Realty Transitions is currently being scrutinized by federal investigative entities.
What was not mentioned in another wonder production from Allie Gross, is the stealin'.
Yes, residents of Detroit lost their homes through tax fraud schemes where someone got a kickback, political campaigns were funded and another foreign investor has conspired in the act of gerrymandering.
If you do not live there, you cannot vote there.
Then, there is the situation of the Court, because the Wayne County Land Bank was supposed to have incorporated in 2009, but failed to do so, which means it is not a public body corporate, which means it has been stealin' the homes from the people of Wayne County, with absolutely no legal recourse, because who are you going to sue when there exists no one to sue, just like the Detroit Land Bank Authority.
Lawsuits take aim at Wayne County's controversial Action Before Auction program
From a distance, the note tacked on the front door looked like your standard mailer — a political advertisement or a 'totally-amazing-act-now!' credit card deal.
But as Mechelle Burrell's car inched closer to the driveway the significance of the paper sank in.
Burrell's presence was requested in 36th District Court two days later on May 17. She was facing eviction.
On its own this would have been troublesome. Realty Transitions, the stated plaintiff and property owner, wanted Burrell and her two daughters out of their northwest Detroit bungalow — the place they'd called home for the past six years.
The summons, however, was underscored by a remarkable peculiarity: Burrell had never heard of Realty Transitions.
"I didn't even know who these people were," the 36-year-old said on an overcast Monday in August, explaining that up until that spring evening she had been under the impression that her house, 11327 Warwick, was owned by a small scale Canadian real estate investor.
And she was in the process of making it her own. Three years earlier, according to Burrell, she signed a five-year, $31,500 land contract with the investor.
Mechelle Burrell, 36 on the front steps of her Detroit home on Tuesday, August, 20, 2019 holding the legal document that was taped to the front door of the home.
Burrell noticed an envelope taped to her front door and it ended up being a legal document for her to appear in court. She was close to being evicted from a company she never dealt with called Realty Transitions.
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| Mechelle Burrell |
“I was speechless,” she continued. "Am I going to lose my house because I didn’t know what was going on? I’ve put so much money into this house."
Action Before Auction program was supposed to save homes
Burrell’s home is one of thousands in Wayne County lost to tax foreclosure over the last two years. It's one of 381, however, that was slotted into the Wayne County Land Bank's short-lived Action Before Auction initiative.
The program, which began in 2017, was pegged as a response to the negative consequences of the annual Wayne County Tax Auction — a process that has been heavily criticized for its devastating impact on residential neighborhoods in and around Detroit. But instead of rectifying problems with the auction — blight, vacancy, speculation and displacement — the program exacerbated these issues. Following a Free Press investigation into these failings, this year's program was cancelled.
Yet, despite the county's pivot, occupants, like Burrell, whose homes got caught in the crosshairs in 2017 and 2018, are finding themselves in a unique position: pushing back against evictions and attempting to lay claim to homes that they say they should have never been kicked out of, based on the program's own rules.
While people like Burrell fight for their homes, housing advocates are questioning how the county can allow these evictions under the Action Before Auction program when the program is under re-evalution.
More: Wayne County's auction program is supposed to keep people in homes. It's not.
More: Wayne County's controversial Action Before Auction program canceled for 2019
"Wayne County has tacitly admitted the program's failure to meet its stated objectives by apparently discontinuing it this year," said Joe McGuire an attorney at Michigan Legal Services who has represented five individuals who have been displaced by the Wayne County Land Bank's program.
"Which is why," he continued, "it is so outrageous that Wayne County is still allowing investors who have already purchased properties through the program to evict longtime residents."
The number of people in same situation is ultimately difficult to track, however.
McGuire, who is representing Burrell is currently suing the Wayne County Land Bank and Realty Transition, alleging that the evictions are invalid because the two parties are not honoring their contract — which dictates the rules of the program, and how occupants of selected homes are supposed to be given the opportunity to stay.
"Wayne County claimed it started this program to stop residents from being evicted from their homes by investors who bought their properties out from under them after property tax foreclosure. But in many cases, the program has not only not stopped this from happening but it has facilitated it and made it cheaper for investors, even when doing so violates their own rules in the contracts that they wrote," said McGuire.
Under the Action Before Auction program, which began in 2017, developers chosen by the land bank selected tax foreclosed properties around the county that they were interested in procuring. The Wayne County Land Bank then submitted a list of these properties to the Wayne County Board of Commissioners who pulled the properties using Right of Refusal, a provision that lets government entities snag a foreclosed parcel before the public sale.
