Seller Financing · Legal · Missouri

When a Tool Becomes a Trap: St. Louis Sues Over “Slow Flip” Home Sales

… and what it means for every investor who seller-finances.

The City of St. Louis has gone to court against a real estate company it says turned the dream of homeownership into a trap. In mid-July 2026, the city sued Bustling Funding, LLC, accusing the company of running a “slow flip” operation — selling homes to low-income, credit-challenged buyers on contract for deed, at inflated prices, in properties that too often weren’t even legal to occupy.

For those of us in the real estate investing community, this case deserves a careful read — not because seller financing is on trial, but because the abuse of it is. Contract for deed, done right, has put thousands of families into homes they could never have bought otherwise. Done wrong, it becomes exactly what the city is describing. The line between the two runs through city ordinances, Missouri statute, and federal law all at once.

What happened

The lawsuit followed an investigation by First Alert 4 (KMOV) that put faces to the practice. One buyer, Latonya McGee, found a north St. Louis home advertised at $760 a month and put down $2,500. After moving in, she says she discovered fire damage in the basement, raw sewage, gas leaks, and a failed water heater — repairs that ran into the tens of thousands. The home had been sold to her for $89,000 on a 30-year contract at 10% interest. The city’s own appraisal of that same property: $5,249 — less than 6% of the sale price.

After the reporting aired, state and local officials vowed action. Missouri Attorney General Catherine Hanaway warned, “If you lie to people about what you’re selling them, we can get you.” Days later, on July 17, 2026, the City Counselor’s Office filed suit. You can read the city’s petition here. Coverage from St. Louis Magazine and the St. Louis Post-Dispatch fills in the details.

Just what is a “slow flip”?

The “slow” refers to the timeline. A fast flip is buy, renovate, resell in a few months. A slow flip collects installment income for years. The city’s core allegation is that the model is engineered around failure.

When the buyer misses a payment, the operator moves to take the home back, keeps the down payment and everything paid to date, and resells the same house to the next hopeful buyer. Inflated prices, high interest, and uninhabitable conditions all push in the same direction — toward a default the seller profits from.

Why the city is suing — and the narrow, clever hook it used

Notably, the city is not trying to outlaw contracts for deed. It took a much narrower and more winnable angle: occupancy permits.

The key is that the permit is triggered by occupancy, not the sale. An investor can sell a house without an occupancy permit. What the code forbids is putting someone in it — renting it, or here, letting a contract-for-deed buyer move in — without first passing the inspection. The city’s theory is that Bustling Funding “permitted the occupancy” of dozens of dwelling units without the required certificates. That is the bridge that lets a health-and-safety occupancy ordinance reach a contract-for-deed sale.

The relief the city seeks is correspondingly targeted: a declaratory judgment that the company must obtain occupancy permits for homes sold this way, plus a permanent injunction requiring it to comply going forward. No effort to ban the instrument — just to force the safety inspection that protects the person living in the home.

The part the operators may be getting wrong: you often can’t just evict

Here is where the case gets interesting for anyone who works with these contracts. Operators tend to treat a contract-for-deed default like a simple lease default — miss a payment, get evicted, forfeit everything. But a contract-for-deed buyer isn’t a tenant. They hold equitable interest in the property, and Missouri has a comprehensive statute governing these deals: the Missouri Contract for Deed Act, RSMo §§ 442.700–442.746. As Kansas City real estate attorney Julie Anderson explains in her guide, “Understanding the Missouri Contract for Deed Act,” these protections cannot be waived or contracted around — any provision that tries is void under § 442.714.

The practical upshot: taking a house back from a defaulting contract-for-deed buyer in Missouri can be slow, costly, and legally treacherous — nothing like a quick eviction. That’s precisely why most attorneys tell sellers to think hard before using a contract for deed at all, and often steer them toward conveying the deed and taking back a promissory note secured by a deed of trust, which carries the faster, well-defined foreclosure remedy. Court records showing Bustling Funding repeatedly filing eviction-style actions against its own buyers raise the question of whether those buyers’ statutory rights were honored — a thread worth watching.

The federal layer: Dodd-Frank, TILA, and how many you can do

Because a contract for deed is a form of seller financing, federal consumer-mortgage law can apply on top of Missouri’s statute — and this is where the “how many properties can I finance” question lives.

