Legislators target profiteering from purchases of city property

Two Baltimore delegates seek state law to prevent quick resale of housing

August 04, 1999|By John B. O'Donnell | John B. O'Donnell,SUN STAFF

Citing "disturbing real estate practices in Baltimore City," two lawmakers are seeking legislation that the General Assembly could adopt next year to curb profiteering from the quick resale of houses, known as "flipping."

Dels. Samuel I. Rosenberg and Carolyn J. Krysiak, both Baltimore Democrats, asked General Assembly policy analysts on Monday to recommend legislative remedies, after The Sun reported Sunday that hundreds of city houses, mostly in poor neighborhoods, have been purchased in recent years at low prices and sold quickly to first-time homeowners and aspiring investors at two to 10 times the purchase price.

Saying they might hold a public hearing, Rosenberg and Krysiak asked in an e-mail message to chief policy analyst Warren Deschenaux for recommendations by Sept. 1. Rosenberg sponsored legislation passed this year by the General Assembly making it easier for the city to seize vacant houses and demolish them. The bill was adopted after The Sun reported that George A. Dangerfield Jr., a convicted drug dealer, owned 120 rental houses in Baltimore.

The Sun article on Sunday was based on an examination of more than 400 property flips that have occurred since 1996. Some purchasers are low-wage workers with credit histories so bad that sellers and brokers will inflate a buyer's income and assets and falsify other documents to help him or her obtain a mortgage.

Inflated appraisals and sham second mortgages are usually part of the deal.

Some buyers end up in foreclosure and bankruptcy, and the neighborhood ends up with more vacant houses.

The Sun described several buyers in foreclosure and bankruptcy, including Joseph Larbie, a hospital respiratory therapist and neophyte investor, who filed for bankruptcy, saying he was surrendering 20 houses that he had purchased during a one-year period.

Community groups and others who have observed the problem fear that the number of dubious transactions is more than 1,000 locally, and much worse nationally.

"There are so many of these things, I am really frightened," said Krysiak, who heads a House of Delegates housing subcommittee. "I hope we can get a handle on it before it totally destroys neighborhoods."

Garrad Johnson, executive director of the Govans Economic Management Senate, a nonprofit community development and housing organization in North Baltimore, echoed Krysiak.

"This flipping stuff ruins communities; it absolutely ruins communities," he said in an interview. "We are in a war."

It isn't new, Johnson said, adding, "This whole cancer of flipping and investors who prey on people has been out there quietly for years, but now it is just coming to light, because it is becoming more brazen."

Stating that "some of this stuff is unethical but not illegal," Johnson said a key remedy would be aggressive counseling for first-time homebuyers, to warn them of the pitfalls they might face.

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