Judged by Their Deeds: Outcomes for Properties Acquired by Contract Sellers Following the Foreclosure Crisis in Detroit

Abstract

Prior research has documented the reemergence of predatory land contracts in majority-Black neighborhoods in the wake of the foreclosure crisis. Though land contracts facilitate property transfers involving lower-value properties and credit-constrained households, they are less regulated and often include risky terms. This paper investigates outcomes associated with properties sold using land contracts signed between 2008 and 2015 in Detroit, leveraging real estate transaction, tax foreclosure, and eviction and land contract forfeiture records. We also assess outcomes for the broader portfolio of properties purchased by large contract sellers. We find that sales by large contract sellers are generally associated with higher odds of near-term failure. We also find that investors using contract sales withheld property taxes on much of their inventory, consistent with a short-term triage-based business strategy. Conversely, the single large non-profit contract seller in our study had a far higher rate of success compared to all other contract sales. These results provide evidence of negative outcomes for sales initiated by problematic entities and supports arguments for stronger regulation of land contracts and upstream interventions to prevent predatory investors from acquiring discounted homes from public and institutional sources.

Keywords:

• Land contracts
• seller financing
• predatory lending

Acknowledgments

We thank the editor and the three anonymous reviewers for their constructive feedback, and we thank Sarah Bolling Mancini for providing data and offering comments on an earlier version of this manuscript. All errors remain ours.

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Notes

1 We received separate records indicating whether landlord–tenant actions resulted in a writ of possession, i.e., whether they resulted in a court-ordered eviction, but we determined these data were incomplete. Cases known to have ended in writs of possession were missing from these records. Further, landlords must pay filing fees to request eviction orders from the court and cover the cost of the court officer carrying out the eviction, so they have an incentive to remove tenants without formally making this request subsequent to issuing an initial demand for possession.

2 Landlord–tenant and land contract forfeiture cases are disambiguated only through the designation of the latter as a “special part.” Whether records were assigned this special part designation was not indicated in records transmitted from the courts, and the presence of land contract forfeiture in a case was only ascertained by looking up the detailed case history online.

3 Looking beyond 2015, there are zero land contracts recorded by Harbour and 18 recorded by Vision, with 15 of those recorded 2016–2017. Although we do not include these later sales in our analysis of contract sale outcomes, they are included in our analysis of outcomes for all properties purchased by these entities (see Table 4).

Additional information

Notes on contributors

Eric Seymour

Eric Seymour is an assistant professor at the Edward J. Bloustein School of Planning and Policy Development at Rutgers University. His research focuses on post-foreclosure-crisis transformations in U.S. housing markets and their implications for housing security and social inequality. This work includes examinations of investors in single-family homes and their business practices across diverse housing markets.

Joshua Akers

Joshua Akers is the Research Manager at the Mid-America Regional Council in Kansas City, MO where his work focuses on issues of housing, workforce, and climate. He was an Associate Professor of Geography and Urban and Regional Studies at the University of Michigan-Dearborn and faculty fellow at the University of Michigan’s Poverty Solutions. He founded the Urban Praxis Workshop, a research collective based in Detroit. This workshop developed community-centered digital data tools, including Propertypraxis.org and Evictionmachine.org.