May 20th 2024.
In a recent turn of events, it has come to light that a real estate broker in Minnesota has been targeting the Muslim community with contract-for-deed deals. Keith Ellison, the state's Attorney General, has taken legal action against the broker, Chadwick Banken, and his six limited liability corporations for violating both state and federal laws. Among these are laws against religious discrimination, as Banken is accused of using these types of transactions to sell homes at inflated prices and imposing unfavorable terms on Muslim buyers. This practice has been deemed "predatory and deceptive" by authorities, and Ellison asserts that Banken is not the only one engaging in such behavior.
However, the lawsuit is not just about holding Banken accountable for his actions, but also about sending a message to others who may be involved in similar practices. Ellison stated, "He's not the only one, but he's one of the worst that I've seen. When people can't make payments, they not only lose their homes but also their hard-earned money. This is a devastating blow to any family." The investigation into these deals began in 2022 after a surge in contract-for-deed sales, particularly within the Somali community. Many buyers were enticed by the opportunity to purchase a home without paying or profiting from interest, due to their religious beliefs. However, it has been revealed that these buyers were often misled and signed contracts without fully understanding the terms, ultimately finding themselves unable to make payments.
The lawsuit alleges that Banken would intentionally set inflated home prices, require higher-than-normal down payments, and impose six-figure balloon payments at the end of short contracts, all in an effort to push buyers into default. This would then allow him to gain ownership of the property. One victim, Abdinoor Igal, purchased a home from Banken in 2022 and had to leave it in 2023 after making nearly $170,000 in payments. He was forced to sleep in his truck for months, while his wife and children had to return to Kenya. Upon hearing about the legal action being taken, Igal expressed his excitement, stating, "I can't even put into words how I'm feeling right now."
Banken has reportedly sold hundreds of homes in these types of deals over the past six years. One of his LLCs, Slow Flip LLC, is specifically named in the suit for engaging in these deceptive practices. In an email from Banken's business to a real estate agent, it is stated that the ideal buyers for these deals are those with "low credit scores" or a "recent bankruptcy/foreclosure." He is also accused of requiring buyers to enter into contracts under business names, creating a false impression in court that it was commercial tenants being evicted. Additionally, these contracts failed to disclose the true cost of the homes or the balloon payments, which is a violation of the Truth in Lending Act.
The Attorney General's office is urging anyone who feels they may be involved in a contract-for-deed deal to reach out to them, as there may be opportunities for restitution in the future. Unfortunately, Minnesota has become a hot spot for these types of deals, with over 47,000 land contracts recorded between 2005 and 2022, making it the fourth highest in the country. While the majority of these contracts were used for home purchases, some were for agricultural or commercial properties.
The investigation into Banken's actions has prompted lawmakers from both parties to introduce the Preserving Pathways to Homeownership Act of 2024. This act would require states to implement laws that provide additional protections for home buyers, with the goal of minimizing exploitative behavior from sellers. It is clear that measures need to be taken to prevent others from falling victim to these predatory practices.
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