Seller Financed Home Ownership: A Dream or Nightmare
June 28, 2017
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The media reports, after an investigation revealed some homes offered on a rent-to-own basis had lead paint, and serious safety problems, Fannie Mae ceased all sales of real estate owned (REO) properties to Vision Property Management – and, in fact, all other “rent-to-own” companies. The companies had responsibility even though the renters had agreed by way of their contracts to move into the homes “as is” and fix them up.

(Goldstein & Stevenson, Dealbook, 2017) (Goldstein & Stevenson, 2017)

There is no place like home.  The dream of owning your own home is a cornerstone of the American dream and can be the path to financial stability.  No more landlords, a yard, maybe a garden or place for the kids and pets to play.  In small towns and suburbia throughout the United States, this dream was almost a given; but what about the poor and lower middle class of our nation?  They also dream of a nice place to live, where they are their own landlords, and own their home.


Enter seller-financed deals.  Throughout the country, thousands of foreclosed and distressed homes have been bought by investment companies.  These companies market attractive deals to the poor and lower-middle-class.  Rent-To-Own or Own Your Own Home is the call through marketing to the residents of major cities throughout the United States.  The American dream is offered by companies presenting high-interest financing or rent-to-own deals.  The investors and their companies often put no money towards renovation or fixing serious problems throughout the homes.  In old cities, the houses are purchased cheaply at auction or from sellers who want out of the properties.  But there is a good reason for the reduced price.  Many of these homes are old, some over one hundred years old.  They have been neglected for many years and can contain a host of serious housing defects.  These include HVAC that do not work; gas and heat problems; faulty electricity; doors and windows that do not lock or secure the residents; floors, joists, and porches that are rotten; leaks; mold; rodents; and toxic lead-based paint. Sometimes, even if there are some repairs, they remain mostly cosmetic, in order to give a buyer the appearance of a clean home with a fresh coat of paint.  But, just under the surface lurks a potential nightmare for the buyers and their family.

What about the Housing Codes?  All major cities have laws to protect renters to try to ensure that rental properties are kept in habitable, safe and sanitary conditions.  This is where these companies have excelled in shifting the burden.  Most of the contracts that sell these homes contain paragraphs, clauses, and provisions that because the buyer is renting-to-own, it is the buyer who is responsible for all repairs.  These companies often are in-effect contracting around the Housing Codes.  Persons who buy these home feels they are renting to own, and are not familiar with Codes and laws in their City.  They, therefore, do not use their legal rights to look to the company to fix very real and dangerous conditions in the properties.

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Some courts have held that this practice can be illegal, and void against public policy.  Owners of property have been trying to shift the blame to renters for many years.  Take for instance the case of Javins v. First National Realty Corporation, 428 F.2d 1071, 138 U.S. App. D.C. 369 (1970).  In this Washington, DC case the landlord of a housing complex filed numerous cases for repossession for failure to pay rent against renters of the property.  The renters argued that there were some 1500 Housing Code violations throughout the complex.  The United States Court of Appeals for the District of Colombia held that duties imposed by housing regulation may not be waived or shifted by agreement if regulation specifically place the duty on the landlord. What this means is just because the contact that says it is the buyers responsibility to fix and repair the house, under certain facts this may be illegal. A competent lawyer should be consulted to look into the buy-to-sell agreement, and how the house is actually titled with land records.  This is especially important in cases of serious injury such a child being diagnosed with lead poisoning or injuries from rotten and decaying steps, porches and ceilings.

If you, or someone you know, has been exposed to lead paint contact Ashcraft & Gerel for a free consultation. We Fight For You. (866) 709-0505 or


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Goldstein, M., & Stevenson, A. (2017, May 23). Dealbook. Retrieved from NY Times:

Goldstein, M., & Stevenson, A. (2017, March 13). DealBook. Retrieved from NY Times:

Compare McDaniel v. Baranowski, 419 Md. 560, 19 A.3d 927 (2011), where Maryland’s highest court held a lease was void, and a landlord could not use evictions procedures because of a failure to properly license and register the rental property according to a local law.