A piece of land. A home to call their own. That was what they wanted.
What they got was an American nightmare.
Two people whom this story will call Eva and Roberto only agreed to talk if their identity was protected.
“This is very important, to have a place for (our) children,” says Eva, a friendly 31-year-old with a ready smile. “It is like the American dream for us.”
They couldn’t afford much, so they looked for an inexpensive option, finding it in Pajarito Mesa, an area that’s an easy 20 minute drive southwest from downtown Albuquerque. About 1,500 people live scattered across Pajarito’s 18,000 wind-swept acres. It’s a rugged existence: Residents live without paved roads, electricity or water. But the lure of cheap land, faith that infrastructure will arrive and the belief that they can live there draws people to it.
"There’s a gross disproportionality of bargaining power between the seller and the buyer. Selller knows what he’s doing and buyer doesn’t"
Because Eva and Roberto didn’t have the income or credit history to qualify for a mortgage, they entered into a real estate contract, purchasing 2.5 acres of land directly from Rosendo Abeyta for $25,000. They gave him a $1,000 down payment with the balance to be paid over seven years, then theymoved into a small trailer on the property. Soon after, they learned they couldn’t live there. They lost their land and all the money they paid.
These real estate contracts are often used in suspect, and sometimes fraudulent, land sales to low-income people. In spite of this, the New Mexico Legislature has been reluctant to regulate them.
“A real estate contract is really not an inherently evil document,” says Craig Acorn, an Albuquerque attorney who has done legal work for people who have problems with these contracts.
In fact, they’re sometimes used for high-end transactions where a buyer and seller want to avoid using a bank and paying all the fees associated with a traditional mortgage. When done right, they can work fine. But, especially with low-income buyers, they’re often not done right.
Tom Prettyman, an attorney at New Mexico Legal Aid, says he’s seen too many real estate-contract deals that take advantage of hard-working people who don’t realize how tenuous the contracts are.
“There’s a gross disproportionality of bargaining power between the seller and the buyer,” he says. “Seller knows what he’s doing and buyer doesn’t, especially if you’re talking about Pajarito.”
While real estate contracts may look enticing because they typically require a small down payment and have fewer fees, there are no requirements for a title search or title insurance (which confirm a property’s legal ownership and protect buyers). They often lack any kind of disclosures about the property and don’t state what the interest rate is; it tends to be high, generally around 10 percent.
“They’re an expensive way of trying to buy real estate,” says Carlos Proffit, a compact, pugnacious 54-year-old. He’s purchased three parcels of land using real estate contracts and lived in Pajarito for close to 30 years. “You miss a payment or two, you’re done. It’s a gamble.”
What he means is that with a real estate contract, if a person misses a payment, even after paying for years, they can lose the land and any improvements they’ve made, including the house they put on it.
Soon after Eva and Roberto moved onto their land, Mike Gallegos, the county employee who oversees Pajarito, informed them that they couldn’t live there because there are no roads.
“If there are no legal roads, (the property) couldn’t meet zoning requirements,” says Enrico Gradi, development manager at Bernalillo County’s Planning & Development Services. “If you build a house, we need to make sure an ambulance can get to you.” This was news to Eva.
“We stopped paying when we realized we could not live there,” she says.
That left the couple in default and, under the terms of their real estate contract, missing a payment allowed the seller to take back the property and keep all the money—about $12,000—they’d already paid.
When asked to comment for this article, Abeyta hung up the phone.
Real estate contracts are also used in what are known as “wrap” or “wrap-around” contracts. In a wrap contract, a person, let’s call them “A,” is buying land on a real estate contract. A, while still paying for the land, decides to sell part of it to buyer B, who may not know that someone else is actually the owner. Typically, A is using the money from B to pay off the actual owner. Sometimes they do, but sometimes they don’t and they’ll default on the contract. When that happens, A may have no legal right to the land. That was the case for Sandra Bustillos and Jesús Garcia Silveyra, who also bought land in Pajarito.
Bustillos and Garcia bought 1.25 acres from Tomasita Atencio for $20,000, paying off the entire amount in a year. They moved a used trailer onto the lot, planning to eventually build a home. When they asked Atencio for the title, says Bustillos, “She would say, ‘You’ll have it in two or three months.’ But we never got it.”
That’s because Atencio didn’t have it. She still owed money to the actual owners, Charles and Angela Wright, who sell quite a lot of land in Pajarito. According to the Wrights’ attorney, James Kirk, the Wrights only learned about Bustillos and Garcia living there when Garcia wrote them a letter. Kirk says the Wrights tried to work things out with Bustillos and Garcia, asking them to pay off Atencio’s debt, but that deal fell through. The family is now facing eviction and stand to lose their land and their $20,000. Charles Wright refused to be interviewed for this story; Atencio couldn’t be located.
Pajarito isn’t the only place where real estate contracts are used and, too often, abused. Throughout southern New Mexico, and in the three other border states, are discrete areas called colonias (neighborhoods) that are characterized by high poverty and unemployment rates, and often lack paved roads, water and sewage. Virtually all sales are done with real estate contracts, and those contracts have often taken advantage of unsuspecting buyers.
Bernalillo County has tried to stop people from moving to Pajarito by putting up a sign at the entrance stating it may be illegal to purchase land there, but it can’t regulate real estate contracts. That’s up to the state Legislature.
“The first crack we had at regulation was in the 2011 legislative session, says Acorn. “We did a very comprehensive bill and the real estate industry was able to kill [it].” Steve Anaya, CEO of the New Mexico Realtors’ Association didn’t return requests for an interview by press time.
The Senate appointed a task force to study the problem, which submitted a report to the Interim Committee on Economic & Rural Development during this year’s legislative session. It recommended that contracts include basic things like full disclosure and title searches, but that didn’t happen. Sen. Howie Morales, who chairs the committee and who is now running for governor in the Democratic primary, didn’t return repeated requests for interviews.
But committee member Sen. Jacob Candelaria, D-Albuquerque, did. He believes that some sort of reform is necessary because “it’s the taxpayer who’s subsidizing the existence of colonias. Why is it fair that taxpayers have to subsidize this kind of off-the-books development?”
You need to look no further than Texas to see the truth in that statement. Texas, which has about 2,400 colonias, has spent a billion dollars over 20 years retrofitting the neighborhoods’ infrastructure—infrastructure that should have been put in and paid for by land sellers or developers.
Pretttyman says the most compelling reason to better regulate real estate contracts is because most of the people who end up on the short end of the stick are poor, and many times don’t speak English or know their rights. If something goes wrong, they have little access to attorneys or the legal system. And anyway, virtually everything favors the seller in real estate contracts,.
“When we have a real estate contract case come in,” he says, “‘You’re screwed,’ is our response.
“The best thing to do with our funding is buy a billboard that says, ‘Don’t buy a home on a real estate contract’ in English and Spanish.”
This story was reported in partnership with the Fund for Investigative Journalism.