Michigan Attorney General Dana Nessel on Wednesday announced her department sent a notice of intended action to EasyKnock, ordering the so-called "sell and stay" company to cease engaging in unlawful business practices.
The Michigan Department of the Attorney General alleged that EasyKnock, a New York City-based residential sale-leaseback company, targets "financially distressed homeowners with low credit and high home equity in an effort to strip them of their home equity and homes."
The so-called "sell and stay" transactions allow homeowners sell their homes to EasyKnock and stay in them as tenants under a lease agreement for up to five years. Officials say EasyKnock represents that homeowners will receive 100% of their home's value, but homeowners "receive only a fraction of that value in cash after deductions are made for processing fees, closing costs, and repair holdbacks."
EasyKnock gives homeowners the option to repurchase their homes, but the consumers using EasyKnock "typically lack" access to the traditional financing required to do so, according to the department. The homeowners-turned-tenants also face annual increases in the monthly rent and the repurchase price, making it more difficult to buy the home back.
If the tenant cannot repurchase the home they sold to EasyKnock, it is sold to a third party. According to the department, EasyKnock recoups their initial investment not just through the second sale, but through the fees and rent collected over the course of the lease agreement.
The department said it has also received reports that EasyKnock "has made misrepresentations or misleading statements to pressure homeowners into transactions, caused confusion about escrow fund disbursements, and failed to make necessary home repairs in a timely manner."
Michigan residents can submit complaints to the Department of the Attorney General's Consumer Protection Team.
"Bad actors often take advantage of customers in vulnerable or even dire financial situations, with hidden fees and confusing contracts," Nessel said in a statement. "Homeowners should be sure they understand any financial agreement they are entering before they sign on the dotted line, and remember that if a deal seems too good to be true, it probably is. My department will continue to investigate businesses that use deceptive tactics to exploit consumers in crisis."
-With reporting from TMX.
