Suit alleging home sale fraud ends in settlement

House bought at $32,000 was sold for $76,700

March 03, 2000|By John B. O'Donnell | John B. O'Donnell,SUN STAFF

A lawsuit that alleged that a 58-year-old nursing assistant was defrauded in the purchase of a Northeast Baltimore home has ended in a settlement.

Margaret Johnson, a first-time homebuyer, paid $76,700 for a 3-bedroom rowhouse in the 2800 block of Pelham Ave. in July 1998 and obtained a $76,300 mortgage insured by the Federal Housing Administration.

In the lawsuit filed in August, Johnson claimed she was defrauded by having to pay more for the Belair-Edison house than it was worth; that the appraisal was inflated; that she was not qualified for an FHA loan; and that American Skycorp Inc., a Timonium mortgage firm, and its president, Lee P. Woody III, falsified documents to get her a loan that exceeded the value of the house.

She also claimed that $6,114.59 in cash that documents said she paid at settlement originated with the mortgage firm.

Johnson's suit was one of a number filed in response to an epidemic of property flipping that has seen more than 2,000 houses bought and quickly resold in Baltimore in the past four years.

In her suit, Johnson said that in June 1998, she obtained a list of available houses from L&R Properties Inc. that priced her house at $66,900 -- nearly $10,000 less than she paid. The house had been purchased in September 1997 for $32,000, according to state records. Some renovations were made before Johnson bought the house, but serious problems remained, the suit said.

Andre Weitzman, Johnson's attorney, would not comment "on the terms of the settlement," but said, "both Ms. Johnson and I were satisfied with the outcome."

Lee Shpritz, who heads L&R Properties and West Star Properties Inc., which was a co-owner of the house that Johnson bought, would not comment, nor would his attorney, Andrew Jay Graham.

John M. G. Murphy, attorney for American Skycorp, Woody and Fleet Mortgage Group, which purchased the Johnson mortgage, said, "We didn't pay a penny" to get the case dropped. "The only thing I said I wouldn't do is pursue sanctions" against Johnson for filing a frivolous lawsuit.

Woody said that he and his firm were "completedly vindicated" and that the end of the litigation showed Johnson's claims were "completely baseless."

He said the suit ended "on the eve" of depositions that Johnson and her sister, Linda Jones, who also lives in the house, were scheduled to provide.

Weitzman responded, "What American Skycorp is saying is not accurate. They know my hands are tied" by a pledge not to discuss details of the settlement. The timing of the depositions had nothing to do with ending the case, he said.

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