The remedies for getting it wrong are real: buyers can recover damages and, critically, raise an ability-to-repay violation as an affirmative defense to foreclosure. Does all of this even reach contracts for deed? In August 2024, the Consumer Financial Protection Bureau issued an advisory opinion concluding that a typical contract for deed is “credit” under the Truth in Lending Act. In May 2025, under new leadership, the CFPB withdrew dozens of guidance documents and paused them for enforcement, and that opinion appears to have been swept up in the rollback. But withdrawing guidance doesn’t change the underlying statute: TILA still says what it says, and private buyers and courts can still assert these deals are covered. Federal enforcement is quiet right now, but the exposure hasn’t gone away. (The SAFE Act, governing originator licensing, is a separate regime with state-specific exemptions — check before you scale.)

Does Kansas City have the same rule? Not exactly

Because the St. Louis case turns on a city-specific ordinance, it’s fair to ask whether the same hook exists here in the Kansas City metro. The short answer is no — and the difference matters.

St. Louis’s § 25.56.040 is a broad occupancy-permit-on-change-of-occupancy requirement. Kansas City has nothing quite like it. KC’s closest analog is the Healthy Homes Rental Inspection Program (Ordinance 180248, effective August 2018), which requires owners of residential rentals to register and submit to complaint-triggered inspections. But it keys off the word rental — and a contract-for-deed buyer is a purchaser, not a tenant, arguably closer to the owner-occupied category the program exempts. That means a slow-flip operator in Kansas City could plausibly argue Healthy Homes doesn’t reach them at all. To address the same conduct here, the backstop is less a city permit and more the statewide Contract for Deed Act, the property-maintenance and dangerous-buildings codes, and potential Attorney General consumer-fraud enforcement. The lesson: don’t assume the St. Louis playbook transplants to the KC market.

The flip side: seller financing done right is a lifeline

None of this makes contract for deed a dirty word. Used honestly, it fills a hole that the mortgage market simply refuses to serve. The reason so many buyers turn to seller financing usually has nothing to do with being careless with money. It’s the price of the house. Most banks won’t originate a mortgage under about $100,000, because the fixed cost of making a loan — roughly $10,600, per Pew Charitable Trusts research — is about the same whether the loan is $50,000 or $500,000.

For sub-$100,000 houses and many mobile and manufactured homes, if the seller doesn’t offer financing, the buyer’s only path is cash. That’s the gap responsible investors fill, and there’s a well-taught way to do it right. You acquire a fixer-upper and make sure the bones and systems are genuinely sound before you sell — a roof that doesn’t leak and has years of life left, a working furnace, AC, and water heater, solid exterior walls, doors, and windows. The “fixer” part is the cosmetic and finish work: dated, missing, or worn drywall, flooring, and fixtures — not hidden structural failure dumped on the buyer. You sell it on contract for deed at a fair, defensible price, and you stand behind it. If the furnace fails a year in, you fix it and finance that repair back to the buyer at a workable payment plan — rather than treating the breakdown as a road to default and forfeiture.

On price and rate, be honest with buyers and yourself. These deals carry real costs — closing costs, a down payment, and interest. And the rate is higher because the risk is higher. With market 30-year rates around 6.55% (Freddie Mac, mid-July 2026), a seller-financed note commonly runs 8–12%, depending on the down payment and buyer profile. That’s a risk premium of a few points — entirely defensible when the price is fair, the house is sound, and the terms follow the Contract for Deed Act.

A buyer’s own words

Perhaps the best rebuttal to “this is inherently predatory” comes from a buyer who used it. In a public comment, Koran Johnson wrote:

That is the whole argument in one voice: a credit-challenged buyer who did his homework, bought a sound home, invested modest sweat equity, supports the safety reform — and gained an asset to pass to his children.

Voices from decades in the business

The investors who have done this the longest tend to say the same thing: the strategy works — it’s the shortcuts that don’t. David Alexander has owner-financed homes for almost 30 years. He started out doing exactly what the “slow flip” describes — contracts for deed, tiny down payments, putting almost anyone who could make the first payment into a house — and calls it “one of the biggest headaches I ever created.” Today he sells with a promissory note and deed of trust instead: “I’m not in the foreclosure business. I’m in the own-the-note business — being a bank.”

Veteran real estate educator Vena Jones-Cox sees the current wave as history repeating — “this is 2010 on repeat,” she says, recalling the hedge funds that once blanketed neighborhoods with “$500 down, $397 a month” signs on houses their buyers couldn’t afford to fix. Her warning is pointed:

That’s the consensus from the people who’ve lived it: the tool isn’t the problem — leaving out “the part about legalities, and fairness, and who to not sell to” is.

The takeaway

The St. Louis case is not an attack on seller financing. It’s an attack on a specific pattern of conduct: inflated prices far above real value, uninhabitable homes, skipped occupancy permits, and contracts written to profit from default. Same instrument, opposite outcomes.

Do it that way, and you’re not the target of the next lawsuit — you’re the reason a family that a bank wouldn’t touch finally owns a home.