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Continued: New Minnesota law puts light on contract for deed

  • Article by: JEFFREY MEITRODT , Star Tribune
  • Last update: July 5, 2013 - 9:43 AM

Earlier this week, he showed off the company’s latest remodel in Brooklyn Park. The foreclosed home, which Real Assets purchased for about $100,000 from a bank, received a $70,000 makeover. The kitchen features new hardwood floors and gleaming stainless steel appliances. The furnace and hot water heater have been replaced with new equipment and the smell of freshly laid carpeting lingered.

“We took a total mess and turned it into a home that the new homeowner will be proud of,” Kohout said.

Kohout said his company will earn a profit of about 10 percent on the sale. By contrast, other contract-for-deed sellers have marked up their homes by 50 to 100 percent, according to a review of local sales and assessment records.

State legislators agree that contract for deed is a good way to sell real estate in certain situations. They said the law is aimed at helping buyers avoid budget-busting deals and hidden defects.

“There’s a real problem out there with landlords scamming people,” said Rep. Joe Mullery, DFL-Minneapolis. “They’re putting people into rentals and then turning those agreements into contract-for-deed sales without even telling them about it. … I think some of those landlords will keep doing it because they think they won’t get caught.”

Legislators acknowledge that enforcing the new law will be difficult. No state agency has been charged with overseeing the market or rooting out abuses. Instead, the new law simply gives buyers the legal right to sue sellers for failing to provide proper notice about potential pitfalls. Buyers can collect actual damages or $2,500, whichever is higher. Sellers can be forced to pay triple damages if buyers can show they “knowingly” failed to follow the law.

“I think it’s a good first step, but in terms of the actual protections it offers, I think it may not be broad enough,” said Connie Sandberg, who oversees St. Paul’s housing sale inspections. “Enforcement is problematic.”

 

Jeffrey Meitrodt • 612-673-4132

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  • “I absolutely think people need to be protected,” said Jamison Kohout, vice president of Real Assets LLC, a St. Cloud company that has sold more than 100 residential properties via contract for deed since 2009.

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