Tucson real estate companies agreed to pay $375K after mortgage deals cost people their homes

Two Tucson real estate companies accused of consumer fraud agreed to pay $375,000 in restitution and fees, according to the Arizona Attorney General’s Office.

Of the accused in the 2021 case were companies Deed and Note Traders and 881Home as well as their manager, David Kinas, for hiding or misrepresenting the underlying mortgages for homes they were selling, ultimately trapping consumers into mortgages they never bargained for, according to a Thursday news release.

“David Kinas and his real estate companies sold the promise of home ownership with rent-to-own property sales to Arizona consumers, but the home-buyers instead received homes weighed down with the sellers’ own undisclosed mortgage debts,” Attorney General Kris Mayes said in the statement.

Arizona Attorney General Kris Mayes, seen here during her ceremonial inauguration Jan.  5, 2023, said David Kinas and his companies decided Arizona consumers, selling them properties with undisclosed mortgage debts.

Arizona Attorney General Kris Mayes, seen here during her ceremonial inauguration Jan. 5, 2023, said David Kinas and his companies decided Arizona consumers, selling them properties with undisclosed mortgage debts.

According to the lawsuit, Kinas had also failed to pay some of the underlying mortgages, even having his companies foreclose on homes after they had already been sold to consumers.

In a breakdown of Kinas’ handling, the attorney general’s office said that consumers were sold homes through a rent-to-own arrangement with owner-provided financing or seller carry-back financing. Kinas’ companies would act as both the seller and the lender, rather than as a bank or other mortgage lender.

Furthermore, consumers weren’t given clear title to the homes and instead the defendants used “wrap-around financing that transferred the title encumbered by its own undisclosed mortgages for loans already owed on the properties”.

According to the attorney general’s office, although wrap-around financing is legal, other mortgages on a property must be fully disclosed by a seller.

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The consent judgment reached requires Kinas’ companies to pay $350,000 in restitution to consumers and $25,000 in civil penalties.

Additionally, Kinas and his real estate companies are permanently prohibited from selling properties with seller carryback financing. They must also use a licensed real estate agent as well as an independent escrow agent and provide title insurance as part of the sale if, and when, they sell any properties, according to the statement.

Consumers interested in purchasing real estate, notably through rent-to-own or other installment-sale arrangements, are advised to be aware of undisclosed seller carryback or wrap-around financing.

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The attorney general’s office suggests consumers follow these recommendations:

  • Research the company or individual offering the home for sale. Look for news reports, consumer reviews, and any government enforcement or disciplinary action.

  • Consider hiring a licensed real estate professional to represent you in purchasing a home, even in rent-to-own scenarios.

  • Obtain title reports and property title insurance to ensure that the seller is selling a property with a clear title.

  • Read all documents and make sure you understand them before signing. If you need help understanding a contract, ask a licensed real estate professional to assist you. Do not rely on any oral statements or assurances made by the seller.

  • Those who decide to purchase a home with wraparound financing must be sure that the underlying mortgage lender is involved. Use an account servicer to ensure that your payments are paying the underlying mortgage lender directly, and make sure such protections are in the purchase agreement to buy the property.

Anyone who believes they may have been the victim of fraud is able to file a consumer complaint via the attorney general’s website. Complaint forms can also be sent directly to you by contacting the office in Phoenix at 602-542-5763 and in Tucson at 520-628-6648. Those outside the Phoenix and Tucson metro areas can call 800-352-8431.

This article originally appeared on Arizona Republic: Tucson real estate companies agreed to pay $375K in consumer fraud case

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