Fifteen days after the tornado blew the roof off the house he was buying here, George Allman got the “eviction” notice.
You’ve got 10 days to come up with the $3,868 you still owe, the seller told Allman, or you’re out.
Allman refused to budge from his Empire Street abode, bought some candles and dug in.
Like many tornado victims, Allman was buying his house through what legal experts say is a risky transaction called “contract for deed.” It can be a great deal for sellers.
For buyers — most of whom can’t qualify for a conventional mortgage — not so much.
Under the process, which is virtually unregulated in Missouri, buyers make a down payment and monthly installments. The seller keeps the deed and — as in Allman’s case and others — any insurance proceeds if the house is damaged or destroyed.
No banks, no inspections, no mortgage companies. And typically, no documents recorded with the county.
Such informal arrangements are rare in urban areas, but the May 22 tornado exposed weaknesses in a practice that had become all too common in smaller cities such as Joplin. And it left many tornado victims here with far less than they had banked on.
One couple in their 60s used their FEMA check to repair a tornado-damaged home they were buying on contract for deed, said Jeannie Brandstetter, a spokesperson for the Missouri Trial Lawyers Association, whose members came here to help after the storm.
But the seller — who would continue to hold the deed until all the payments were made — had signed the house over to his daughter, who asked the couple to sign a new agreement. The couple thought that agreement would allow them to continue building equity in the house and eventually own it. But Brandstetter said the document actually assigned all rights to the house to the seller’s daughter.
Volunteers and legal aid lawyers said they found case after case like that in the tornado’s aftermath.
“I was shocked,” said Dave Knieriem, a St. Louis lawyer who volunteered in Joplin as part of the trial lawyers program. “These agreements are inevitably written by the seller, who gets most of the rights and remedies. If the buyer breaches the agreement, they forfeit all their property and equity.”
Over the years in Joplin, sellers would often declare that buyers had defaulted, then get a new down payment and re-start the process with new, often unsophisticated buyers. “Some of these places have turned over five and six times,” said Steve Cope, Joplin’s chief building inspector.
The trial lawyers intend to propose legislation in Missouri that would better regulate the practice.
In Allman’s case, he said the seller forgave his May house payment in the aftermath of the tornado, then tried to “evict” him for failing to pay it. The landlord, Jason Alford, could not be reached for comment and his attorney declined to respond to phone calls, letters and an email.
Allman’s friends eventually helped him pay the remaining balance on the house. Allman agreed to release any claim on insurance proceeds that the seller “may have or may receive at a future date” and was then given a deed. He’s fixing the house himself, relying in part on material contributed from his neighbors’ damaged homes.
“I learned my lesson on that contract for deed deal,” Allman said.
Not everybody was that lucky.
Tawana Baker said she had one year left on her contract for deed when the tornado damaged her roof. Baker can’t afford to fix it and didn’t have insurance on the house because she couldn’t buy it without a deed.
Baker said she does not know if the seller had insurance but either way, she said he refuses to fix it.
The seller also recently acknowledged to Baker that the property isn’t even in his name. The house is actually in the name of the seller’s deceased wife, according to Jasper County land records.
As a result, he may not have a legal right to sell it in the first place, Knieriem said.
“Before the storm we had a decent relationship,” Baker said of the seller. “He’s my adopted father, Danny Walden.” Walden could not be reached for comment.
In the meantime, Baker said, she is refusing to make more monthly payments until the roof is repaired.
Mike and Gina Boykin, desperate for a place to live, bought on a contract for deed
The Boykins lost their rental home — and Gina and her daughter nearly lost their lives — to the tornado.
“We felt like refugees after the storm,” Mike Boykin said. “There were thousands of people looking for houses and we looked at some horrible places.”
The Boykins, who would have had trouble qualifying for a mortgage, paid $4,000 down and are making monthly payments on a contract for deed.
There were some problems with the house and they were leery of the process, but they got advice from a lawyer. Their agreement is recorded with the county.
Knieriem, the St. Louis lawyer, says that’s one good way to protect yourself.
He says contracts for deed should also include an arbitration provision.
“What concerns me about these deals is that inevitably people see an opportunity to make money on this,” Knieriem said, “and if that overcomes basic human decency, then there aren’t enough lawyers to handle all the problems.”