James R. Williams thought he had found a great deal on a home. The monthly fee on the three-story fixer-upper in Cincinnati was cheaper than the rent on his last home. And the payments would go toward the $40,000 he needed to own the place.
But Mr. Williams will almost certainly never own the house. Instead, he was left with a grandson with lead poisoning from peeling paint in the 98-year-old home and he says around $10,000 in critical repairs to the plumbing system.
And as if that wasn't enough, in the five years that Mr. Williams has been in the house, the ownership has changed three times, making it difficult for him to deal with an overdue water bill of several thousand dollars, keep current with the property taxes and figure out where to send the monthly checks under the 30-year contract he signed.
"It's confusing," said Mr. Williams, 61, a manufacturing parts assembler, who lives in the home with his wife, Mary Ann. "It's a pain in the butt, and it's aggravating as hell.''
Across the country, people like Mr. Williams have found themselves in similar predicaments. Unable to obtain a traditional mortgage, they have signed a high-interest, seller-financed deal known as a contract for deed that works like an installment plan for housing. For many, these deals can quickly turn into money traps.
The deals also have added to neighborhood blight when the houses fall into further disrepair.
Contracts for deeds are difficult to track because the transactions are not recorded in many states. It can become difficult to determine who actually owns the property — and who is responsible for its upkeep and paying property taxes — often because the original contract is sold to several investors over time.
The financing has become such a problem in poor communities that it has prompted a range of responses. The Federal Reserve Bank of Atlanta recently issued a report calling for better recording of contracts for deed. The Uniform Law Commission, an organization that proposes model laws for states, is weighing whether there should be a uniform law governing the rights and responsibilities of buyers and sellers in contracts for deed. A commission committee looking into the matter conducted a survey that "found problems or abuses with contract for deed in 80 percent of the states."
Even in Ohio, where contracts for deeds are supposed to be recorded, Mr. Williams's case slipped between the cracks.
In April, the City of Cincinnati sued Harbour Portfolio Advisors, a Dallas-based investment firm that originally sold the home to Mr. Williams through a contract for deed. The city sought to hold Harbour accountable for shirking its responsibility to maintain dozens of homes in the city and failing to pay more than $360,000 in unpaid fines and fees.
But Harbour, one of the nation's largest contract for deed firms, has pushed back, contending that it had sold many of those homes — often with existing long-term installment contracts in place — to other investment firms.
Mr. Williams's contract was one of them.
For Jessica Powell, chief counsel in the Cincinnati Law Department, figuring out where the buck stops is frustrating. Her office plans to amend its lawsuit to add in new parties.
"It is mind boggling; nobody is recording them," Ms. Powell said.
Led by Charles A. Vose III, Harbour once owned more than 7,000 homes in over a dozen states, but more recently it has been selling off the contracts for deeds it signed with borrowers over the last six years.
Harbour's business practices were featured prominently in a front-page article in The New York Times last year. Subsequently, the federal Consumer Financial Protection Bureau began an investigation into the firm's use of contracts for deeds to sell formerly foreclosed homes "as is."
Provisions in a contract for deed are enforceable as long as they do not conflict with state law. The home dweller has more limited protections than a person buying a house with a mortgage, and residents are typically responsible for repairs and paying property taxes. But since legal title does not transfer until the final payment is made, city officials often look to hold the actual owner of a home liable.
Mr. Vose has complained that the coverage in The Times focused on a small group of Harbour's customers, writing in an email that he is "hardly the rich, arrogant Wall Street guy that you paint me as." He said he created Harbour in response to the housing crisis "to step in and help clean up the mess and help families get a new start."
Valerie Hletko, a lawyer with Buckley Sandler who represents Harbour, disputed Mr. Williams's claims that the Dallas firm failed to pay any outstanding water bills or taxes on the home. She added that there was no confusion about title to the property and that "recording is the contractual responsibility of the buyer," not Harbour's.
Those familiar with Harbour's activities say it now owns fewer than 1,000 homes, having sold most of its homes and contracts to a wide array of investors, including hedge funds, small investment firms, mom-and-pop investors and even one Bitcoin entrepreneur from Canada, Haseeb Awan, who referred to his small investment in contracts for deeds as "gambling money."
Harbour has used Incenter, a service provider to mortgage lenders and an affiliate of the Blackstone Group, to assist with the sales.
Cincinnati is not the only city struggling to follow the daisy chain of property title ownership. The firm bought homes from the government mortgage finance firm Fannie Mae in other cities, too.
Robert A. Cutler, who runs Hamilton Green Crest, a small investment fund in Westport, Conn., says he now regrets buying a contract for deed from Harbour.
In May 2016, Mr. Cutler bought a contract in Atlanta for a home Harbour sold on an installment plan for $41,000. Mr. Cutler and his firm are included in a lawsuit filed earlier this year by the Atlanta Legal Aid Society, contending that Harbour had targeted African-American communities to sell contracts for deeds on homes at inflated prices. (Ms. Hletko said there was "no basis for that deplorable allegation" in the lawsuit.)
"We thought we had done enough due diligence on this, but obviously we were wrong," said Mr. Cutler, a corporate lawyer who added he had little prior experience with contracts for deeds. "We had no idea they were pushing properties on people with oppressive terms."
Legal Aid lawyers say that the woman living in the home, Anita Jordan, 39, was confused as to whom to make payments to when she received a letter last September from Mr. Cutler's firm saying it had officially acquired the contract she signed with Harbour in August 2012. Mr. Cutler, who paid Harbour $16,000 for the contract, said he now believed he was misled by Harbour and an independent broker peddling the contract.
Ms. Hletko said that buyers of Harbour contracts were "sophisticated real estate investors who are fully informed about the properties and transactions."
A representative for Incenter declined to comment.
Nicholas Press of Clark Partners in San Diego, a small residential investment firm that is the current owner of Mr. Williams's contract in Cincinnati, said he was looking to reverse the deal.
Mr. Press, who bought a half-dozen contracts in March, said he faulted Park Street Group, a firm in Michigan, which sold him the contracts, for not being upfront with the looming problems facing Harbour in Cincinnati and elsewhere.
"I want my money back," Mr. Press said. "I think Harbour is doing damage to low-income borrowers."
Mr. Press said he made numerous requests to Park Street to complete the necessary paperwork to record the deed of sale and transfer of the contract.
David Prentice, who co-founded Park Street and also operates under the name DMP Holdings, said he was merely serving as middleman between Harbour and buyers — taking temporary title to contracts and homes before reselling them. He said he was no longer selling Harbour contracts or homes.
But for Mr. Williams, the confusion led to him owing taxes to Cincinnati.
Mr. Williams, represented by the Legal Aid Society of Southwest Ohio, said he has had enough. He said he cannot get a traditional mortgage for the house because of its run-down condition. For him there are two options.
"Either buy me out," he said, "or give me the money to fix it up."