Nightmare on the horizon - Point of Sale Ordinances

It is no secret that the Great Lakes region of our beautiful country is undergoing a rather sobering experience - loss of some major employers, outsourcing of services, declining populations and increasing taxes.  Doesn't sound much like a recipe for Success Pie, does it?

Well, it isn't.  And there are some who think that they need to place one more pothole in the road to recovery.  They are our esteemed political leaders who are sharing their knee-jerk reaction to a truly rotten situation.

The history of it all?  Our area had a local investment group that solicited investments while promising a 10% - 12% return - correction:  guaranteeing a return.  This return was guaranteed by mortgages.  Actually - land contracts.  The company in question was flourishing for quite a few years and the investors were getting the expected returns, as promised.  Then it happened.  The whole thing went belly up.  Investors stopped getting their money, investigators from the SEC started poking through the books, and auditors from the state of Ohio started going through the files on all these properties - there were thousands of them.  And it was not looking good.

Long story short...after the investigations were complete, the indictments were handed down, the hearings and trials were held, deals were made.  The doors of the investment partnership were locked and the entire stock of homes that were secured with investors monies were placed in receivership.  Now it's time to wait.....wait....wait.....  Then came the auctions to clear all these properties and divide the proceeds among the investors that had gotten burned.  And many people who thought they had valid land contracts were displaced from their homes - sad to say.

OK - just another bad deal, right?  Nope.  It started another kind of storm in our area.  A storm that has been brewing for many years, but has picked up strength and volatility in the past 2 years.  The name of that storm?  Oh....let's call it................................Point of Sale.  Sounds innocent enough, eh?  Well, not really.  Let me explain the way I see it.

The housing market in Toledo, Ohio has been challenged for quite a while now.  There are many people that, due to loss of jobs/level of income, have been foreclosed on and are needing to rent.  Well, rather than rent they would prefer to own.  Simple enough.  But with their credit scores this won't happen - enter........the Land Contract.

Now the Land Contract has been a viable tool in real property transactions ever since I was a kid - and probably before then.  My grandfather used to enter into them all the time.  It was not a new concept to me.  The people that wanted to buy a home but couldn't do it in a conventional manner would opt for this type of 'mortgage' in order to establish their credit and then be able to complete a more conventional type of financing.  Sometimes the land contract was for 12 months - sometimes for 60 months.  It was all dependent on a persons circumstances.  Kind of like being a precursor to the "personalized loan" market that we read about so much.

Fast-forward to today's problem.....The City of Toledo is pushing (or being pushed by some of the local community groups) to institute a Point of Sale ordinance which would force investors that are offering homes on land contract to undergo inspections by a city approved inspector (for a hefty fee, of course), receive a certificate of occupancy (again, for a hefty fee), and record all land contracts - prior to the purchaser taking possession of the home.  The powers that be are calling this a minimum habitability standard in order to avoid the ire they are spurning in the local investors.  But, if you read the local Municipal Code there are already ordinances in place that assure these standards.  And these ordinances are not being enforced now - so why do the powers that be think that by establishing yet another layer of rules that this will get any better?  If you'd like to read the entire proposed ordinance, you can find it here.  My biggest concern is that this is yet another situation where government wants to ride in on the white horse and save the masses.  Those masses that, through their own fault or not, were anxious to own that home, anxious to sign on the dotted line, and anxious to 'make it' in the world of homeownership.

Does your area have this type of ordinance in place, and if so has it worked well for your area?  I would love to be able to take some input from other areas to the next hearing on this (Aug. 23) so that we can put this thing to rest - one way or another.

Thanks for taking the time to share - it may help a whole lot!