These were then sold to the developers. If properties were occupied, developers were supposed to check the "eligibility" of the occupant — a list of criteria created by the Wayne County Land Bank — to see whether the occupant could buy back (at a premium) the property.
The county pulled 141 properties for the program during its first year in 2017 and 240 in 2018.
Investors favored over homeowners <=== because investors contribute to political campaigns.
As the Free Press previously reported, internal documents, emails with the Wayne County Land Bank, and interviews with occupants from both years of the program highlighted four trends: few occupants had a real shot at reclaiming their homes; developers, like Realty Transition, were being sold properties for pennies on the dollar and making significant profits; the Wayne County Land Bank was giving developers remarkable flexibility within the program; there was little-understood financial benefit for the county.
The house Burrell lives in was one of 63 properties Realty Transitions purchased from the Wayne County Land Bank in 2018. The organization is owned by Shady Awad, who was the subject of an FBI investigation this past spring revolving around the City of Taylor's use of the Right of Refusal.
Realty Transition has contracts with several municipalities in the region to purchase homes using RoR.
In the second year of the Action Before Auction program, the Wayne County Land Bank slotted homes into two different tracks. Track A was supposed to be "occupied" homes and Track B was "occupied and unoccupied homes." The stipulations and requirements to prove eligibility were more lax under Track B. What complicates this, however, is homes were placed in tracks without checking first on occupancy.
Burrell's home, where she's lived since 2013, was placed in Track B.
Under Track B, an "eligible occupant" can fit under two categories.
First, they could be an "eligible prior owner," which means the person, or family member, owned the property prior to foreclosure; electric utilities were paid on the property for six-plus months before foreclosure; the property doesn’t carry a mortgage over $5,000 — or if it did the developer could charge the occupant what would have been the remainder of the mortgage debt.
Second, they could be an “eligible renter,” which was defined as any person living on the property who paid rent for 6-plus months prior to foreclosure under a lease agreement.
Under both categories, the Wayne County Land Bank stated that there could be no evidence of intentional fraud tied to the property.
While Burrell's occupancy — rental contract and land contract — should have made this an easy process. She never had the opportunity to prove eligibility.
Burrell contends that the May notice — nine months after Realty Transition got the deed — was the first she heard of the company.
“I was not aware that my home had been foreclosed on for delinquent property taxes until I was brought to court by Realty Transition, LLC on May 17, 2019. I was not aware that my home had been sold to Wayne County Land Bank Corporation, or Realty Transition, LLC,” she wrote in an affidavit a May 22 affidavit.
"To my knowledge, no one from the Wayne County Land Bank Corporation or Realty Transition LLC has ever visited my home," she continued.
The Free Press made several attempts to reach representatives from Realty Transitions and the Wayne County Land Bank, but they did not respond.
In a May 29 email to McGuire, however, Melissa Palepu, the land bank's attorney, stated that the land bank "knocked on the door at the beginning of the program" and an individual answered and gave a phone number but no other information.
"The occupant was provided with a flyer with some contact information and told to please reach out. The occupant did not reach out to the Land Bank and from my understanding did not reach out to the participant," Palepu wrote.
“What happened here," she wrote, "is no occupant reached out to either the Land Bank or the Participant by the deadline or at all and therefore the Participant requested the property be certified as containing no Eligible Occupant."
While McGuire is wary of the fact that all the onus around eligibility was placed on the occupant, he is also skeptical of the entire description of what happened.
"The standardized process that this program was supposed to impose on these purchases was thrown away and really each case has been different," said McGuire who believes the willy-nilly nature in which rules within the Action Before Auction program were followed in fact exacerbated the problems it claimed to be fixing.
"Each investor is different," he continued. "The approach to each occupant seems to be different. The requirements imposed on occupants. The way they’ve been contacted," he said. "So, far from correcting the chaos of the auction, it seems to have really replicated it."
The fight to save her home
The night Burrell got the notice, she remembers sitting with her mother and younger sister on their porch — where they'd spent many evenings chatting and catching up. It was hot and Burrell had just had a long day at work attending to patients at a suburban doctor's office where she's a medical assistant. But despite the distractions and exhaustion, the court notice sent a jolt through her system. She was focused and scared.
"Do you have all your paper work?" she remembers her mom asking. "You have to have your paper work."
