Kansas Couple Faces Homelessness Over 'Deceptive' Housing Contract

A Kansas couple is facing homelessness after signing a housing contract that they believe was deceptive, and now they're warning others.

Signing a housing contract can hold several risks if you're unsure about what specific clauses mean, and some clauses are written intentionally to mislead or confuse prospective renters and buyers.

Kansas City residents Mary McLain and Greg Goodman have spent most of this year fighting against a mortgage foreclosure on their home. Now, after losing their case, the couple is set to be homeless in just days and has nowhere to go. McLain said they were evicted after signing a contract with a "deceptive clause."

Homelessness has reached a record high in America in recent years, according to the Department of Housing and Urban Development. More than 650,000 people were living in shelters or on the street in 2022, up 12 percent from the year before.

McLain and Goodman had a contract for deed on the home, owned by Glen and Betty Penner. A contract for deed is a legal agreement for the sale of a property between a buyer and seller and generally works as an alternative to a mortgage. The buyer can hold the title of the home while making payments to the seller, who is the one financing the sale. Only after all payments are made will the property deed be transferred, but it can protect residents from unexpected evictions since they aren't "renting" the home.

McLain said she was shocked when the sellers served them with eviction papers at home. Until that visit, McLain said her relationship with the owners was always "open, honest and respectful." She said she trusted them "as financial guardians and, more importantly, as people."

That all changed in August 2022, when the eviction papers were served.

"The hurt and disrespect we encountered during that August visit with eviction papers was overwhelming," McLain told Newsweek. "The shock value cannot be understated."

McLain said Betty Penner yelled at her, calling them "trash" and that they were "no good and living off the state."

The statements were made in reference to McLain and Goodman using Kansas Emergency Rental Assistance payments to pay for the housing between 2021 and 2022. McLain and Goodman first applied for the program in 2021 after Goodman's jobs as a remodeling contractor stopped because of COVID-19 shutdowns.

The Kansas Emergency Rental Assistance program was approved by the state to help low-income citizens whose jobs were directly impacted by the pandemic, and McLain and Goodman depended on the help during this time.

"We explained that the payments had been made to them, accepted by them, and it did not matter from where the money originated," McLain said. "She angrily screamed back that it 'did matter where it came from.' She hostilely stated we were the 'worst tenants' and how 'she and her husband were finished with us.'"

While McLain said the conversation was offensive and insulting on a personal level, the legal framework to kick them out was also in question. Since housing occupants have rights to protect them against discriminatory practices, McLain said they should have been protected from any "source of income" discrimination, whether the payments were made with their own income or rental assistance programs.

"Discriminatory or not, I felt ashamed for accepting government assistance while hearing her comments," McLain said.

Previously, the payments had always been accepted, without any complaints either in person or by text, McLain said.

"Hearing her hurl angry and offensive insults to us, the housing occupants on her property, was equivalent to a teacher reading a paper I wrote, assigning it an A+ grade, then walking into class a few days later and telling me to stand up in front of the class where he proceeded to spew hateful and insulting comments about the paper he had just assigned an A+," McLain said.

"It was a deep sense of injustice, and I felt undignified."

After applying for free legal representation from Kansas Legal Services, McLain, Goodman and their attorney made the case that the eviction was void because they had been under contract for deed to purchase the house. This was in September 2022, and they won.

The judge dismissed the case, telling the owners that they needed to file foreclosure papers in a different courtroom if they wanted them out of the house. The eviction was said to be based on nonpayment of rent or mortgage, but McLain said they had never fallen behind on their monthly payments at that point.

The sellers initially refused the next month's payment from McLain but later "mysteriously" accepted after several exchanges, she said.

But then more complications arose. After getting approved for more assistance from the Kansas Homeowners Assistance Fund, McLain said she was told the program ended up denying the application because the Penners never responded to accept the money.

The refusal is what McLain said is the "crucial factor" that sent them into payment default, and the mystery of the sudden refusal has been "agonizing," McLain said.

It changed their legal circumstances, too, as the owners now had a right to take McLain to court for nonpayment.

"Lenders and owners use nonacceptance of government funding to kick buyers out of their homes, like our situation," McLain said.

After falling one month behind because of the owners' payment refusal, McLain said they were served with foreclosure papers, roughly a year ago, a few months after they initially won in court.

When McLain said they and an attorney worked to counterclaim the foreclosure lawsuit, they focused on a hefty 8.5 percent monthly interest rate they had been charged. But in July of last year, the lawyer withdrew from the case, leaving McLain and Goodman devastated. No other lawyer would take on the case on a pro bono basis, she said.

Representing themselves, McLain and Goodman showed up in court to fight for their home on January 19. But they found the judge was not as sympathetic to their plight this time, declaring they had lived in the house for a year without making any payments.

"While true, that statement is not accurate," McLain said. "The judge did not acknowledge the decision...to refuse payment was the only reason those months went unpaid."

So McLain and Goodman lost their case and their home. Their contract stated that if a buyer defaults on payments and is more than 45 days late, the relationship reverts to a landlord-tenant situation.

After January 20, McLain and Goodman were told they had just 21 days to get out and navigate a new world of homelessness.

"We are looking for another place to live, of course, but the prospects are grim," McLain said. "The housing crisis is heavy everywhere due to the financial help available due to COVID being withdrawn."

