SOUTH CHICAGO, Ill. - Land contracts, which according to the Cook County Recorder of Deeds are becoming more popular, may help some people who can't qualify for a traditional mortgage, but for others could turn out to be risky real estate.
"I feel like I've been cheated, hoodwinked, lied to and deceived," said Karen Edwards.
Edwards has poor credit, so she felt lucky to find someone who would give her a contract for a home.
In his television ads, Brian Urbanowski says, "I'll help you get into the property of your choice with just a small deposit."
Edwards and her family got into their South Chicago home thanks to a deal with Illinois Land Investments, which Urbanowski owns.
"I would have to give them a down payment of $5,000 and I would be able to say what I could pay for a mortgage, and they said mortgage," she said.
But what Edwards actually signed is a land contract.
"I never heard of a land contract," she said.
Edwards thought at the end of her five-year contract she'd pay off her $45,000 home, but she won't. That's because the interest on the loan never decreases like it does in a traditional mortgage. So at the end of the five years, she will owe a lump sum of $18,000 or lose the house.
"It's one of the worst contracts I've ever seen," said Jack Macnamara, housing expert.
Macnamara said the consequences of Edwards not having that $18,000 are serious.
"She could be evicted," he said. "They prefer to sell on contract because then they don't have to pay for repairs, they don't have to make sure the property is habitable."
The contract also requires Edwards to pay taxes and back taxes.
Land contracts have made a resurgence in Chicago. Karen Yarbrough, Chicago's Recorder of Deeds, estimates there are over 3,000 recently purchased. Many of those deals, the county said, resulted in complaints from the buyers.
"We have no idea. There are probably any number of contracts out there that are horrible documents, and people just don't know what they don't know," Yarbrough said.
Urbanowski is being investigated by the state. The Illinois Attorney General's Office told the I-Team, "We have received complaints about Brian Urbanowski's real estate practices. We are actively investigating his conduct."
Urbanowski wouldn't talk to the I-Team about the investigation or Edwards' contract, but his attorney sent a statement, saying:
ILI's (Illinois Land Investments) installment contract has been used for many years, reviewed by many lawyers, and signed by many buyers who found the terms to be fair and competitive with other seller-financing options.
When a prospective buyer cannot qualify for a conventional mortgage loan or other financing, ILI may offer an installment land contract, that allows buyers to live in the home while they improve it.
Since learning that she chose to pursue media attention, ILI has repeatedly attempted to contact Ms. Edwards to address any concerns, but she has not returned any of our calls.
"No one wants to roll the dice on these homes," Yarbrough said.
A new state late went into effect on Jan. 1, giving more protection to buyers. It requires land contracts to contain an amortization schedule so buyers can see how long it will take to pay off their loan; to define who is responsible for repairs, taxes and insurance; to disclose code violations and liens; to prohibit certain predatory loan terms; and to be documented with the Recorder of Deeds to ensure clear title to the home.
"There will be a living breathing document in our office that anyone can look at and see what were the terms of that agreement," Yarbrough explained.
Real estate experts say if you're interested in a land contract instead of a traditional mortgage, you should have it reviewed thoroughly by a real estate attorney. You can also check with your Recorder of Deeds office.
The Illinois Attorney General's Office asks that anyone wanting to file a complaint against any land contractor should visit their website, or call their fraud hotline.
TO CONTACT THE COOK COUNTY RECORDER OF DEEDS
Visit www.cookrecorder.com or call 312-603-5050
FULL STATEMENT AND INFORMATION FROM THE ILLINOIS ATTORNEY GENERAL'S OFFICE
"We have received complaints about Brian Urbanowski's real estate practices. We are actively investigating his conduct.
"We encourage people to be cautious when buying a home through an installment contract. To help consumers, the Attorney General drafted and urged the legislature to pass a new law to provide greater protections for consumers. The new law requires sellers to provide buyers with a document called 'Important Notice to Buyers.' This document was drafted by our office. The new law also requires sellers to give buyers a copy of the sales contract in advance of the closing. The 'Important Notice to Buyers' is available on our website at: http://www.illinoisattorneygeneral.gov/consumers/Important_%20Notice_to_Buyers_Installment_SalesContract%20Act.pdf."
Consumers who want to file a complaint should visit the Attorney General's website or call our Consumer Fraud Hotline: 1-800-386-5438.
FULL STATEMENT FROM ILLINOIS LAND INVESTMENT, INC.
Seller financing provided by Illinois Land Investment has helped hundreds of buyers with bad or no credit realize their dream of home ownership. ILI's buyers have renovated hundreds of homes in low-income areas, helping to revitalize troubled neighborhoods and maintain the tax base.
When a prospective buyer cannot qualify for a conventional mortgage loan or other financing, ILI may offer an installment land contract, a type of contract recognized under Illinois law that allows buyers to live in the home while they improve it and build equity over the term of the contract. ILI's installment contract has been used for many years, reviewed by many lawyers, and signed by many buyers who found the terms to be fair and competitive with other seller-financing options.
ILI applauds the state legislature for recent changes in the law applicable to installment land contracts. ILI has always worked with its buyers to enable their success, and it will continue to do so in compliance with the new law.
Regarding Ms. Edwards, since learning that she chose to pursue media attention, ILI representatives have repeatedly attempted to contact Ms. Edwards to address any concerns, but she has not returned any of our calls.
See the New Bill: The Installment Sales Contract Act.