She did. But it was also confusing. And who were these people? None of it seemed to make sense.
"People have been doing this to people for years. But why me? I signed a land contract," she said, adding that had she known the house had delinquent taxes — $2,513 was needed to redeem it — she would have made efforts to save it.
"I could have gotten my kids and moved, or I could have bought the house myself," she said. "I put a lot of money into the house."
The Burrell case — one of several that's made its way through the legal system as a result of the Action Before Auction program — highlight the chaos of the program, as well as the auction process it was attempting to rectify.
More so, however, it underscores Detroit's dysfunctional housing market — a market that despite rocket-high prices in certain up-and-coming neighborhoods, never fully recovered from the mortgage crisis. And, in fact, is still grappling with residual effects of the housing meltdown. Specifically the impact of bulk buyers — who have taken advantage of the cheap real estate available via the mortgage crisis and now the tax crisis, and have capitalized on exploitative tools like land contracts when negotiating deals in neighborhoods where mortgage companies won't lend.
What is amply clear: confusion reigns. In many ways, before 11327 Warwick was foreclosed, it was battling the odds.
A look at the chain of title highlights the chaos that transpired — but also how these seemingly different housing problems and solutions are all inter-related.
According to property records, the home was bought in 1999 by a married couple who took out a $67,700 mortgage for the purchase. Over the course of the next 12 years the couple refinanced the home twice, taking on subprime adjustable rate mortgages — the loans at the heart of the mortgage crisis.
In June 2013, the couple sold the home for $7,000 to Rai. A month later the couple was discharged from the Mortgage Electronic Registration System. According to Joshua Akers, an assistant professor of geography and urban and regional studies at the University of Michigan-Dearborn, this sequence of events — coupled with the low sale price — indicates the sale was like a short-sale.
From here, the trajectory of the house gets confusing. And since rental and land contracts don't have to filed anywhere, keeping track of the transactions can be difficult.
According to Burrell in August 2013 she moved into the house paying $500 a month.
A rental contact she provided to the Free Press between her and Rai's LLC — Reasonable Rent — has two dates on it February 2014 and May 2015.
The land contract, which has no signatures on it, is dated April 2016. It details a plan to sell, over time, the house to Burrell for $31,500 — paying $1500 upfront and then $525 a month over five-years.
In terms of tax responsibility the contract is vague. It says the buyer — Burrell — would be responsible. However, if taxes aren't paid the seller can pay them and tack the fees onto the monthly payments, or view non-payment of taxes as breaking the contract.
These fuzzy lines alone could raise some questions about accountability and responsibility, however, before they even come into play there is a bigger issue: While Burrell said she had been paying the land contract fees each month until May — when she got the court summons — the investor, Harvinder Rai, said he has never received any payment.
In a late August phone interview, Rai explained that in 2013 he attempted to purchased 10 homes in Detroit. Since he was in Canada he contacted a realtor, Stacy Williams. In the end, he claims a middle man never paid him back or got any of the rent owed. He was under the impression that man has since died.
Rai contends he never received any of Burrell's money.
The Free Press researched a half dozen phone numbers associated with the man Raj named as his contact, but all were disconnected.
The confusion here can be boiled down, according to Akers, to three trends in a post-mortgage housing market: An out of state bulk buyer, using a finicky tool like a land contract and relying on parasitic middle men to facilitate the transactions.
All of the incumbent issues and pressures that people like Burrell face are driven in part by the ability of these large scale buyers to buy cheaply. It’s one of the reasons the city haslost population but the eviction rate remains the same.
On Wednesday, online bidding is set to begin for the Wayne County Tax Auction. The initiative Action Before Auction was supposed to fix.
Less than 3,000 properties will be part of the auction — a dramatic decrease from 2015 when 28,000 were up for sale.
Of the properties for sale this year an estimated 521 are occupied, according to Mario Morrow a spokesperson for Wayne County Treasurer Eric Sabree. What will happen to these individual property owners is unknown. Historically, the results have been displacement or finicky land contracts.
For Burrell, whose home was supposed to be saved from such an outcome, this irony is not lost on her. As she awaits the next court date she reflects on what attracted her to Warwick to begin with.
“It was the neighborhood,” she said. “It was the fact that the house was a brick home. It was the fact that you can tell everyone on this block, they own their homes. It’s really quiet, it’s family oriented. My neighbors are great. The house has brand new windows. The house is really, really cute. It’s good enough for me and my two children.”
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