This New Seller Financing Method Is Having A ‘Life-Changing Impact’ On Renters' Homeownership Dreams

Success, stability and prosperity are the guiding principles of the American dream. For many, achieving success means homeownership.

However, most renters today fear that they will never be able to own a home. Many face financial hurdles such as insufficient credit scores, credit card debt, job insecurity and difficulty with the high cost of purchasing and maintaining a home.

To overcome the obstacles, Philadelphia-based Home Owner Makers Educational Services LLC, or H.O.M.E.S., has created the Qualified Contract for Deed, or QCD, a unique financing approach that gives renters a direct, simplified path to ownership.

“The life-changing impacts of the QCD method are immediate,” H.O.M.E.S. founder Samuel Bradstreet said. “Most people are aware of the low homeownership rates that minority groups experience, but unless the QCD is implemented as an accessible solution, little will change for these renters.”  

In 2023, the rate of white homeownership rests at about 73%, but the rate of Black homeownership stands at only 45%. Hispanic homeownership is slightly higher at 50%, but is still below the desirable level, Bradstreet said. And while the overwhelming majority of renters have the desire to own a home, nearly 14% of those who apply for a mortgage get denied. He said that many renters don't even apply to avoid disappointment.

Bradstreet added that this sizable ownership gap results from the deed mortgage system that fails to work well with lower-income applicants, or with those who cannot meet today’s stringent lending requirements. These qualifications can include a debt-to-income ratio of around 43% or less, a credit score of at least 620 and the ability to come up with a 20% down payment.

“It takes an average 13 years to save down-payment money in our country, and many people don’t even have the capacity to save for one,” he said. “The QCD system goes around all this with an alternative that doesn't require government participation.”

The process makes ownership accessible to a much wider range of renters, and it is especially useful to those with lower incomes, Bradstreet said.

"You can't have a city where half the people don’t, and never will, own their homes, and that's exactly what we've got," he said. "Nobody knows how to fix it except with a Qualified Contract for Deed.”

According to the QCD method, the seller and buyer agree upon a price and create a simple contract using the standardized elements H.O.M.E.S. defines. The parties' attorneys review the documents, and the buyer receives an immediate transfer of equitable interest at signing, Bradstreet said. The home is now considered to be “owner-occupied,” so the buyer gains the rights of homeownership, including occupancy and resale profits in exchange for their monthly payments of principal and interest.

The typical down payment with the QCD method is 1%, compared to the 20% a traditional mortgage requires. Buyers have no closing costs, and they have the option to refinance with a conventional mortgage after at least 12 months of timely payments. After refinancing, the legal title will transfer to the buyer.

Bradstreet noted that the implementation of the QCD method comes at a time when it’s needed most. In major cities such as Orlando, Florida, Los Angeles and Boston, more than half of the population are renters. In Miami and New York, rentership has risen to 70% and 67%, respectively. Homeownership is not a city issue, but rather a daunting challenge for the national mortgage industry, he added. 

He estimates that the big eastern cities like Philadelphia, Baltimore and New York are where QCDs are going to have the most immediate impact. This is because much of the housing stock is made up of row homes that don’t require apartment-to-condominium conversions. The transition to ownership may also lead to a decrease in crime throughout these larger cities, he said.

“It’s as simple as knowing that those who now own their homes will care more about their neighborhoods,” he said. “That prevents homes from being abandoned or boarded up, and increasing property values will ultimately benefit all the parties involved, as well as the neighborhood itself.” 

Bradstreet said that the H.O.M.E.S. team is working with several homeowners and developers in the area that want to use the QCD as their preferred financing strategy for their upcoming projects.

Based in Philadelphia, H.O.M.E.S. launched this program locally, but it is designed to be used nationally. Many real estate professionals are also becoming certified to use the QCD through H.O.M.E.S.’ e-learning courses, displaying their dedication to providing renters with a solid path to homeownership.

“The QCD will be the biggest change in how our country lives,” he said. “All of the developers we’re working with right now see a much higher profit by selling their properties to their renters, relieving them of turnover problems and repair costs. They will be adding substantial value to a rental just by changing it into an 'owner occupied' unit, and they’ll also be giving an opportunity to someone who may not ever have a chance to own their own home, and that’s game-changing.”

For further information about the QCD method and the company's 15-minute training courses for buyers, landlords and realtors, please go to www.homeownermakers.com.

This article was produced in collaboration between Home Owner Makers Educational Service and Studio B. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.