Warren tops county in number of land contracts
WARREN — While some are calling on changes to municipal laws to regulate land contracts, others say that is the job of the state.
Warren has the most recorded land contracts in Trumbull County, with 540 recorded between January 2013 and Sept. 5, 2018. Howland is a distant second, with 84 recorded land contracts in the same time period.
For every land contract successfully completed and released in the time period, nearly five more were signed in Warren, an average consistent with the ratio in the other Trumbull County communities.
Trumbull County Recorder Tod Latell, who obtained the data by working with the office’s software provider Document Technology Systems, said the database of recorded land contracts shows about 20 percent of land contracts are successfully completed.
Land contracts are a non-traditional way of selling property through seller financing. The buyer is usually someone without access to a typical bank mortgage, or who is attempting to buy property a bank isn’t interested in backing.
Land contracts often have shorter terms than traditional mortgages and usually require a modest down payment. But the contracts can surprise buyers by including balloon payments, clauses that can cause them to forfeit their right to the property for one missed payment, clauses that require the buyer to make expensive repairs and contracts that don’t mention the state of the home makes it uninhabitable.
Sometimes the properties have back taxes the buyer is unaware of, and the home is foreclosed upon while he or she is living there and making payments.
Groups like Alliance for Congregational Transformation Influencing Our Neighborhoods, a faith-based alliance in Youngstown, are putting pressure on some municipalities to require a lot more from property owners wishing to sell real estate in a non-traditional way. The group wants to see legislation modeled after an ordinance in Cincinnati to become law in Youngstown.
Rose Carter, with ACTION, said she wants to see inspections and title searches done on homes before land contracts are signed.
Matt Martin, executive director of Trumbull Neighborhood Partnership, which manages Trumbull County’s land bank, said he would like to see something similar in Warren to help stabilize neighborhoods.
“These numbers confirm that land contracts in Trumbull County overwhelmingly manifest as predatory tools and not home ownership tools, especially in Warren. Some sellers are making square deals, but most aren’t. Legislation to run the bad guys out is long overdue,” Martin said.
However, Greg Hicks, Warren’s law director, said the state is more suited to address the issue.
“Those things need to be done at the state level. How you transfer and sell property is regulated by the state, not the city. The protections for buyers need to be placed by the state,” Hicks said.
One thing the city could do is change the definition of non-owner occupied housing — which now applies to rentals — to include land contracts. That would require the homes to be inspected, create a registry of them in the city and allow the city to collect permit fees, Hicks said. It is unclear if the seller could require the buyer to make the repairs in that situation, Hicks said.
State law does not afford buyers in land contracts the right to a foreclosure proceeding until they have paid off 20 percent of the contract or lived there for five years.
“Not all land contracts are bad. The problem is unscrupulous landlords that are trying to get around inspections. In order to get around the property being non-owner occupied, they put them on a land contract with nothing or very little down, and in some cases only sell a percentage of the property — 2 to 5 percent ownership. Then they don’t have to get an inspection and the new ‘owner’ never has access to true ownership,” Hicks said.
But when the contracts are done well, because of a decent seller or a buyer that closely reads the contract and ensures he or she is getting a good deal, land contracts can be valuable for people without access to a traditional mortgage, Hicks said.
“If we overregulate them, they will no longer be a vehicle available to those who need them,” Hicks said.
But to stop “rental bypass,” for people who have no intention of really selling the house in a land contract, Hicks said “we could redefine no-owner occupied housing, we could say the buyer has to have a 50 percent interest in the house.”