A Minnesota real estate broker is scheduled to go on trial Monday morning for allegedly targeting Minnesota’s Somali community with predatory home sales and inflated prices.
Chadwick Banken allegedly sold 160 homes using contracts for deed, which offer few protections for consumers, according to Minnesota Attorney General Keith Ellison. The attorney general sued Banken in civil court in Hennepin County, leading to this week’s trial.
The lawsuit is the result of a joint investigation in 2022 from Sahan Journal and ProPublica that first exposed the questionable sales practice. It also identified Banken as one of Minnesota’s top seller of homes through contracts for deed from 2019 to the time the story was published in 2022.
Ellison’s office sued Banken in 2024, alleging that he used six of his limited liability corporations to commit consumer fraud and deceptive trade practices. The lawsuit also alleges that he inflated home prices and pressured homebuyers to pay large down payments.
“At trial, we intend to prove that Chad Banken rigged the homebuying process against Minnesotans from the start,” Ellison told Sahan Journal in a prepared statement. “Enough is enough. My office intends to put an end to this unlawful and predatory scheme.”
Banken “deceived homebuyers into agreeing to fundamentally unfair contracts” and set them up to “fail and forfeit both the property they were purchasing and all the payments they made towards purchasing it,” Ellison said.
“All too often, Banken would pocket the payments, keep the property, and then run the same scheme on another would-be buyer,” he added.
Banken and his attorney, Jack Pierce, did not return messages seeking comment for this story. In a court filing, Banken denied wrongdoing, stating that he has “always been transparent with clients about the details of the contract for deed transaction.”
Banken also asserted that he “provided the required disclosures” for his contracts, and never “engaged in any unfair, deceptive, abusive or fraudulent acts of practices.”
Sahan and ProPublica’s investigation also prompted state and federal lawmakers to pass new laws reforming contract for deed practices. The federal Consumer Financial Protection Bureau also created new guidelines to govern contract for deed sales.
How contracts for deed work
Contracts for deed are often used by homebuyers who don’t financially qualify for traditional home mortgages, or who reject them as an option. Many Muslims, for example, follow Islamic religious practices that discourage lenders from profiting from interest payments, which prevent them from taking out a conventional mortgage from a bank.
Contracts for deed are a type of loan that offer alternatives to conventional mortgages, and can be structured to avoid interest. But the loans, which are handled directly by the home seller, also provide fewer consumer protections. Most must be paid in five years while home loans from a bank typically last 30 years.
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The buyer in a contract for deed sale pays the seller directly for the home in installments.
Experts and consumer advocates said that many of the contract for deed sales Sahan and ProPublica examined in 2022 were structured to prevent buyers from paying off their homes at the end of their five-year contracts.
The attorney general’s lawsuit said that in Banken’s case, the contracts started with requiring “very large down payments for homes with dramatically inflated prices.” Banken set up the contracts so he could evict a buyer for missing just one monthly payment, according to the lawsuit.
The contracts lasted five years, and when they ended, Banken would charge the buyers six-figure balloon payments for the remaining cost of the home. If a buyer couldn’t afford to pay that cost all at once, Banken could evict the buyer in 60 days and take possession of the home.
The lawsuit alleges that Banken evicted one homebuyer who defaulted on their loan.
A foreclosure process under a conventional mortgage, by contrast, typically gives homeowners a year to save their home before eviction.
The attorney general’s lawsuit alleges that these balloon payments are illegal and that Banken hid many of these terms from his buyers.
The case against Banken
Banken is among the state’s top home sellers using contracts for deed. He’s worked in real estate in Minnesota for two decades, and was sued twice in the mid-2000s by clients who claimed he misled them about how they could save their homes from foreclosure. Banken and those homeowners settled the suits.
In the current case, Banken typically wrote contracts for five years. At the end of the contracts, he allegedly charged six-figure balloon payments to push buyers into default, which allowed Banken to regain ownership of the homes.
Banken is also accused of discriminating against Muslim East African homebuyers by promoting his contracts as halal loans when they in fact contained high interest rates.
The lawsuit is seeking to bar Banken from conducting contract for deed sales, and to compel him to pay restitution to his clients.
The trial is expected to last around two weeks. Jury selection begins Monday at 8:30 a.m. before Hennepin County District Court Judge Laura Thomas.
Homebuyers expected to testify
Several homeowners who purchased from Banken are expected to testify during the trial. Among them is Abdinoor Igal, who spoke with Sahan Journal and ProPublica for the 2022 investigation.
Igal bought a spacious, $727,000 Lakeville home from Banken in 2022, with a $73,000 down payment. His interest rate on the home was 6.5 percent, when market interest rates for homes at the time were at 5.3 percent. That put Igal’s monthly payment at $4,779.
Igal’s loan required him to pay a lump sum balloon payment of $612,000 at the end of his five-year contract in order to keep the house.
The payments became too much for Igal, who works as an independent truck driver and has seven children. He walked away from his home in late 2023. He estimates that he lost $170,000 in the deal.
After losing their home, Igal’s wife and children relocated to Kenya while he stayed behind and tried to figure out his next move.
“For almost a year, I was homeless,” he told Sahan Journal last week. “I was sleeping inside my truck.”
Igal then moved into a two-bedroom apartment, where he now lives with two of his older children. He is saving up to buy a home for his family, who remain in Kenya, but expects it to take time.
“It will take about five years to prepare myself from scratch again,” Igal said.
Igal is hoping for the lawsuit to prevail at trial so he can get his money back.