While McLain believes the contract they signed had a deceptive clause, she acknowledged that neither she nor her husband fully understood what it entailed. They didn't realize the clause about payments being more than 45 days late would take away their rights as homeowners during a foreclosure.

"In a perfect world, we should've had an attorney look over the contract prior to making a decision," McLain said. "However, we could not afford one. We trusted this seemingly nice, elderly couple at the time. I wouldn't have believed they would have deceptive or exploitative terms in their contract."

McLain said the couple's refusal to accept payment from the Kansas Housing Assistance Fund was the reason for their lack of payments, but Nick Steinwart, the attorney representing Glen and Betty Penner, disagrees. He said McLain's account of the situation was "wrong and contrary to the evidence."

"The Penners did not refuse any mortgage assistance payments from KERA," Steinwart told Newsweek. "In fact, the Penners presented evidence of those payments at trial, showing they were credited to the loan."

Steinwart said the sellers accepted a total of $10,950 in payments from the rental assistance program, and that the 8.5 percent interest rate was yearly, not monthly.

"The judgment was granted in this case because the court found there had been a default under the contract," Steinwart said. "Payments were not made as they came due, even after accounting for the KERA payments. There is nothing deceptive about this simple, two-page contract which is considerably easier to understand than a traditional lender's mortgage which usually runs to 15 pages of legal jargon."

How to Avoid This Situation

Some real estate attorneys say contract for deed arrangements, because they differ from traditional mortgages, often hold some contract terms that can be misleading if not properly explained.

Because of how quickly many Americans sign their housing contracts, especially non-mortgage ones, without looking into the precise details, the situation with McLain and Goodman is not unique.

"Avoiding deceptive clauses in contracts, especially in housing agreements, is crucial for renters to protect their rights and interests, but let's be honest, no one reads their lease," Alicia Sanchez, rentals investor at Mamas Dinero, told Newsweek.

Whether signing a rental, mortgage or contract for deed agreement, you should look closely at the facts. Many contracts can hide hidden fees, like parking, maintenance, utilities or even "processing" or "convenience" fees.

Sometimes, housing contracts lie by omission, too, either neglecting to mention or fully lying about the state of the property.

"This form of deceit is particularly rampant when there is a high demand for housing units whereby landlords or sellers feel obligated to overexpose their properties," attorney Loretta Kilday told Newsweek. "By misleading renters, this practice also compromises the integrity of the real estate market, thereby eroding trust and competition."

Getting your contract in front of a real estate attorney before signing it is the best-case scenario, but even being aware of specific consumer protection laws could help you down the line.

The most common and often most harmful deceptions occur in contracts when buyers and renters overlook a clause and it leads to rapid eviction or loss of equity, such as what happened in this case, Florida attorney Howard Hao Li said.

Based on McLain's description of events, Hao Li said, "the predatory lender exploited the buyers by refusing to accept payments, leading to foreclosure proceedings."

"The larger impact of such practices is substantial, leading to financial hardship, housing instability, and a market where unethical lenders can exploit vulnerable buyers," Hao Li said.

In McLain and Goodman's situation, there was no true mortgage lender, so the legal protections about predatory mortgage practices do not apply, experts said.

"This is an unfortunate legal crack that they fell into," attorney Scott Smith, who also runs Debt Reduction 101, told Newsweek. "A contract for deed is an atypical situation. It acts like a promissory note, so it is neither a mortgage nor a rental situation."

Smith said McLain and Goodman might benefit from Section 8 housing, as it offers protections for everyone, unlike a contract for deed, which can leave things more up in the air.

"They've got to know that contracts for deeds are a gamble since they don't always give you the backup that a regular mortgage does," Dan Belcher, the owner of Oklahoma-based Top Tier Real Estate and CEO of Mortgage Relief, told Newsweek. "In their situation, not having a straightforward loan or note made things pretty shaky from the start.

"Their best bet is to find a real estate lawyer willing to work out a payment plan with them. Someone who can take a fresh look at their case and find a way to challenge the ruling or find another way out."

The experience McLain and Goodman had did not occur in a vacuum, however, and it could act as a warning to others about the traps you can fall into without a thorough look into the contract.

"What they're going through is tough, but their grit is inspiring," Belcher said. "Hanging onto hope and pushing for a fair shake is the way to go."

Housing Crisis in America

Now facing homelessness, McLain said her situation is indicative of a larger nationwide housing crisis.

"I think the current housing crisis is a symptom of a host of issues our country refuses to face," McLain said. "Lack of affordable housing is indicative of poverty. Poverty is not simply a lack of money to pay for housing. It is a lack of choices."

McLain added that for many, including herself, unresolved trauma leads to poverty, along with untreated mental illness, low-paying jobs and lack of social mobility.

In a new report from Harvard's Joint Center for Housing Studies, roughly half of U.S. renters were paying more than 30 percent of their income on rent and utilities. And nearly half of those people were categorized as "severely cost-burdened," paying more than 50 percent of their income just to find housing.

"I was taught to not complain about a problem unless I can suggest a solution," McLain said. "I don't have one. So many issues need to be addressed. I don't know where to start."

Are you having trouble paying rent or your mortgage? Newsweek wants to hear from you. Contact us at personalfinance@newsweek.com.