GBBR head to focus on `flipping'

New president Kane decries use of fraud in real estate practice

`Reflects on industry'

Group has formed task force to suggest ways to solve problem

October 31, 1999|By Robert Nusgart | Robert Nusgart,SUN REAL ESTATE EDITOR

Patrick J. Kane surveyed his audience of peers and saw them nodding in agreement to the words he had spoken after being installed as president of the Greater Baltimore Board of Realtors.

In a matter-of-fact demeanor, he spoke about the controversy of "flipping" properties. He spoke of how it has turned an accepted real estate practice, making a sensible, quick profit by legitimate sellers, into an unsavory practice by suspect sellers, appraisers and title companies. He spoke of how it has become a blight on the industry.

"One of our major thrusts is going to be [dealing] with these fraudulent real estate practices, particularly in the city, but all over the area," Kane said Wednesday, a day after the GBBR held its annual installation of officers luncheon. Kane, vice president and general manager of Coldwell Banker Grempler Realty Inc., succeeded Marc Witman as president of the 3,000-member organization.

Flipping a property has been used over the years by real estate investors who purchase a property at below market value. Before going to settlement, the investor finds a buyer willing to pay market value -- or a little more -- for that property. The investor then settles on the property and "flips" it to that new buyer and takes home an easily made profit.

However, a recent series of articles in The Sun depicted how a rash of Baltimore properties were being bought cheaply, given bloated appraisals and resold to unsuspecting buyers for many times more than their real value.

"I get a little impassioned about this because it reflects on our entire industry that there are too many people [involved in a transaction] that can know when something is being done wrong," Kane said.

"When [flipping] is done by using fraudulent values on real estate. When it's done by using fraudulent credit reports. When it's done by [taking] things off of the settlement sheet that is what I am talking about.

"It is something that has to be looked at by the whole industry."

Kane said the board has formed an Issues Mobilization Task Force, composed of Realtors, appraisers, lenders and title company employees, to examine the issue and suggest ways to solve the problems.

"The reason why we are taking an interest in this as well, is not just because of appraisers and lenders and anyone else who might be involved, but if there are any cases where there might be a Realtor involved," he said.

But Kane is wary of state lawmakers, also taking a significant interest in the problem, who may seek far-reaching legislation.

"I think there is enough legislation on the books that if we just go out and enforce what we already have, we shouldn't need any more legislation," Kane said.

"There should be more education for the public. More education throughout the real estate industry is what it is going to take to try and eliminate some of these practices," Kane said. But he added, "If there is not enough [legislation] on the books, then by all means if that's what it takes, then that's what it takes."

Kane takes command of the GBBR as the organization has come off major legislative accomplishments, including the change to collecting property taxes from an annual basis to a semiannual basis.

"We want to be sure that we don't lose any of the victories that we had last year, that we don't have any unexpected challenges to [the] semiannual tax [law] in particular," he said.

He also said the GBBR would be addressing recent changes that require appraisers to issue more detailed, complex reports on properties that are being financed through Federal Housing Administration-insured loans.

Kane said the enhanced appraisals take longer to complete and cost consumers more money.

Overall, he sees a Baltimore housing market that may be slowing a bit, but still has vibrancy.

"I think it is going to remain good," Kane said. "I don't see anything on the horizon that should shake consumer confidence tremendously. The economy seems to be good."

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