Built-to-Fail Home Financing: Evidence from Eviction Court Exhibits on Predatory Contract-for-Deed and Rent-to-Own Practices

• In Event: Credit Access, Alternative Financing, and Homebuyer Outcomes

Abstract

Contract-for-Deed (CFD) and Rent-to-Own (RTO) arrangements are marketed as alternative paths to homeownership for buyers excluded from conventional mortgage lending. An estimated 9 million Americans have entered a CFD and 10 million an RTO agreement, yet critics have long argued these contracts are "built to fail" by design. Testing this claim has been difficult because no U.S. jurisdiction requires CFD or RTO contracts to be recorded in a form that links their terms to what happens when they fail. This study closes that gap using a novel data source — eviction court exhibits — that makes contract terms and enforcement outcomes jointly observable.

We analyze 372 CFD, RTO, and RTO-manufactured-home (RTO-M) eviction cases filed in St. Louis City, St. Louis County, and Jackson County, Missouri between July 2023 and December 2025, drawn from 46,922 eviction filings with uploaded contract exhibits. Using OCR, keyword search, and regex/LLM-assisted extraction, we recover sale prices, down payments, interest rates, repair-liability clauses, and default terms, and link these to court outcomes, timing, and property records.

We find that CFD properties sell for a mean of 206% above the seller's own purchase price, and RTO properties for 27% above, with average CFD interest rates of 12.92% — well above rates reported in prior studies. Down payments are unusually low (3–4% of sale price), and nearly all contracts (92–100%) contain "as-is" clauses shifting repair costs to buyers, despite Missouri's non-waivable implied warranty of habitability. Nearly all CFD contracts include language converting defaulting buyers into tenants, enabling rapid eviction-based repossession rather than foreclosure. In practice, 77% of CFD eviction filings occur within a year of contract signing, typically over just one to two months of missed payments. Sellers are represented by counsel in essentially all cases, versus 8% of CFD and RTO tenant buyers, and judgments favor sellers 84% and 63% of the time, respectively. Enforcement is highly concentrated: 75% of filings come from sellers with five or more cases, and a single Virginia-based investor accounts for nearly a third of all filings. Filings are overwhelmingly concentrated in predominantly Black neighborhoods (97% for CFD).

These findings provide some of the first systematic evidence directly linking CFD/RTO contract language to enforcement timing and outcomes, substantiating the built-to-fail critique empirically rather than anecdotally. We conclude with three policy measures — mandatory recording with enforcement teeth, independent property valuation at sale, and extension of habitability warranties to these contracts — that could close the pathway from predatory contract design to rapid, low-cost repossession.

Author

• Yi Wang, Washington University in St. Louis
  Presenting Author