By John Minnis, Legal News
In the Motor City, out-of-state real estate companies are buying up thousands of homes in foreclosure from lenders for as little as $1. The problem is that many of these investors have little or no intention of improving the properties before flipping them — via land contract.
This bothers Robert Day of the Legal Aid and Defender Association, the largest poverty law firm in the state.
“It’s really upsetting,” he said. “I represent homeowners who are trying to prevent foreclosures. To see lenders then turn around and sell their homes for $1, it’s upsetting.”
Thousands of these Detroit and Wayne County homes are being bought — and sold on land contract — sight-unseen. “I doubt they’ve ever seen these properties,” Day said.
Not only is no money being put into the homes — basic “shells,” in many cases, stripped of copper, fixtures, metal and glass — but many are delinquent in taxes, unbeknownst to the purchaser. Consequently, even while keeping current on the land contract and taxes and utilities, purchasers find their homes being taken from them due to unpaid taxes dating prior to the land contract purchase — taxes the seller was to have paid.
“They’ve set it up to fail,” Day said of the land contracts. Just with the down payment, the out-of-state buyers have made a profit. The rest is gravy.
“It’s big and getting bigger,” Day said from his downtown Detroit office on Abbott. “I’ve been doing this in the city since 2000, 11 years. When I get five, six, seven or eight of a given case, I get a strong feeling there are hundreds out there. We see these problems early on.”
A case in point is the one Day filed June 17 in Wayne County Circuit Court. In the complaint, two out-of-state companies — Paramount Land Holdings Inc. out of Gilbert, S.C., and Bryce Peters Financial Corp., out of Nevada, are accused of entering into an errant land contract with an unwitting buyer, preventing the buyer from getting home repair assistance; failing to pay back property taxes on the property; and, consequently, causing her to lose the home, the down payment and land contract payments she had paid for nearly two years.
In Dana Hill v Paramount Land Holdings Inc. and Bryce Peters Financial Corp., the plaintiff alleges she entered into a land contract with Paramount in February 2009 for the property at 14411 St. Marys St. near Greenfield and Grand River in northwest Detroit.
Hill agreed to pay $44,301.06 for the property. After down payment of $750, her monthly payments were $495, which she paid faithfully beginning April 1, 2009.
Unknown to the buyer, however, was that Paramount did not have title to the property. Rather, Bryce Peters Financial Corp. had purchased the property from Deutsch National Trust for $1 in December 2008.
In the land contract agreement, Paramount failed to include a legal description of the property. Consequently, after the home furnace went out in December 2010, the plaintiff/purchaser was unable to get financial assistance to replace the furnace. Resulting plumbing damage made the house uninhabitable.
To make matters worse, the hapless land contract purchaser received a notice from the Wayne County treasurer that $7,574.82 in back taxes prior to 2008 were owed on the property and that foreclosure proceedings were proceding.
Legal Aid and Defender attorney Day, representing the would-be homeowner, alleges that Paramount had no legal authority to enter into a land contract. Further, the bogus land contract it entered into with the plaintiff prevented her from getting the furnace repaired and caused the home to become uninhabitable, forcing her to pay to live elsewhere. He argues that it was no accident that the legal property description was omitted from the purported land contract.
“Everybody in any kind of real estate business knows that a legal property description is required,” he said.
Day further alleges that since Paramount agreed in the land contract, bogus or not, to pay all past taxes, the company is in breach of contract for not paying said taxes.
Even though the true owner of the property, Bryce Peters Financial Corp., does not appear to have been part of the land contract arrangement, Day is not letting the company off the hook and has named it as a defendant in the suit.
“They have some kind of working relationship with Paramount,” he said, which he believes will be borne out in discovery.
According to Day’s complaint, a search of Wayne County Register of Deeds records reveals that both Paramount and Bryce Peters Financial have title to more than 2,000 properties — each.
While it is not illegal to acquire properties in foreclosure — even for as low as $1 — Day questions the legal, moral and public policy aspects of what is going on today.
“It does raise questions,” he said. “The bank won’t work with you on mortgage reduction but sells the home for $1. It raises questions to me.”
Nor do these out-of-state “investors” seek to improve the properties. In fact, Paramount was fined last year by a Cleveland housing judge more than $1 million for its persistent failure to fix derelict property conditions.
Paramount did not return a call to an answering service at its listed phone number in Gilbert, S.C.
Bryce Financial Corp. was formed in Nevada in January 2000. Reliable Corporate Service Co., 2790 Wrondel Way, #500, Reno, Nev., is the registered agent. Bryce Peters III is listed as the company’s president, treasurer and director. No phone number listing could be found for Peters or the registered agent.
Day seeks to warn land contract buyers to beware. He even invites purchasers to bring in their land contracts to the Legal Aid and Defender Association or the United Community Housing Coalition for review before signing.
“We’re not going to solve Michigan’s problems this way,” Day laments on what he sees going on. “It’s a merry-go-round. Who’s going to rip off the people next in the city of Detroit?”
The Legal Aid and Defender Association is located at 613 Abbott, Detroit, MI 48226, (313) 967-5555. The United Community Housing Coalition is located at 220 Bagley, Suite 224, Detroit, MI 48226, (313) 963-3310.
Published: Thu, Jul 14, 2011