicate that of more than 125 doors hit, half of the properties are abandoned. That’s not good for neighborhoods, the City of Detroit, or the future prospects of building viable communities there. We increasingly began to question how good this level of abandonment of land contract and rent-to-own properties is even for the companies that specialize in this seamy side of the housing market in urban areas.

As a business model that fits snugly in the category of what a reporter for the New York Times termed the dominant modern “flagrant exploitation economy,” the companies operating within this most predatory segment of the housing and rental market face challenges. By process of elimination of usual factors, an economist speculating on principal cause of the 2008 real estate collapse is now arguing that there was an irrational psychology that almost spread virally that vast sums were to be had by “flipping” real estate, which like the tulip craze in Holland and so many other bubbles of the previous centuries, led to the unsustainable inflation of prices until the crash. Detroit Property Exchange is still pushing that myth in lower income communities with its signs that urge potential customers to call 888-FLIP to connect with the company.

Certainly the lease and contract documents starting from “as is” and including the company’s rights to evict the “buyer” immediately for even a single missed payment at any point in the term of the agreement, lead one to believe that these companies are making their money by flipping the contracts from one “sucker” to another, as an on-line Detroit magazine called the Bridge, writing about our campaign described the buyers. We are not convinced that theory translates into facts on the ground from our doorknocking. Additionally, Professor Josh Akers shared with us an overview of research he and a colleague are soon publishing on land contracts in Detroit over the 10-year period from 2005 to 2015. The largest dozen contract sellers were involved in almost 7500 acquisitions, which was less than 10% of the over 80,000 properties in Detroit that had been acquired through tax auctions or REO’s from various governmental foreclosures. In that period contract sellers had gone through eviction procedures for about 1 out of every 3 properties, but evictions with specific properties acquired by all buyers involved eviction procedures at the ratio of 1 out of every 4 properties, which is not a world of difference. Over a 10-year period that doesn’t translate into a constant churn, likely because there is tepid demands that these practices have inevitably created in these neighborhoods.

Because there is not a robust market for these properties from stories the Home Savers Campaign is hearing on the doors, it seems that tenants wanting or willing to stay in these properties are able to negotiate a fair amount of forbearance even when missing payments because the sellers realize there isn’t a line waiting to open the door behind them. It also explains stories we have heard from several buyers where they are able to negotiate shorter terms when they are willing to take over the properties.

One reason may be the fact that many of these companies are not forwarding payments made by the buyers to resolve tax payments nor are they disclosing past liens on the properties. Lawsuits like those filed against Harbour Properties and Vision Property Management in Cincinnati to collect back taxes, fines, and penalties for their properties in that jurisdiction reveal a business model of nonpayment that seems to typify this part of the industry. That’s a ticking time bomb for the tenant-buyer for sure, especially given the rigid collection and delinquency procedures of Wayne County, and we have heard cases falling into this bad basket every day in Detroit, but it also seems to be leading to shorter term contracts and more negotiating opportunities if the campaign could engage the parties successfully.

We’re finding the handles, but we are not convinced yet that people want to grab them, given that many still see themselves as renters, rather than potential owners. That’s the puzzle we still need to find, even as we are understanding more and more about the market and these companies exploiting it.

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Vision Property Management: Exploiting Lower Income Home Buyers as a Business Model

New Orleans   In writing about Vision Property Management, the predatory and unscrupulous rent-to-own real estate company, reporters for The New York Times obviously struggled for a way to describe where to place Vision and other bottom-fishing realty companies that exploit lower income and working families’ hopes of home ownership. They ended up just talking a walk and euphemistically referring to these operations as operating in “this corner of the housing market.” If it’s a corner, it’s a very dark and nasty place.

Vision, based in Columbia, South Carolina, owns more than 6000 houses, many of them purchased at rock bottom prices from the foreclosure inventory dumped on the market “as is” by the quasi-governmental housing finance giants Fannie Mae and Freddie Mac. The Times described their modus operandi succinctly:

Vision markets its homes on a website, with most of the transactions taking place either over the phone or by email. Sometimes the photos of the properties are several years old and do not reflect what they actually look like.

You’re wondering how that would not run afoul of truth-in-advertising laws aren’t you? I thought the same thing, but to the degree that state and federal laws do not seem adequate to regulate operations like Vision, this dark corner of the real estate market, whether called contract-for-deed, rent-to-own, lease purchase, or whatever, is based on transactions where the “looks” of the place may be the least of the problem. No inspections, no appraisals, and agreements based on condition “as is,” make it easy to hide problems as severe as lead poisoning and roof leaks in Baltimore, lack of water, heat and good sewage in Arkansas, and unaddressed code violations and thousands of dollars in fines in Cincinnati, all of which reporters were able to document from disgruntled and exploited wannabe home buyers. Even a recent photo on the Vision website would not have revealed the horrors that awaited these families – and thousands of others.

As we’ve noted over recent months, contract for deed land purchases, like a bad weed, have grown in the credit desert since the Great Recession for lower income families still hoping to own their own homes. In the wake of these horrible stories of exploitation, some states are finally looking to tighten up regulations. A bill in Illinois is progressing that would give buyers some additional rights, especially once they have paid more than 10% of principal and interest. A bill proposed in Maryland had less luck, as the real estate industry muscled up to prevent reform even in the wake of lead paint poisoning in some of the homes, arguing that over worked and undermanned city inspection teams needed to do better. The Uniform Law Commission is evaluating whether to draft model legislation on contract for deed purchasers in the wake of all of this shame and scandal, but that will also take years.

Exploited home buyers shouldn’t have to crouch in this dark corner of the market waiting for relief. Signing light on the problems is valuable, but this is a situation that cries for action, since the words aren’t working.

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