Some Homebuyers Turn To 'Rent-To-Own' As A Way To Enter Housing Market
MARY LOUISE KELLY, HOST:
There's rent-to-own furniture, where you make a monthly payment towards a new couch or dining set. There are also rent-to-own houses. This is an option for homebuyers who don't qualify for a mortgage or can't afford one. Consumer advocates say these deals come with lots of risks, as Ben Paviour of member station WCVE in Richmond, Va., reports.
BEN PAVIOUR, BYLINE: Dawn Devine was sick of sleeping on couches. She had a little savings and wanted to retire in her own house. So a couple years ago, she and her dog, Chimney, moved into a little place in Petersburg, Va.
(SOUNDBITE OF DOG BARKING)
DAWN DEVINE: No barking. Hey - no.
PAVIOUR: When she moved in, she found lots of surprises - holes in the walls, gaps in the floorboards and leaks in the roof.
DEVINE: That part of the ceiling, if you push on it, it's like a waterbed.
PAVIOUR: And then there was the neighborhood.
DEVINE: You'll hear dogs start going off. And then, all of a sudden, you hear pop, pop, pop, pop, pop, pop, pop, pop, pop. It's a lot too. It's not just, like, a gunshot or two.
PAVIOUR: Devine thought a rent-to-own-home would be a good deal. It seemed simple - make a payment every month, and after 10 years, she'd own a home. But she didn't realize she was responsible for repairs. And unlike a traditional mortgage, if she misses just one payment, she can be evicted and lose all of her investment. Sarah Mancini of the National Consumer Law Center has seen this happen again and again.
SARAH MANCINI: You've been investing all of this time and money and hours of your labor to make this home habitable. And there's nothing that protects you from losing it in the blink of an eye.
PAVIOUR: Rent-to-own homes are officially known as land contracts or contracts for deed. And they've been around since at least the 1940s. It's hard to know how widespread they are now because most states don't track them. But legal aid attorneys say rent-to-own deals became more common after the 2008 subprime mortgage crisis, when millions of Americans lost their homes.
The most rundown of these homes were sold in bulk to investors. They were clustered in struggling neighborhoods in places like Toledo, Ohio, and Birmingham, Ala. Rather than fix the places, many investors offered them up as rent-to-own. That includes Zack Broaddus, who sold Devine her home. Here he is talking to the "Investor Army" podcast in 2017 about a contract he'd signed in Alabama.
(SOUNDBITE OF ARCHIVED RECORDING)
ZACK BROADDUS: That's good for me because I don't have to worry about it. I don't have to worry about fixing up the house. I don't have to worry about what's going in - on in Alabama. All I have to worry about is if that check shows up in my bank account each month.
PAVIOUR: Broaddus didn't respond to requests for comment. His business partner, Zach Weatherspoon, said they'd given Devine a shot at owning a home when no one else would. Consumer advocates like Mancini say it's rare these deals have a happy ending. They say these contracts have contributed to evictions in places like Detroit, where they're especially common.
That's all the more reason to do your homework, says Jeffery Watson, an attorney with the National Real Estate Investors Association. He says these contracts can work out well if sellers follow the law and buyers do their research.
JEFFERY WATSON: This is an important purchase. You're not buying a pack of bubble gum. You're not even buying a car. You're buying something that you and maybe your family's going to be residing in for years.
PAVIOUR: In the last couple years, these deals have come under scrutiny from the Consumer Financial Protection Bureau and drawn lawsuits from the attorney generals of Pennsylvania and Wisconsin. Several states are also considering new regulations, including where Dawn Devine lives in Virginia. Devine's still trying to settle into her house. It needs a lot of work, and her disabilities make repairs hard.
DEVINE: It's creating a lot of stress living here and a lot of pain, unnecessary pain.
PAVIOUR: Still, she's determined to fix the place up, beat the odds and finally own a home of her own. For NPR News, I'm Ben Paviour in Richmond, Va.
(SOUNDBITE OF ANDREW BIRD'S "TRUTH LIES LOW") Transcript provided by NPR, Copyright NPR.